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Series 7 > chapter 22 > Flashcards

chapter 22 Flashcards

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Series 7 Top-off Exam flashcards
1
Q

May an RR and a client share in an account?

A

Yes, with firm approval and provided the sharing in gains and losses is proportionate to their investment.

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2
Q

True or False: The findings of an arbitration panel may be appealed.

A

False

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3
Q

Churning is described as _____________________ designed to _____________________.

A

excessive trading to generated commission

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4
Q

May an RR write a research report and not hold the title research analyst?

A

Yes

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5
Q

True or False: Firms writing research reports must disclose potential conflicts of interest.

A

True (e.g., firm makes a market in the stock or has had or will have an investment banking relationship with the issuer)

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6
Q

Who must approve a research report?

A

Supervisory analyst

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7
Q

According to FINRA, the guideline for determining commission or markup on transactions is ___%.

A

5%

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8
Q

Does the 5% policy apply when a BD is acting in an agency capacity, a principal capacity, or both?

A

Both

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9
Q

True or False: The 5% Policy is a rule that may not be exceeded.

A

False, it’s a guideline, not a rule

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10
Q

What factors could justify a larger markup than 5%?

A

The type of security, the availability of the security, or the total transaction amount

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11
Q

Is the 5% policy based upon the current market value of the security or the dealer’s cost?

A

current market value

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12
Q

What trades would be covered by the 5% policy?

A

Secondary market trades of stocks, corporate bonds, and Treasuries

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13
Q

What is exempt from the 5% policy?

A

Trading of municipal bonds, new issues, registered secondary offerings, and mutual funds

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14
Q

Is correspondence subject to principal approval?

A

not, but it must be reviewed by the firm

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15
Q

Define research reports.

A

Written or electronic communication about equities, including information for a client to make an investment decision.

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16
Q

When must a research report be approved?

A

Prior to first use by a Supervisory Analyst

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17
Q

May firms allow for the free flow of information between their research department and investment banking department?

A

No

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18
Q

May an RR in the research area be supervised by the investment banking department?

A

No

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19
Q

The Telephone Consumer Protection Act (TCPA), allows calls from ________ to ________ local time of the called party.

A

8:00 AM to 9:00 PM

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20
Q

What must be checked before a BD makes telephone solicitations?

A

the firm’s do not call list

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21
Q

According to the TCPA, what information must telephone solicitors provide to clients?

A

Their name, firm name, a telephone number, or address where they can be contacted, and the purpose of the call

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22
Q

Under the TCPA, how is an established customer defined?

A

One that has made an unsolicited inquiry or effected a transaction with the firm

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23
Q

An unlisted, non-Nasdaq stock priced below $5.00 per share is called a ____________________.

A

penny stock

24
Q

What are some of the special standards that firms follow in regard to soliciting sales of penny stocks?

A

Determine suitability, principal approval, send risk disclosure, client’s written authorization for the first 3 trades

25
Q

Under Penny Stock Rules, when does a customer become established?

A

When they have purchased 3 different penny stocks on 3 different occasions, or they have been a customer for one year

26
Q

What actions may the hearing panel take regarding rule violations?

A

Censure, fine, suspension, request to requalify, or expulsion of the respondent

27
Q

The hearing panel may not impose a ___________________ due to rule violations.

A

prison sentence

28
Q

Hearing Panel findings may be appealed to the ___________________________,then the _____, and then ________________.

A

National Adjudicatory Council (NAC), then the SEC, and then federal court.

29
Q

Industry disputes are handled through ______________.

A

Arbitration

30
Q

May a customer be forced to use arbitration?

A

No, but signed pre-dispute arbitration agreements are binding.

31
Q

When arbitration involves public customers, __________ of arbitrators must be from outside the securities industry.

A

a majority

32
Q

When a minor dispute is handled through simplified arbitration, is the ruling final and binding?

A

yes

33
Q

Retail communication concerning an investment company must be filed with FINRA within ___________ days of use.

A

10 business days

34
Q

Retail communication generally requires _______________________.

A

principal preapproval

35
Q

Define correspondence.

A

Material that a member firm makes available to 25 or fewer retail investors within any 30-calendar-day period.

36
Q

List the three forms of communications with the public.

A

Retail communication, institutional communication, and correspondence

37
Q

According to FINRA rules, list some of the persons that are considered institutional investors.

A

Banks, insurance companies, investment companies, investment advisers, FINRA members and their RRs

38
Q

Under FINRA’s communication rules, what is meant by the term broadly disseminated?

A

That material has been created for generally accessible Web sites, print media, and television or radio

39
Q

What forms of communication are NOT required to be approved by a principal or filed with FINRA?

A

Retail communications that do not recommend or promote a BD’s services, institutional communications, and correspondence

40
Q

What forms of communication are required to be approved by a principal, but NOT filed with FINRA?

A

Email recommendations, telemarketing or sales scripts, independently prepared reprints, and ads promoting products

41
Q

What retail communications are required to be filed with FINRA at least 10 business days PRIOR to first use?

A

Those for investment companies with self-created rankings, bond funds including volatility ratings, and security futures

42
Q

What retail communications are required to be filed with FINRA WITHIN 10 days of first use?

A

Those related to DPPs, CMOs, and ETNs, as well as templates for reports produced by investment analysis tools

43
Q

True or False: On request, institutional communication may be provided to a retail client.

A

False. Institutional communication may never be provided to a retail investor.

44
Q

True or False: Institutional communication must be preapproved by a principal and filed with FINRA.

A

False. Institutional communication is not required to be preapproved or filed with FINRA.

45
Q

Define institutional communication.

A

Written or electronic communication that is distributed or made available only to institutional investors

46
Q

For a firm’s first year as a FINRA member, when must its broadly disseminated retail communications be filed with FINRA?

A

10 business days prior to use

47
Q

If a BD’s investment company communications include self-created rankings, when must they be filed with FINRA?

A

10 business days prior to use

48
Q

For how long must retail communication, institutional communication, and correspondence be maintained?

A

for three years, easily accessible after 2 years

49
Q

All forms of communication with the public must be kept for _____ years, but easily accessible for the first ___ years.

A

3 years, 2 years

50
Q

A client’s name and number must be kept on the Do Not Call List ____________.

A

indefinitely

51
Q

If an RR suspects that a client may be showing signs of dementia, what is the best course of action?

A

To request a meeting with both the client and a family member

52
Q

What action should be taken if a senior investor requests a meeting to make a significant change to her objectives?

A

Request that the client have a family member accompany her to the meeting

53
Q

True or False: For an RR, a good business practice is to meet with a confused elderly client alone.

A

False

54
Q

If a client seems confused and demands an unsuitable change of objective, what step should an RR take?

A

Confusion and/or dementia are concerns that may warrant an RR to request a meeting with the client and a family member.

55
Q

True or False: An RR may sell stock from a client’s non-discretionary account if a negative report is released.

A

False

Series 7 (25 decks)

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