Chapter 16: Rules and Regulations Flashcards
A ______ is anyone who can legally make decisions for another investor
-Fiduciary -Examples are custodians of UGMA accounts, registered rep with power of attorney, an executor of an estate, a trustee, etc.
Fiduciaries are subject to the _______, which means that they must invest the fund’s money in securities designated by their state’s Legal List
Prudent Man or Prudent Investor Rule
Registered Reps must complete the regulatory element of continuing education with _____ days of their registration anniversary date.
A. 30
B. 60
C. 120
D. 270
C. 120
Under FINRA rules, all registered reps must complete their computer based regulatory element of their continuing education within 120 days of their 2nd anniversary of becoming a registered rep and every 3rd anniversary after.
FINRA and the NYSE have the authority to do which of the following?
I. incarcerate
II. fine
III. expel
IV. censure
A. II and III
B. II, III, and IV
C. I and II
D. I and IV
B. II, III, and IV
As SROs, FINRA and NYSE can fine, expel, and/or censure members. Because they are not affiliated with the government they cannot imprison members.
A future rep failed the series 7 exam 3 consecutive times. How long must he wait before making a fourth attempt?
A. 30 days
B. 45 days
C. 90 days
D. 6 months
D. 6 months
If you fail the exam once, you have to wait 30 days before another attempt. If you fail twice, you have to wait 30 days before another attempt. If you fail a third time you have to wait 6 months.
If a registered rep leaves a brokerage firm to join the military and serves for two years or more, how much time after leaving the military does the person have to find a brokerage firm to work for and avoid the period of inactivity from starting again?
A. 30 days
B. 60 days
C. 90 days
D. 120 days
C. 90 days
A registered rep has had several slow months and must file for bankruptcy. Who must he notify?
A. The Fed
B. his employing firm
C. FINRA
D. the SEC
B. his employing firm
Individuals who pass the series 7 exam are limited municipal representatives. Which of the following licenses must an agent obtain to become a full municipal securities representative?
A. Series 52
B. Series 55
C. Series 65
D. Series 86/87
A. Series 52
Series 55 is to become an equities trader for a brokerage firm. Series 65 or 66 is to become an investment advisor. Series 86/87 is to become a research analyst of a brokerage firm.
The General Securities Principal exam is the
A. Series 4
B. Series 9/10
C. Series 24
D. Series 31
C. Series 24
This allows principals (managers) of a firm to supervise trades of most securities.
Agents who charge a fee for giving investment advice must pass which of the following exams?
A. the series 65 or 66
B. the series 65 or 62
C. the series 62 or series 24
D. the series 24 or series 10
A. the series 65 or 66
Under the Investment Advisors Act of 1940, if your charging a fee for giving investment advice, you must register as an investment advisor. If your sole business is charging for investment advice, you can take the series 65. However, if you plan on passing the series 7 so that you can execute trades for customers and charge a commission, you can take the series 66. The series 66 is an investment advisor exam but is good only in combination with the Series 7.
Which of the following will prohibit an individual from becoming an employee or officer of a brokerage firm?
I. the individual has been convicted of a felony within the last 10 years.
II. the individual has been charged with a misdemeanor marijuana violation within the last 10 years.
III. the individual has been charged with a DUI in the last 10 years.
IV. the individual has been convicted of securities related fraud within the last 10 years.
A. I, II, and III
B. II, III, and IV
C. I and IV
D. I, II, III, and IV
C. I and IV
While building his book, a newly registered rep would like to work weekends as a bartender to earn a little extra income. He would be required to tell his
A. broker dealer
B. broker dealer and FINRA
C. broker dealer and the NYSE
D. broker dealer and the Fed
A. broker dealer
A corporate customer would like to open a cash account for his company. To open the account, you would need a copy of the
A. corporate charter
B. corporate resolution
C. corporate charter and corporate resolution
D. none of the above
B. corporate resolution
The corporate resolution tells you the trading authority for the account. If the corporation were opening a margin account you would need the corporate charter and corporate resolution. The corporate charter (bylaws) lets you know that if corporation is allowed to purchase securities on margin.
What is the minimum amount of assets your client must have to establish a prime brokerage account?
A. $100,000
B. $500,000
C. $1,000,000
D. $5,000,000
B. $500,000
Prime brokerage firms consolidate information from all brokerage accounts the client has to provide one statement for the customer. The minimum requirement is only $100,000 if established through an investment advisor.
Your brokerage firm reports to your client that he purchased ABC common stock at $15.80. However, the actual conformation shows that the trade was executed at $16.00. What must your client do?
A. pay $15.80
B. pay $15.90
C. pay $16.00
D. cancel the trade
C. pay $16.00
If a brokerage firm accidentally reports a trade executed at a different price than shown on the actual confirmation, the client must accept the price on the actual confirmation. In this case, your client would have to pay the $16.00 per share.
Principals must approve trades made by registered reps
A. at or prior to execution
B. at or prior to completion of the transaction
C. the same day as the execution of the order
D. none of the above
C. the same day as the execution of the order
Principals (managers) must approve trades on the same day as execution but not necessarily before execution. This would allow the order to be entered as quickly as possible. Principals must approve trades as soon as possible after execution but no later than the end of the day at the latest.
For member to customer transactions, the member firm must sent a trade confirmation
A. at or prior to the completion of the transaction
B. no later than one business day after the trade date
C. no later than two business days after the trade date
D. no later than three days after the trade date
A. at or prior to the completion of the transaction
For member to member transactions, the firms must send each other confirmations no later than one business day after the trade date.
Under MSRB rules, a client’s confirmation must include
A. the markup or markdown
B. the location of the bond resolution
C. the settlement date
D. whether the trade was executed on a dealer or agency basis
D. whether the trade was executed on a dealer (principal) or agency (dealer) basis.
The amount of the commission on an agency trade does need to be disclosed but the dealer’s markup or markdown on a principle trade doesn’t have to be disclosed. The trade date (the day the transaction was executed) would need to be disclosed but not the settlement date because that is assumed to be 3 business days after the trade date.
Which of the following would NOT be included on a trade confirmation?
A. whether the trade was solicited or unsolicited
B. the amount of commission charged on a broker transaction
C. the trade date
D. the address of the brokerage firm delivering the confirmation
A. whether the trade was solicited or unsolicited
Whether an order is solicted or unsolicited is on an order ticket, not the confirmation. Order confirmations include items such as the customer’s account number, the agent’s ID number, the trade date ,whether the security was bought (BOT) or sold (SLD), the number or par value or securities, the yield (if bonds) the CUSIP number (if any), the price of the security, the total amount paid, and the commission charged.
