Chapter 5

Question 1

Prudent investor rule consideration

Answer 1

Trustee owes duty to beneficiary

Needs of heirs of beneficiary of trust would not be a consideration when making investment decisions

Question 2

Trustee investing opitons

Answer 2

No restriction in asset class
Covered calls okay if permitted in Trust documentation

Question 3

FINCent

Answer 3

combat money laundering via bank secrecy act

Question 4

Money laundering stages

Answer 4

1. Placement- cash enters financial system
2. Layering stage- Funds moved into other accounts
3. Integration stage- Funds reintroduced into economy to purchase legitimate assets

Question 5

CTR

Answer 5

> $10K for one person transaction in a single day

Question 6

Money laundering abatemnt act

Answer 6

Verify identity of customer seeking to open account within 5 business days

Question 7

SAR

Answer 7

Funds of $5K or more where financial firm detects any known or suspected Federal Criminal Violation
If suspicious activity, must file within 30 days

Question 8

Correspondnce

Answer 8

Any written/electronic communication of < =25 retail investors within 30 day period
Principal not required if no recommendation/no promoting of product

Question 9

Retail investors

Answer 9

prospective and existing clients
>25 retail clients with 30 day period
Principal approval required before earlier of use with FinrA

Question 10

Testimonials

Answer 10

May not be used in advertisements

Question 11

IDs to use for system

Answer 11

Two (user name and password)

Question 12

Wiring insturction

Answer 12

Do not do via email

Require verbal confirmation and secret word

Question 13

Order ticket must include

Answer 13

1. Account #
2. Time order was received
3. agent on account,
4. term and conditions of order

Price at the time order was received does NOT need to be on order ticket. Exchange or name of marketmarker who executed order does NOT need to be on the order ticket

Question 14

Exception to communicatin with public

Answer 14

A prospectus is considered to be a disclosure document, not advertising. It is intended to provide a full and fair disclosure of all of the material facts about a new issue that an investor would want to know. It is the formal legal offer of a new issue. It must not contain sales or promotional claims. Prospectuses filed with the SEC are not subject to the FINRA rules on communications with the public, including the content standards.

Question 15

Internet connection

Answer 15

Unsecured connection not allowed

Question 16

US patriot act terrorism prevent

Answer 16

The USA PATRIOT Act requires financial institutions to maintain customer identification programs (CIPs) to protect against financing terrorist operations or activities and potential money laundering activities. The Office of Foreign Asset Control (OFAC) publishes and maintains the “Specially Designated Nationals” list which financial institutions use to determine if any customers or potential customers have been identified by OFAC as posing a terroristic threat or are involved in money laundering activities.