Chapter 17 SRO and the SEC Flashcards
SRO
Function under SEC oversight.
FINRA
MSRB
CBOE
FINRA
Regulates all matters related to investment banking (securities underwriting), trading in the OTC Market, trading in NYSE-listed securities, investment companies and limited partnerships.
CBOE
Regulates all matters related to trading standardized options and related contracts listed on their exchange.
FINRA Manual
Conduct Rules
Uniform Code Practice
Code of Procedure
Code of Arbitration Procedure
Conduct Rules
Set fair and ethical trade practices that member firms and their representatives must follow when dealing with the public.
Uniform Practice Code
UPC - establishes the uniform trade practices, including settlement, good delivery, ex-dates, confirmations, DK procedures and otehr guidelines.
Code of Procedure
Describes how member violations of the conduct Rules will be heard and handled.
National Adjudicatory Council
Establishes rules, regulations and membership eligibility standards.
Continuing Education (FINRA)
Regulatory Element
Firm Element
Regulatory Element
Requires that all registered persons complete computer based training session within 120 days of the person’s second registration and every three years thereafter. 5, 8, 11.
Firm Element
Annual Training provided in house
Annual Compliance Review
RR and Principal - individually or in groups, regionally, or centrally located, Webcast, live or on demand.
Terminations
Membership doesn’t transfer. Must file u-5 to terminate. Must rejoin in 2 years. If terminate must notify FINRA within 30 days.
Statutory Disqualification
Disciplinary actions by the SEC, another SRO, a foreign financial regulator, or foreign equivalent of an SRO may cause it.
Central Registration Depository
Mainains information on disciplinary history of all persons currently registered. CRD
In connection with any investigation, complaint, or examinatio by FINRA,
NAC after 20 day written notice and no resoonse can revoke registration. Oversees Department of Enforcement.
Respondent and Complaint
Has 25 days to respond, Code of Procedure complaint.
Uncontested Offer - Goes to Department of Devense and then to NAC for final approval.
Contested Offer - DOE appoints hearing officer. Hearing officer negotiates and sets hearing between NAC and violater.
Code of Arbitration
In the abscence of a signed arbitration agreement, a customer can still force a member to arbitration, but a member cannot force a customer.
Correspondence
Principal approval if it includes financial investment recommendations or promotes a product or service and is sent to 25 or more existing or prospective retail customers within 30 days. Doesn’t need to be filed with FINRA.
Filing of Sales Literature and Advertising
for the first year, all advertising must be filed with FInRA 10 days before use. Must be kept in file for 3 years and accessible first 2 years, including name of eprson and who approved it. Reviewed by the Department of Enforcement from FINRA.
Investment Companies and DPP sales literature
must be filed with Finra no later than 10 days after first use or publication. In DPPs no filing necessary if it has been previousily filed.
Option Sales Literature
Must be filed with FINRA 10 days prior to use OCC must accompany or precede.
Exclusions from filing sales literature
Preliminary Prospectus, offering circular, tombstones, and other documents already filed with the SEC or any state.
Recommending Investment Company Products
Use charts or graphs showing a fund’s performance over a period long enough to reflect variations in value at least 10 years. 1, 5, 10 years.
Reveal source of graphics
Separate capital gains and dividends. Reveal highest applicable sales charge,
Form BD
Fictional Name or DBA name authorized if filed with FInRA and the SEC. Name is used to designate member.
Limitations on Contacts between Research Analysts and Issuers
Prevent analysts from showing draft reports to issuers
prohibit analysts from threatening to withold favorable information
Research Analysts may not publish a report 40 Days after an IPO and 10 days in a secondary offering.
Restrictions on Trading by Analysts
Analysts and members of household cannot invest before IPO or if the analyst covers the company, 30 days before, and 5 days after report.
Members and analysts cannot trade against the analyst’s recommendation.
Limitations on Contacts between Research Analysts and Issuers
Prevent analysts from showing draft reports to issuers
prohibit analysts from threatening to withold favorable information
Research Analysts may not publish a report 40 Days after an IPO and 10 days in a secondary offering.
Restrictions on Trading by Analysts
Analysts and members of household cannot invest before IPO or if the analyst covers the company, 30 days before, and 5 days after report.
Members and analysts cannot trade against the analyst’s recommendation.
