Chapter 6 Study Notes

Question 1

Parking

Answer 1

Parking refers to the practice of temporarily holding a position for a customer, often to
avoid certain regulatory filing or net capital requirements. This activity is prohibited

Question 2

Use of Stockholder Information

Answer 2

A member firm that acts on behalf of a corporation as a trustee is
not allowed to use information about the corporation’s shareholders for solicitation purposes. However,
if the corporation directs the firm to do so, this is permitted.

Question 3

Private Securities Transactions

Answer 3

Selling Away
 If the associated person is to receive compensation for the transaction, the member must specifically
approve the transaction in writing in order for the person to participate. In such a case, the
transaction must be recorded on the member’s books.
 If the associated person will not receive compensation for the transaction, the member may
nevertheless require the associated person to adhere to specific conditions in order to participate in the
transaction.

Question 4

Private Securities Transactions

Exemptions

Answer 4

The requirements of this rule do not apply to accounts that are limited to
transactions involving redeemable investment company securities (mutual fund shares), unit
investment trusts, variable contracts, or 529 plans.

Question 5

Finra Sanctions effective date

Answer 5

Other than a bar or expulsion, a sanction is effective 30 days after the respondent has received
notice of a final disciplinary action.

Question 6

Finra Minor Rule Violations

Answer 6

it may impose a fine of not more
then $2,500 and/or censure the member or associated person
 Failure to have advertising and/or sales literature approved by a principal
 Failure to properly maintain advertising and/or sales literature files
 Failure to file advertisements on time with FINRA
 Failure to file timely reports of short positions
 Violations of SEC or FINRA books and records rules
 Failure to submit trading data as requested

Question 7

Investor Education FINRA’s Investor Education and Protection Rule

Answer 7

requires member firms, at least
once every calendar year, to provide to each customer, in writing, the following information:
 FINRA Regulation Public Disclosure Program Hotline Number
 FINRA Regulation Web Site Address
 A statement as to the availability to the customer of an investor brochure that includes information
describing the Public Disclosure Program.

Question 8

The Code of Arbitration

Answer 8

is concerned with the settlement of disputes through arbitration. It is not
concerned with discipline for violations of rules and regulations, which is covered by the Code of
Procedure.
The Code of Arbitration requires that disputes between members and other members, or between
members and any clearing corporation be settled by arbitration. Arbitration is also required in
disputes between member firms and persons associated with a member, except in the case of
statutory discrimination claims, which include claims of sexual harassment