Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Series 24 Group Share > FC Chapter 6 > Flashcards

FC Chapter 6 Flashcards

1
Q

Gifts exceeding $_____ are considered excessive.

A

Gifts exceeding $100 are considered excessive.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

True or False: A gift in excess of $100 is allowed if given to a family member employed by another BD.

A

True. Gifts to family members are excluded from the Gift Limit Rule.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Is it acceptable for a BD to give two tickets to a Broadway show (valued at $250) to an employee of another BD?

A

No. It is unacceptable. However, the gift limit would not be violated if the RR attends with the recipient.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

True or False: An RR needs approval from his BD to work part-time for another member firm.

A

True. Specific consent of his primary employer is required.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Due to the violation of a firm rule, Frank was fined $5,000 and suspended for three weeks. To whom is this reported?

A

To the appropriate SRO (e.g., FINRA)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

If a client is short 600 shares of the subject company involved in a tender offer, how many shares may he tender?

A

Zero. An investor is prohibited from using borrowed shares to respond to a tender offer.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

If a client requests a copy of the predispute arbitration agreement, when must it be provided?

A

Within 10 business days of the request

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the maximum fine that may be imposed by FINRA?

A

Unlimited

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

The hearing panel may not impose a ___________________ due to rule violations.

A

The hearing panel may not impose a prison sentence due to rule violations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Upon receiving a second notice from the Dept. of Enforcement regarding a complaint, firms must respond within ____ days.

A

Upon receiving a second notice from the Dept. of Enforcement regarding a complaint, firms must respond within 14 days.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

When reviewing discretionary accounts for excessive trading, which factor should be reviewed first?

A

The client’s investment objectives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is required of an RR participating in a private securities transaction where compensation is received?

A

Written approval and recording the transaction on the books of the firm

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Once notified by a Code of Procedure hearing panel, the hearing must be held within ____ days.

A

Once notified by a Code of Procedure hearing panel, the hearing must be held within 28 days.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Unless appealed, when do penalties become effective under the Code of Procedure?

A

No later than 30 days from the decision

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How often are summaries of written customer complaints filed with FINRA?

A

Quarterly

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

May an RR and a client share in an account?

A

Yes, with firm approval and provided the sharing in gains and losses is proportionate to their investment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

True or False: Rule violations are handled by the Code of Arbitration.

A

False. Rule violations are covered by the Code of Procedure.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Which SRO’s rules are NOT enforced under the Code of Procedure?

A

The rules of the CBOE since it has its own enforcement division

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

From which individuals may an RR borrow funds?

A

Friends, relatives, or business partners

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

True or False: If an employee of a BD opens an account at another BD, each trade must be preapproved by the employer.

A

False

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

True or False: The Code of Procedure can be used by a customer against a member firm to resolve a monetary dispute.

A

False. This situation would be handled under the Code of Arbitration.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

True or False: When an RR purchases mutual fund shares through another BD, the employing BD must be notified.

A

False. If the account is limited to the purchase of mutual funds, annuities, or UITs, the BD need not be informed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Dan, an RR of a BD, is the coach of his son’s Little League team. Must Dan notify his BD of his coaching position?

A

If no compensation is received (for hobbies or charitable service), written notification is NOT required.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

With simplified arbitration, if a client brings an action against a firm, how many public arbitrators hear the case?

A

One

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

True or False: If a BD’s RR opens an account at another BD, the employer may request duplicate confirms/statements.

A

True. If requested, the executing BD must provide duplicate confirmations and statements.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

True or False: A member firm may force a customer to resolve a dispute through arbitration.

A

False. Unless a customer has signed a predispute arbitration clause, a member firm may not force the use of arbitration.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Industry disputes are handled through ______________.

A

Industry disputes are handled through Arbitration.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

True or False: The manager of a syndicate giving each of its members a gift of $250 would violate the gift rule.

A

True. The maximum gift is $100 per person/per year and includes gifts between member firms.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

The maximum claim under simplified arbitration is $________.

A

The maximum claim under simplified arbitration is $50,000.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

True or False: All employee-to-employer disputes must be submitted to arbitration.

A

False. Sexual harassment and discrimination cases may be taken to court.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

An existing client of a BD has just started a career as an RR with another BD. What is the client required to do?

A

She must promptly notify the executing firm of her new employment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

True or False: A difference between arbitration and mediation is that mediation is binding and arbitration is not.

A

False. Arbitration is binding on all parties, whereas mediation is not.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

What must be done by the carrying firm when opening an account for an employee of another Finra member firm?

A

The carrying firm must receive written consent from the employer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Do all outside activities of an RR require notification to an employer?

A

No. Notification is only required for employment activities, not hobbies.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

What actions may the hearing panel take regarding rule violations?

A

Censure, fine, suspension, request to requalify, or expulsion of the respondent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

True or False: FINRA’s Public Disclosure Program provides investors with background details about registered persons.

A

True. Requests may be made through a toll-free number or FINRA’s BrokerCheck Web site.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

An RR receives a text message from a client who is upset, is this considered a written complaint?

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Under the Code of Procedure, a __________ conference may be held to prepare for the conference and increase efficiency.

A

Under the Code of Procedure, a prehearing conference may be held to prepare for the conference and increase efficiency.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

Any awards granted by an arbitrator must be paid within how many days?

A

30

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

If an employee of a BD opens an account with an investment adviser, the __________ must notify the employing BD.

A

If an employee of a BD opens an account with an investment adviser, the employee must notify the employing BD.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

Where is the predispute arbitration agreement typically found?

A

In a new account form

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

Under the Code of Procedure, a decision must be rendered within ____ days after collection of evidence stops.

A

Under the Code of Procedure, a decision must be rendered within 60 days after collection of evidence stops.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

The statute of limitations for submitting an arbitration claim is ___ years from the occurrence of the event.

A

The statute of limitations for submitting an arbitration claim is 6 years from the occurrence of the event.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

When are clients provided with a copy of the predispute arbitration agreement?

A

The earlier of 30 days from signing the agreement or within 10 business days of request

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

If a written complaint relates to general securities activities, for how long are the records required to be maintained?

A

Four years

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

The Code of Procedure sets the process used to discipline members who violate ____, ______, or _____ rules.

A

The Code of Procedure sets the process used to discipline members who violate SEC, FINRA, or MSRB rules.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

Is it acceptable for an RR of one BD to take an employee of another BD to an NFL game costing $300 per person?

A

Yes. If the RR attends with the recipient, it is considered a legitimate entertainment expense.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

After a Hearing Panel decision, in what order may appeals be filed?

A

Appeals would first be heard by the National Adjudicatory Council (NAC), then the SEC, and finally the federal courts.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

What is it considered if a person fails to respond to a written complaint filed under the Code of Procedure?

A

A failure to respond is considered an admission of guilt.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

What is the makeup of the arbitration panel for industry disputes?

A

The panel may be comprised of industry arbitrators.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

Define selling away.

A

The execution of transactions by an associated person outside his employment with a member firm

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

What is needed for an RR to receive compensation for selling limited partnership interests outside the scope of his BD?

A

1) Written notice to his employer, 2) Employer approval, and 3) Transaction recorded on the BD’s books

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

True or False: For simplified arbitration, a hearing will be held before a five-member panel.

A

False. Simplified arbitration involves document submission, rather than a hearing.

54
Q

Simplified arbitration procedures are used for monetary disputes not exceeding $__________.

A

Simplified arbitration procedures are used for monetary disputes not exceeding $50,000.

55
Q

True or False: FINRA must approve all gifts in excess of $100.

A

False. FINRA approval is not required for gifts. Generally, gifts in excess of $100 are prohibited.

56
Q

Under the Code of Procedure, the Hearing Panel has _________ jurisdiction, while the NAC has __________ jurisdiction.

A

Under the Code of Procedure, the Hearing Panel has original jurisdiction, while the NAC has appellate jurisdiction.

57
Q

Simplified industry arbitration uses a ___________ arbitrator.

A

Simplified industry arbitration uses a nonpublic arbitrator.

58
Q

A client’s order is executed on a principal basis by a market maker at 21.10, plus commission. Is this acceptable?

A

No. Firms are prohibited from acting as principal and selling at a net price, and then adding a commission as an agent.

59
Q

Are BDs who violate the political contribution rule banned from obtaining competitive underwriting deals from issuers?

A

No, since the deal is obtained on the merits of the bid.

60
Q

True or False: Mediation is often cheaper and quicker than an arbitration proceeding.

A

True

61
Q

When does a decision to ban or expel a registered representative from association with a member firm become effective?

A

Immediately

62
Q

What is required for an agent to open a joint account with a customer?

A

Written approval of the client and the BD and any sharing must be proportionate to each person’s contribution.

63
Q

If an employee has a nonbusiness dispute (e.g., discrimination or harassment), is arbitration mandatory?

A

No. The client may or may not choose arbitration to settle the dispute.

64
Q

By signing Form U4, to what is a person agreeing in the event of an industry dispute?

A

His willingness to accept arbitration, rather than litigation, to settle a dispute

65
Q

Sara, an RR of a BD, has recently been elected to the board of directors of a corporation. What is Sara required to do?

A

Provide her BD with written notification of her position on the board

66
Q

True or False: Arbitration is the process used for rule violations.

A

False. Rule violations are handled through the Code of Procedure.

67
Q

For accounts opened for employees of another member firm, what is provided to the individual’s employer upon request?

A

Duplicate confirmations and statements

68
Q

True or False: Under the Code of Procedure, the National Adjudicatory Council (NAC) has appellate jurisdiction.

A

True. The NAC may review the sanction imposed by the hearing panel.

69
Q

True or False: Quarterly complaint reports must be sent to both FINRA and the SEC.

A

False. Complaint reports are sent to FINRA, not the SEC.

70
Q

After receiving notice from the Dept. of Enforcement regarding a complaint, the firm must respond within ____ days.

A

After receiving notice from the Dept. of Enforcement regarding a complaint, the firm must respond within 25 days.

71
Q

The Hearing Panel must give a member firm ____ days prior notice before a hearing is held.

A

The Hearing Panel must give a member firm 28 days prior notice before a hearing is held.

72
Q

What is required if an RR effects a transaction outside her BD, but does NOT receive compensation?

A

Written notice to her employer

73
Q

True or False: Tickets valued at $500 given to four people are considered excessive.

A

True. The gift limit considers both the dollar value and number of intended recipients.

74
Q

True or False: A firm may act as both a broker and dealer on the same trade.

A

False

75
Q

True or False: Failure to file a tax return would trigger an amendment to Form U4.

A

False

76
Q

Bill, an RR of High Mark Brokerage, has been hired as a bartender on the weekends. What step must Bill take with his BD?

A

Since Bill will be compensated as a bartender, he must provide written notice to his BD.

77
Q

What is the makeup of the arbitration panel for disputes involving public customers?

A

A majority of the panel must come from outside the securities industry.

78
Q

May a customer be forced to use arbitration?

A

No, but signed pre-dispute arbitration agreements are binding.

79
Q

__________________________ expenses are not subject to the Gift Rule.

A

Entertainment/business expenses are not subject to the Gift Rule.

80
Q

What is required for an agent to receive compensation for effecting transactions outside his BD?

A

1) Written notice and response from, his employer, 2) Employer approval and 3) Transactions recorded on the BD’s books

81
Q

True or False: People initiate arbitration by filing a Submission Agreement, a Statement of Claim, and the required fee.

A

True

82
Q

A client is long 900 shares of ABC and short 4 ABC calls. For tendering, what is his net long position?

A

500 shares. The 4 short calls (each representing 100 shares) reduce his net long position by 400 shares.

83
Q

The______________________ covers disciplinary actions by FINRA against member firms and their employees.

A

The Code of Procedure covers disciplinary actions by FINRA against member firms and their employees.

84
Q

Is there an exception to notifying the employing BD when one of its employees opens an account with another BD?

A

No. If an employee (registered or clerical) opens an account with another BD, notification is required.

85
Q

True or False: Allegations of forgery or theft are reported to, and investigated by, FINRA.

A

True

86
Q

May a client whose securities are in street name request that his BD send proxy materials to his investment adviser?

A

Yes

87
Q

Unless requested otherwise, what is the composition of the arbitration panel for disputes involving public clients?

A

A majority of the arbitrators must be unaffiliated with the securities industry.

88
Q

Under the Code of Procedure, a sanction becomes effective ____ days after the firm has received final notice.

A

Under the Code of Procedure, a sanction becomes effective 30 days after the firm has received final notice.

89
Q

True or False: An RR may lend money to a customer with whom he has an outside business relationship.

A

True. However, the RR must obtain written permission from his employer and the customer.

90
Q

What is required of an employee seeking part-time employment outside of her brokerage firm?

A

Firm notification before the activity starts

91
Q

Prompt FINRA notification is required if an associated person is subject to an internal fine exceeding $______.

A

Prompt FINRA notification is required if an associated person is subject to an internal fine exceeding $2,500.

92
Q

True or False: Clients may reject the selection of any arbitrators appointed by the Director of Arbitration.

A

False. Clients have the right to reject the selection of one arbitrator on a peremptory basis.

93
Q

Decisions made by an arbitration panel are ________ and may not be _________.

A

Decisions made by an arbitration panel are binding and may not be appealed.

94
Q

Under the Code of Procedure, who has original jurisdiction over an alleged rule violation?

A

The hearing panel

95
Q

What is the industry policy regarding an RR who sets up an outside business that involves paid public speaking?

A

This is considered employment and the RR must receive employer approval.

96
Q

Explain the rulings made by an arbitration panel.

A

The rules are binding and may not be appealed.

97
Q

True or False: Penalties for violating the Code of Procedure may include a maximum prison sentence of 10 years.

A

False. A prison sentence may not be imposed under the Code of Procedure.

98
Q

True or False: A client must make written acknowledgement upon receipt of a predispute arbitration agreement.

A

True

99
Q

What are the requirements for a BD to open an account for an employee of another BD?

A

Written notification to the client’s BD, send the BD duplicate confirms (on request), and notify client of these steps

100
Q

True or False: Selling away includes effecting personal transactions in mutual funds or variable contracts.

A

False. These transactions are not covered under selling away.

101
Q

When arbitration involves public customers, __________ of arbitrators must be from outside the securities industry.

A

When arbitration involves public customers, a majority of arbitrators must be from outside the securities industry.

102
Q

How is a business-related dispute between an employee and a member firm settled?

A

Through arbitration

103
Q

For a minor violation of FINRA rules, a maximum fine of $______ may be assessed.

A

For a minor violation of FINRA rules, a maximum fine of $2,500 may be assessed.

104
Q

A client sends a letter to his BD alleging unsuitable recommendations. What is the letter and what steps are taken?

A

The letter is a written complaint and must be reviewed by a principal. Firms submit periodic complaint reports to FINRA.

105
Q

True or False: The findings of an arbitration panel may be appealed.

A

False. Arbitration decisions are final and binding.

106
Q

If an RR plans to engage in outside activities and receive compensation, who must the RR notify?

A

The RR’s firm must receive prior written notification from a principal. Notification to regulators isn’t required.

107
Q

True or False: Orders placed by an RR for a discretionary account must be approved by a principal prior to execution.

A

False. All orders (discretionary or not) must be approved by a principal on the day of entry, but not in advance.

108
Q

True or False: When determining if churning has occurred in an account, profit or loss is a key consideration.

A

False. Profit or loss is never a consideration when examining the excessiveness of trading.

109
Q

Hearing Panel findings may be appealed to the ___________________________,then the _____, and then ________________.

A

Hearing Panel findings may be appealed to the National Adjudicatory Council (NAC), then the SEC, and then federal court.

110
Q

If an RR is involved with a charity, does she need to provide written notification to her employer?

A

If compensation is not received, notification will NOT be required.

111
Q

In a simplified industry arbitration, __________________ decides the case without a hearing.

A

In a simplified industry arbitration, one non-public arbitrator decides the case without a hearing.

112
Q

True or False: Decisions arising from arbitration may be appealed to the federal court system.

A

False. Decisions are binding on both parties and may NOT be appealed.

113
Q

What steps must a person take to initiate arbitration?

A

File a submission agreement, submit a statement of claim, pay the required fee, and make appropriate records available

114
Q

True or False: Complaints may be oral or written, including e-mail or text message.

A

True

115
Q

A client has signed a predispute arbitration agreement. What if she has some claims not covered by the agreement?

A

She may request that ALL claims be handled through arbitration.

116
Q

Trades executed outside the scope of an RR’s employment with a BD are known as ___________________ transactions.

A

Trades executed outside the scope of an RR’s employment with a BD are known as private securities transactions.

117
Q

A penalty imposed by a hearing panel is generally effective ____ days after assessment.

A

A penalty imposed by a hearing panel is generally effective 30 days after assessment.

118
Q

Under the Code of Procedure, the first opportunity to respond is within ____ days, and within ____ days for the second.

A

Under the Code of Procedure, the first opportunity to respond is within 25 days, and within 14 days for the second.

119
Q

Firms must typically respond to written customer complaints within ____ days.

A

Firms must typically respond to written customer complaints within 25 days.

120
Q

True or False: Members may charge customers for collecting dividends and for the safekeeping of securities.

A

True, as long as the charges are reasonable and do not discriminate unfairly between customers.

121
Q

An arbitration award must be paid within ____ days.

A

An arbitration award must be paid within 30 days.

122
Q

How many arbitrators are involved in simplified arbitration?

A

One

123
Q

What will be stated in the predispute arbitration agreement?

A

Parties waive the right to sue in court, arbitrator decisions may not be explained, and possible rewards are unlimited.

124
Q

May a wholesaler reimburse the expenses of a spouse traveling with an RR who is attending an educational seminar?

A

No. Covering legitimate travel expenses of the RR is acceptable, but not the spouse’s expenses.

125
Q

True or False: Any response provided to clients regarding a complaint must be in written form.

A

False. There is no requirement indicating that responses must be written.

126
Q

True or False: A customer may share in the profits and losses with his member firm’s proprietary trading account.

A

False, a customer and a firm may not commingle their funds to form an account.

127
Q

Who pays the expenses incurred for mailing proxy materials or annual reports to clients whose assets are in street name?

A

The distributing corporation

128
Q

What is required for an RR to share in a client’s profits or losses?

A

Approval from the client and firm is required and any sharing must be in proportion to the money invested

129
Q

True or False: FINRA regulates accounts of member firm employees opened at another firm.

A

True. The rule also covers accounts for the employee’s spouse or dependent children.

130
Q

A customer complaint is defined as any grievance that is provided in _________, ______, or ____________ form.

A

A customer complaint is defined as any grievance that is provided in written, oral, or electronic form.

131
Q

The $100 gift limit may be exceeded if the gift is given to a _______________.

A

The $100 gift limit may be exceeded if the gift is being given to a family member.

Series 24 Group Share (42 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions