Chapter 6 Flashcards
What does the Principal review & approve?
Principal: reviews & approves, promptly (can be ex post), in writing: new accounts, retail communications and transactions
What key personnel does the BD need to identify?
-persons responsible for testing supervisory systems
-executive rep (reviewed quarterly < 17 biz days of EoQ)
-CCO (certified annualy < Apr 1)
What are the two elements of continuing education?
firm element: BD
regulatory element: FINRA
What is Tape recording and when should it be done? Rehiring/Hiring restriction?
Recording of conversations with customers if a significant portion of registered representatives come from disciplined firms.
Must be set up < 60 d of FINRA notification, if:
-5-20 RRs, >40% from disciplined firms < 3y
-20+ RRs, >20% ………….
can’t rehire fired agents for 180 days
can’t hire more agents to dilute
What are the Heightened supervisory requirements and when do they need to be put in place?
Supervisors: financially independent, diff location
If:
-complex structure or proprietary products
-managers who generate >20% (1y) of production they supervise
When can’t a BD use info re: an issuer to solicit business?
Info obtained by BD during performance of duties for an issuer can’t be used to solicit business
How should customer complaints be managed?
-report to FINRA < 15 d EoQ
-< 10 d if alleged misappropriation of funds or securities forgery
-maintained for 4y
What are the different kinds of offices? What are the characteristics of each?
Office of supervisory jurisdiction
-custody of fund or securities
-approval of retail coms, accounts, orders
-executes orders or makes markets
-forms or structures offerings
-supervises employees at other branches
Branch office
-RR can act as branch manager
-notify < 30 d if relocation
Satellite office
-home office (can’t meet with clients or handle customer checks or securities at home)
-orders must be monitored by branch
-secondary / vacation home: < 30 days
Who can conduct the annual compliance review?
People that aren’t assigned to inspected office and do not report / are not supervised by office. Excluded: compliance personnel.
What is the Business continuity plan?
Alternative means of communication, data back up plans
-2 senior members as emergency contacts: 1 principal. If change, 30 d.
-Customers must be advised of plan at account creation
What are the rules surrounding Currency (cash) transactions?
-must report >$10k / day
-Currency Transaction Report to IRS < 15 d
-maintain record of international wires > $3k
What are the patriot act requirements?
-Questionable transaction >$5k => Suspicious Activity Report < 30 d
-SAR stuff maintained 5 y
-BD needs to check records against list sent by FinCen every few weeks. Notification < 14 cal d
What are the different kinds of identity fraud?
Alias fraud
Classic account takeover
Family fraud
What can broker dealers do to avoid the exploitation of seniors?
-BDs can withhold distributions to seniors and clients with mental impairments for 15 biz days if suspected exploitation
-Then 10 more biz days + possible additional 30 biz days (55 max total)
