chapter 3 deck two Flashcards
annual review items
- muni activities 2. supervisory system 3. written supervisory procedures Must determine if they are adequate, up to date and reasonably designed to detect and prevent violations
Principal Designation records retention
6 years
Discipline Firm
Any firm expelled from membership in an SRO or sec revoked registration
Taping
Employees of a disciplined firm hired by another firm may need to be taped
Sec rule 17f-2
Fingerprinting
Fingerprints must be sent within 30 days of registration or it will be deemed ineffective.
* books and records
* Supervisors
*handles funds and securities
* sales
Finger printing card
black inc
fingers must be rolled
signed by person doing it
FBI can request up to 3 times
Retention is 3 years
u4/u5 retention
3 years
associated persons
One off
even outside directors or partners who only contribute capital are still associated persons
U5
Termination form
IF hired by a new form they are required to review the U5 from the previous firm within 60 days.
Amending U5 after termination
due to new material facts
must be updated in 30 days and sent to new employer
series 24
Books and records
can supervise books and records maintenance
repurchase agreement
loan made to a customer collateralized by an equal value of bonds and the member repurchases the bonds from the customer typically at a fixed higher price.
The difference is considered interest
Repurchase agreement
Securities type
must be exempt securities such as US government or municipal bonds
Required for repurchase agreement
- in writing
- exempt securities
- specify time and price of repurchase
Sharing in a family members account
approval
Still needs approved by a principal.
Form Letter
any written or email message sent to 25 or more people in a 90 day period.
Approving Advertising
A sales principal or FINOP can’t approved advertising must be approved by a 24 or 53
Exclusions from definition of advertising
official statements
Preliminary official statements
A list of bonds for sale.
Summaries or abstracts of official statements are advertising.
Advertising Yields for secondary market securities
can’t include current yield unless it has either YTM or YTC also displayed.
If YTM is displayed then the call date and call price must be shown.
Advertising bonds not in inventory
Must then state “subject to availability”.
Must also state bonds are subject to change in yield or price.
Publishing initial reoffering prices or yieds
Even if price or yield has changed they can advertis these if the date the syndicate bought the securities is included.
In the event prices or yields differ from the initial reoffering the advertisement must sho the price or yields at the time the advertisement is submitted for publication.
A statement that they may not be available or available at a different price or yield must be included.
4 main disclosures in all advertisements
- consider investments objective, risks and charges and expenses
- more information is available in the official statement
3Explains broker is an underwriter.
- read the official statement before investing
Any advertisement that refers to the security or issuer by name must include
- where to obtain teh official statement unless exempt
- for 529 to consider if beneficiaries home state offers any stat tax or olther benefits for only that states funds.
- If held out as having MMF characteristics. must say not FDIC insured.
Performance data in an advertisement
(disclosure)
LEgend disclosing the data represents past performance and does not guarantee futur results.
If the advertiesement includes total return quotation to the most recent month end 7 days before publishing then it must include a phnoe # or website to obtain total return quotations.
advertising and sale loads
maximum amount of the load or fee must be disclosed. If the load or fee is not reflected in the performance data a statement is included indicating that and data would be lower if a load or fee was included.
If the advertisement describes the nature of specific benefits
It must also name factors that may materially limit the availability of the benefit. and they must in close proximity to and not less prominent
Mail to associated persons
A delar has the legal capacity to insist mail to its offices be deemed related to it’s business even if marked to the attention of a particular associated person and can restrict receipt of personal corresponece at the firm.
MSRB RUles availability
due to activities
- Underwriting Trading or selling
- financial advisory or consultant services for issuers
- Research or investment advice regarding municipals
- activities that involve direct or indirect communication with public investors
Satisfying rule availability
can provide
Soft cover edition
Loose-leaf edition
the website www.msrb.org
Software that contains teh MSRB Rules
telemarketing time phrames
8.00 am to 9.00 pm local time of the party being called.
Business relationship exceptions to telemarketing time frame
- Person has made a transaction, has positions or had activity in the last 18 months.
- The person contacted the broker inquiring about product or services within the last 3 months
- borker dealer is the BD of record within the last 18 months.
FTC Do not call list
Congress requires BD’s to update against the national call list no longer than 31 days.
Telemarketing procedures
Written policy for do not call list
Training of personell and use of DNC list
Recording and disclosure of Do not Call request, I.e. maintain a list. and must be no later than 30 days.
Identification of sellers and telemarketrs -name of caller, name of BD an address or phone #to contact bd and state the purpose of the call.
Must maintain the number on the DNC list for five years after requested.
AML Designated individual
Must designate and identify to FINRA throught the FINRA Contact System (FCS) the compliance officer chaged with the firms oversight.
Must notify finra within 30 days of any changes and verify the names annually 17 business days after the end of each calander year
Approving an AML program
The firms senior management must approve the firms anti-money laundering program and that program must be reviewed annualy by an outside examiner knowledgable in the Bank SEcrece Act and regulatiosn
FinCen
Financial Crimes Enforcement Network of the department of the treasure
FINCEN Form 112
Currency Transaction Report CTR
any cash deposits in one day exceeding 10K.
Failure to report can result in 500K fine and up to 20 years in prison.
Filed within 15 calendar days
stages of money laundering
Placement
Layering
Integration
Interdealer Transactions
Must report trades with other dealerst to the NSCC. Must include the names of the two executing firms and the amount of accrued interest if known.
if clearing/introducing broker arrangements are used the executign broker (normally the introducing BD) must make the report.
Time of trade is always required
For interdealer trades
Reporting parties
both sides report
assessments
exempt
Trades that have a stated final maturity of nine months or less
and
Bonds that at time of trade may be tendered at the option of the holder (put option) for redemption at par at least as frequently as every nine months until maturity.
529 issuers
529 suitability
529 Contribution types
must be in cash
Reporting Customer Transaction exceptions
no cusip
is a municipal fund security
Trade report rules
15 minutes of execution
- Cusip
- Date
- Time
- executing broker symbol
- Buyer or seller
- par value
- Dollar price excluding commissions
- Yield
- If the firm acted as Agent or principal
- Settlement (if KNown)
- capacity
12 commission if any
msrb examination is every
4 years for finra members
2 years for everyone else
Arbitration
MSRB no longer administers arbitration. Claims for Arbitration now go thru FINRA.
Retail order period
submission requirements
- If customer meets issuers eligibility criteria for a retail order.
- If customer is already conditionally committed
- Whether the BD received more than on order that security (matching cusip) i.e. to different maturities for the same serial issue wouldn’t constitute two orders.
- Any identifying information required by the issure.
- Par amount of the order.
Brokers Broker acts on behalf of
the Seller unless the seller and buy agreed prior to the transaction in writing
ATS
automated trade system and must be registered with the SEC. like a brokers broker they can’t maintain accounts.
Brokers Broker
commission disclosure
must have policies and procedures in place and must prominently post them on it’s webside and provide them in writing annually to sellers and bidders.
