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Series 24 MS > Chapter 3 > Flashcards

Chapter 3 Flashcards

1
Q

What dollar amount qualifies an individual as an Institutional Investor?

A

$50 Million

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2
Q

For a customer who intended not to day trade, becomes a day trader, how many days are given to approve the account as a Day trading account?

A

The account must be approved within 10 Days

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3
Q

How frequently must the Margin Disclosure statement be given to non-institutional clients?

A

At least Annually

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4
Q

For clients who wish to trade in the after hours markets, what must be communicated to them?

A

No member may permit a customer to trade in extended hours unless they have received a “Disclosure Statement”

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5
Q

Under the US PATRIOT ACT, records relating to the verification of customers identity must be retained for how long?

A

5 Years

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6
Q

When a customer opens a new account, within how many days must they be furnished with a copy of the Account Record?

A

within 30 Days of account opening

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7
Q

How often must the firm send the client a copy of their current records?

A

at least every 36 months (3 years)

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8
Q

After an account is closed, for how long must the firm keep a copy of the client records?

A

5 Years after the account is closed

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9
Q

What are the two services that a Member cannot Charge the Customer for?

A

1) Research (a BD would have to licensed as Invt.Adviser)

2) Forwarding Proxy Material (fund co’s pay this cost)

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10
Q

How long can a BD hold client mail without a reasonable response to warrant extended hold

A

3 Months

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11
Q

What are the 3 “A”s to determine if an order is Discretionary?

A

Action
Asset
Amount
(price or timing is not discretionary)

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12
Q

When must a trade confirmation be given to a client?

A

At or before the completion of any transaction

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13
Q

When must confirmations for DVP/RVP Trades be delivered to customers?

A

No later than T+1

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14
Q

Does a confirmation for a CMO have to disclosed Yield?

A

No
other information for CMO’s is required on the confirm: nominal face amount, interest rate, maturity dates and settlement date, along with weighted avg coupon.

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15
Q

For the Transfer of client Assets from one BD to another, via ACTS, what is the validation period and how many days to ship the assets?

A

1 Business day to Validate
3 business days following validation to ship the assets.
if asset is non-transferrable, the firm has 5 business days to send the proceeds from liquidation.

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16
Q

Upon the death of a client, what are the 3 steps a BD must take:

A

1) Cancel all Open Orders
2) Mark the account as Deceased
3) Freeze the assets in the Account

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17
Q

Where a customer in a TIC account dies, what actions must be taken:

A

The member must freeze the account and acceptance of orders until the required documents are presented.
(for JWROS - does not preclude the remaining tenant from entering orders)

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18
Q

What signature(s) is required not he Customer New Account Form?

A

The Principal - customer signatures are not required on the new account form.

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19
Q

Under Reg S-P, what must Members provide their customers and when?

A

New customers must be provided with a Privacy notice when accounts are opened, and all existing clients must be provided with a Privacy notice Annually.

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20
Q

Are member firms allowed to disclose Non-Public personal information to unaffiliated 3rd parties?

A

YES, under Reg S-P, if the client has not opted out, the BD is allowed to share SSN, account balances, transaction history etc..

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21
Q

How frequently are Members required to send notice to clients of Free Credit Balances in their accounts?

A

At least Quarterly or on any statement that is sent.

It is required to be disclosed Monthly in Active accounts and Quarterly in inactive accounts.

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22
Q

How frequently must a BD conduct an independent review of its AML Program?

A

Annual independent test is required

  • unless the Broker dealer engages solely in proprietary trading or conducts business with only other broker dealers (independent test every 2 years)
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23
Q

Should a firm receive a currency receipt of more than $10,000 in a single day, what is the reporting requirements?

A

Form 112 must be filed within 15 days of receipt of the currency.

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24
Q

When must a firm file a Suspicious Activity Report with FinCEN? What is the Dollar Value and what is the time required to report?

A

Over $5000
within 30 Days of noticing,
must retain documents for 5 years

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25
Q

Are member firms allowed to pay commissions, concessions or transaction fees to other non-members?

A

NO,
member firms can only grant concessions to other member firms ‘UNLESS’ They are a Foreign Non-Member where they are ineligible for membership.

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26
Q

Under what context can a Member Firm invite a non-member firm into an Underwriting Group?

A

Only during exempt market transactions: such as Municipal Bonds - non members like Banks can be part of the underwriting group.

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27
Q

For how long must a firm keep Customer Correspondence Reviews

A

3 Years

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28
Q

Does a Retail Communication that does not make any financial or investment recommendation or otherwise promote a product or service of the member require Pre-Principal Approval?

A

No Principal Approval is required.

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29
Q

What are the Filing requirements for Retail Communications relating to Investment Companies (MF, UIT’s, Variable contracts), DPPs, CMOs

A

Must be approved by a Principal and filed with FINRA within 10 days (Post-filing) of first use.

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30
Q

What are the Filing requirements for Retail Communications relating to Options, Futures?

A

Must be approved by a Principal and filed with FINRA at least 10 days BEFORE first use

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31
Q

What are the hours under which Cold Calling can take place?

A

8:00am - 9:00pm called persons local time.

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32
Q

For Cold Calling rules - what period defines a pre-existing relationship?

A
  • person contacted has made a transaction within the previous 18 months
  • member is or was the broker dealer of record for the person in the preceding 18 months,
  • person contacted the broker or member regarding a product or service within the preceding 3 months
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33
Q

Who falls under the exception of “Personal Relationship” within the cold calling rules?

A

Any family member, friend, or acquaintance of the AP

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34
Q

A broker-dealer is required to collect and retain certain information in connection with funds transfers such as wire orders for amounts equal to or greater than?

A

$3000

The U.S. Treasury and the FRB require a record of funds transfers such as wire orders equal to or greater than $3,000 be maintained by financial institutions

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35
Q

Does the 5% commission /mark-up policy apply to exempt securities (such as US government securities) ?

A

NO

it does apply to nonexempt securities transactions in the OTC market.

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36
Q

A pattern of currency deposits designed to avoid currency reporting requirements is termed?

A

Structuring
is any attempt to circumvent the currency reporting rules (e.g., making multiple cash deposits of $2,000 on different days rather than making a single deposit, that would trigger a filing with FinCEN).

37
Q

Retail communication that includes a ranking or comparisonn of funds, that is the creation of an investment company or member firm must be filed when?

A

Pre-approval by a qualified principal, filing with FINRA 10 business days prior to use

38
Q

A carrying member may take exception to an account transfer instruction for what 2 reasons?

A

Discrepancies over
a) money balances or
b) securities valuation
is not cause for taking exception.

39
Q

Most money laundering regulations are written by which 2 regulators?

A

Federal Reserve and the US Treasury

40
Q

Under the account transfer rules, which of the following is subject to delayed delivery from the carrying firm to the receiving firm?

A

The securities underlying “When-Issued” are subject to delayed delivery

41
Q

FINRA rules require broker/dealers to conduct anti-money laundering training on what frequency?

A

ON an Ongoing Basis

42
Q

Retail Communications: what is the distribution breath?

A

to more than 25 retail investors within a 30 day calendar-day period.

43
Q

Does Correspondence require Pre or Post Review by a principal?

A

Post distribution review of at least ‘some ‘ of each representatives correspondence.

Only PRE-Review required is for Retail Communication.

44
Q

What is the retention period for Customer Correspondence review?

A

Correspondence file must be retained for 3 years?

45
Q

What types of communication must prominently disclose the name of the member and the name of the firm sa disclosed on FROM BD?

A

Retail Communications and Correspondence

46
Q

In a sales communication concerning CMO’s, can a comparison be made to other types of Mortgage Products?

A

NO - CMOS may not be compared to any other investment vehicle, including bank CD’s.

47
Q

What are the filing requirements for retail sales communications concerning Options, Futures?

A

the member must file compile with FINRA at least 10 days BEFORE first use (PreFiling)

Recommendations, past performance and projected performance are not permitted in options advertising.

48
Q

What are the filing requirements for an Investment Company that is including a ranking or compares that is generally not published or is the creation of the investment company

A

Pre-Filing requirement at least 10 days before first use.

49
Q

Can an investment advisor use an independently prepared reprint in his sales communication?

A

Yes - but Independently preparer reprints require PreUSE Approval by a Principal to ensure accuracy of the reprint

  • but are not subject to any FINRA filing requirements.
50
Q

What is the only kind of Advertisement that does not require the member’s name?

A

Blind Recruitment Advertisements

51
Q

Is Principal pre-approval required for social media content?

A

YES - Static content requires Prior Principal Approval: Profiles, background, Wall Information.

Static content requires principal approval BEFORE it is Posted!

Status Update on facebook is considered Interactive and does not need Prior Approval.

52
Q

Are twitter posts considered Static or Interactive?

A

Static - they require PRIO Approval by principal.

53
Q

Are member firms required to review ‘All’ electronic communications?

A

NO Firms are permitted to take a risk based approach in reviewing incoming, outdoing, and internal electronic communications.

54
Q

What is the Safe-Harbour rule for Cold-Calling?

A

If a do not call listed person is contacted within 31 days of the AP acquiring the most recent list, there is safe harbour exemption.

55
Q

What ACT enabled the requirements for Identity Verification requirements?

A

Patriot Act

Under the US Patriot Act, records relating to the verification of customer identity must be retained for 5 years

56
Q

where a customer sends in an address change, is the firm required to furnish the customer with a copy of the updated records?

A

YES

Firm must provide the customer with a copy of the updated account records within 30 DAYS for changes to:
Name / Address / Inv. Objectives

57
Q

What are the 3 requirements to deem an order Discretionary?

A

Action (buy / sell)
Asset (the security to be bought or sold)
Amount (number of share or $$ value)

Discretionary authority must be approved by a Principal before it is exercised.

58
Q

What are the Principal’s requirements around Discretionary Accounts?

A

Must Pre-approve Discretionary Authority

Must approval all order tickets promptly after execution,

Must frequently review all discretionary accounts to detect potential abuse.

59
Q

Is a Trade Confirm required to disclose if the trade was Solicited or Unsolicited?

A

NO - not required by the SEC

this is only required on the order ticket

60
Q

When is a Form 112 CTR used?

A

Currency Transaction Report is used when the transaction is OVER $10,000

61
Q

Upon receiving updated client information, when must the dealer deliver copies of the information back to the client:

a) 30 days after receiving the information
b) 30 days after updating the information?

A

The dealer must furnish the client with copies of updated information 30 days after ‘receiving’ the information.

the dealer has 30 days to update the info and provide copies to the client.

62
Q

What actions are required for the death of a client when dealing with a TIC Account?

A

Tenants in Common Account

  • FREEZE the account
  • Stop acceptance of any orders
  • until the required documents are presented.
63
Q

A customer of an introducing firm, in reviewing his monthly statement, notices an error in the number of shares of XYZ he recently purchased. Under FINRA rules, the customer should notify

A

BOTH - his Introducing Firm
and
Clearning Firm.

it is a requirement to a reference be included to advice notification to both firms if there is a statement discrepancy.

64
Q

Under state law, an offer of rescission made by a broker/dealer to a customer must be accepted or rejected by the customer within how many days of the offer?

A

30 Days

An offer of rescission must be accepted within 30 days of the offer. Rescission can occur if a member solicits an unsuitable trade for a customer and subsequently wishes to rescind the trade. With an offer of rescission, the member offers to buy back the security from the customer at cost plus interest at 6%. The offer becomes void after 30 days, and the customer can no longer sue for recovery of any losses.

65
Q

Under regulation S-P, what are 3 Opt Out methods that must be provided to customers?

A
  1. A reply form with Opt-out notice
  2. Electronic means to opt out if customer has sagert to E-Delivery
  3. a toll-free number that customers may call.
66
Q

Reg S-AM extends customer privacy information to what types of companies?

A

Affiliates are restricted in using customer information for marketing purposes so long as customers have been given fair opportunity to opt out.

67
Q

Where an offer to a client is made for Recission?

a) How many days does the client have to decide? and
b) Does the dealer have to pay interest?

A

A) Offers of rescission must be accepted or rejected by the customer within 30 days of “RECEIPT” or give up future legal action.

b) Dealer Pays interest to the customer based on cost from date of purchase to date of repurchase.

68
Q

How does a Dealer Member vote on proxy information where customer returns proxy form signed but with no instructions?

A

Member must vote shares as recommended by management.

69
Q

How does a member vote, when the customer does not return the proxy voting card?

A

if by the 10th day before the annual shareholders meeting, the member may vote as it sees fit as long as the matters are of minor importance.

if major (merger, issuance of additional shares) the member may never vote the shares as it sees fit.

70
Q

What types of securities are covered under the 5% markup/down policy?

A

Non-Exempt securities in the OTC and exchange markets. (does not apply to exempt securities or PROSPECTUS based offerings - like municipal bonds)

It is a guideline and not a firm policy.

71
Q

Does the 5% markup/down policy apply to commissions? or just principal transactions?

A

it apples to Agency, Principal, , markups and downs and commissions. but not to anything sold by prospectus.

72
Q

If applicable, payment for order flow must be disclosed where?

A

must be disclosed on the confirmation

73
Q

Do mark up/mark down rules apply to Municipal securities?

A

NO

74
Q

AML Rules for the firm are founded in which 2 entities/Regulations?

A

Bank Secrecy Act and FINRA Rule 3310

75
Q

How frequently must the Firms Anti Money Laundering program be reviewed?

A

AT least annually, but for firms that do not execute transactions for customers/ engaged in BD to BD it can be every 2 years.

Must be conducted by someone independent of the AML group

76
Q

Reporting the receipt of currency (currency receipts) is required using From 112 - When?

A

any currency received in the amount of more than 10K on a single day.

First has 15 days to report using Form 112.

77
Q

What 2 federal agencies are empowered to deal with Money Laundering?

A

Federal Reserve and Department of the Treasury

78
Q

What is the threshold for reporting Suspicious Activity Reprorts to FinCEN?

A

any transaction that alone or in the aggregate involves at least $5,000 in funds or othe rassets

79
Q

US Patriot ACT requires firms tot make and retian records relating to wire transfers of X dollar amount?

A

3000 or more…

80
Q

A client proceeds to conduct a series of unusual wire transfers; what stage of the AML cycle would this be?

A

Layering stage.

this is designed to obscure the trail of the money.

81
Q

Upon receiving FinCEN’s list of high scrutiny, if the firm finds a match, when must they report the match?

A

Firms must report the match within 14 days.

82
Q

How are firms supposed to report cyber crime or cyber events?

A

Using a SAR, firms need to incorporate into their AML program cyber crime detection procedures.

83
Q

Can a suspended member be included in a syndicate offering if the suspension comes to an end before the offering date?

A

No -

suspended members cannot be a a part of an underwriting syndicate for nonexempt securities,.

84
Q

Under Regulation S-P, if a member firm sends to a customer an initial privacy notice that contains an opt-out provision, the firm may not disclose nonpublic, personal information about that customer for how many days from mailing?

A

30 Days

A firm must give a customer 30 days to implement any opt-out provision in the privacy notice.

85
Q

In dominated and controlled trading markets, markup is computed based on:

A

contemporaneous cost

86
Q

You are requested to contact a referal who happens to be on the Do-Not-Call List, what can you do?

What are the exceptions to contacting someone on the Do-Not-Call List

A

You can Send them a Letter

Members may not make telephone solicitations to persons on the National Do-Not-Call list with three exceptions:

  1. your firm has an established business relationship
  2. your firm has obtained the person’s prior written consent, or
  3. the person making the call has a personal relationship with the recipient of the call.
87
Q

Where a market maker receives a retail order from a client and decides to buy the security as principle in the market from another BD and then sell it to the client ‘Net’,

What is the name of this transaction and any requirements?

A

Net Transactions/Riskless Trade

must receive the customer’s written consent prior to order execution / order-by-order

institutional orders can achieve concent:

a) Written
b) Negative consent letter
c) Oral disclosure

88
Q

With a compelling reason, a bulk transfer of variable annuities may be accomplished by use of a(n)

A

negative response letter,

Ordinarily a negative response letter is not permitted. However, with a compelling reason, a negative response letter is permissible for bulk transfers.

89
Q

A client in a branch comes to open an account and forgets his ID - can we

a) open the account
b) accept a deposit
c) place a first trade?

A

open the account, accept a deposit, and invest per the customer’s instructions

SEC rules require that we verify a customer’s identity within a reasonable time period before or after account opening. Therefore, the account may be opened and investments made.

Series 24 MS (7 decks)

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