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Series 24 Group Share > FC Chapter 7 > Flashcards

FC Chapter 7 Flashcards

1
Q

If a storyboard has been filed, when must the final version of a TV or video advertisement be filed with an SRO?

A

Within 10 business days of initial broadcast

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2
Q

If a BD’s investment company communications do not include self-created rankings, when must they be filed with FINRA?

A

Within 10 business days of first use

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3
Q

Unscripted participation in a chat room, radio interview, or Q&A session is considered a __________________.

A

Unscripted participation in a chat room, radio interview, or Q&A session is considered a public appearance.

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4
Q

An RR sends an e-mail to all of her existing clients as well as 40 prospective clients. What is the e-mail considered?

A

Since the communication is being provided to more than 25 retail investors, it is considered retail communication.

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5
Q

A member firm’s written and electronic communication must be retained for _____ years from the date of last use.

A

A member firm’s written and electronic communication must be retained for three years from the date of last use.

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6
Q

What retail communications are required to be filed with FINRA WITHIN 10 days of first use?

A

Those related to DPPs, CMOs, and ETNs, as well as templates for reports produced by investment analysis tools

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7
Q

If variable product retail communication mentions liquidity, what must also be described?

A

Any potential fees or expenses

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8
Q

True or False: Member firms may conduct educational seminars on securities.

A

True

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9
Q

If a firm communicates through an instant messaging service, what must the firm be able to do?

A

Monitor, archive, and retrieve the messages

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10
Q

True or False: Institutional sales material must be filed with FINRA.

A

False. It is only required to be available for spot check.

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11
Q

List some examples of retail communication.

A

Newspapers, magazines, radio, TV, videotape displays, publicly available Web pages, blogs, billboards

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12
Q

True or False: A member firm is prohibited from issuing a press release to the media without filing it with an SRO.

A

False. Provided the press release is done in accordance with industry regulations, it may be issued.

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13
Q

What interactive device produces simulations and statistical analysis?

A

The Interactive Technology Tool, which must be filed with FINRA

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14
Q

Retail communication generally requires __________ ____________.

A

Retail communication requires principal preapproval.

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15
Q

True or False: A non-interactive blog is considered retail communication and requires a principal’s pre-use approval.

A

True

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16
Q

All forms of communication with the public must be kept for _____ years, but easily accessible for the first ___ years.

A

All forms of communication with the public must be kept for three years, but easily accessible for the first two years.

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17
Q

True or False: Variable contracts may guarantee the investment results, but not the death benefit.

A

False. Variable contracts may guarantee the death benefit, but not the investment results.

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18
Q

For how long is a firm required to retain any written or electronic communication?

A

Three years from the date of last use

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19
Q

If a BD’s investment company communications include self-created rankings, when must they be filed with FINRA?

A

At least 10 business days prior to use

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20
Q

True or False: If bond ratings appear in retail communication, the member must provide an explanation of the ratings.

A

True. Additionally, the nature and date of the rating must be disclosed.

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21
Q

True or False: Principal preapproval is required for extemporaneous remarks that take place in a chat room.

A

False. However, supervisory requirements may require review after the fact.

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22
Q

Retail communication for an investment company may contain what limited information and NOT be considered a prospectus?

A

Fund objective, emphasis on growth or income, and names of principal officers

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23
Q

Illustrations showing returns for variable products must be for a minimum time of ____ year.

A

Illustrations showing returns for variable products must be for a minimum time of one year.

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24
Q

For how long must a BD maintain institutional sales material?

A

Three years

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25
Q

A firm’s investment analysis tool is required to be filed with FINRA if it is made available to _______ investors.

A

A firm’s investment analysis tool is required to be filed with FINRA if it is made available to retail investors.

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26
Q

Goldwing Software, an incorporated entity, has $42 million in assets. Is Goldwing considered an institutional investor?

A

No. It does not meet the monetary minimum requirement of $50 million in assets for “any other entity.”

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27
Q

If an instant message is sent to more than 25 retail investors, it is considered ____________________.

A

If an instant message is sent to more than 25 retail investors, it is considered retail communication.

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28
Q

Define independently prepared reprint.

A

An unaltered reprint of an article or publicly available company report issued by an independent publisher

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29
Q

With whom is a firm’s investment analysis tool filed?

A

FINRA’s Advertising Regulation Department

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30
Q

True or False: Variable products are mutual funds.

A

False

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31
Q

An instant message that is sent to 50 prospective clients is considered ____________________.

A

An instant message that is sent to 50 prospective clients is considered retail communication.

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32
Q

True or False: An investment analysis tool must be filed with FINRA if it is made available to retail investors.

A

True

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33
Q

True or False: RRs engaged in chat room discussions at home follow different rules than those that apply in the office.

A

False. The same due diligence exercised in the office must be followed at home.

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34
Q

When must retail communication concerning CMOs be filed with FINRA?

A

Within 10 business days of first use

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35
Q

For a firm’s first year as a FINRA member, when must its broadly disseminated retail communications be filed with FINRA?

A

10 business days prior to their first use

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36
Q

When showing mutual fund returns, what time periods must be included?

A

1, 5, and 10 years or life of the fund if less

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37
Q

An RR sends an e-mail describing recent tax law changes to five existing clients. What is the e-mail considered?

A

It is correspondence and would therefore be subject to review.

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38
Q

What are the rules about referring to past recommendations?

A

The period must cover at least one year and the firm must include all recommendations for the same type of security.

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39
Q

List the three forms of communications with the public.

A

Retail communication, institutional communication, and correspondence

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40
Q

True or False: Firms may NOT use proprietary names when selling variable contracts.

A

False. Proprietary names are permitted as long as the policy is described as either variable life or variable annuity.

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41
Q

A posting on a BD’s Facebook or Twitter page is considered what form of communication?

A

Retail communication

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42
Q

True or False: On request, institutional communication may be provided to a retail client.

A

Institutional

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43
Q

True or False: Retail communication approval may be provided either in writing or orally.

A

False. Approval must be provided in written form.

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44
Q

Investment company sales material is prepared and filed by the sponsor. If a BD does not alter it, must it be refiled?

A

No, provided it is unaltered, duplicate SRO filing is not required.

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45
Q

When will a firm’s institutional sales material be considered retail communication?

A

When the material is made available to, or redistributed to, the public

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46
Q

True or False: Investment company retail communication that contains performance figures is considered a prospectus.

A

True

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47
Q

True or False: Investment company ads without self-created rankings, must be filed at least 10 business days before use.

A

False. Since rankings are NOT included, it must be filed within 10 business days of initial use, not prior to use.

48
Q

True or False: Institutional sales material requires a principal’s review.

A

True

49
Q

An RR uses instant messages and e-mail to communicate with her clients. What is this communication considered?

A

Correspondence

50
Q

If a testimonial appears in retail communication, what must be disclosed?

A

Whether the provider was paid more than a nominal fee and the provider’s qualifications if an expert opinion is implied

51
Q

Under FINRA’s communication rules, what is meant by the term broadly disseminated?

A

That material has been created for generally accessible Web sites, print media, and television or radio

52
Q

Retail communication concerning an investment company must be filed with FINRA within ___________ days of use.

A

Retail communication concerning an investment company must be filed with FINRA within 10 business days of use.

53
Q

True or False: A firm may release its recommended investment list to a periodical.

A

True

54
Q

When is filing an investment analysis tool with FINRA not required?

A

When made available only to institutional investors, or sales material simply describes the availability of the tool

55
Q

Give some examples of correspondence.

A

Market letters, reports regarding tax law changes, e-mails, and instant messages with limited distribution

56
Q

What is an investment analysis tool?

A

An interactive tool that produces illustrations, simulations, and predictions about the likelihood of future performance

57
Q

A BD may not distribute institutional sales material if it is suspected that it may be redistributed to ___________.

A

A BD may not distribute institutional sales material if it is suspected that it may be redistributed to the public.

58
Q

What rate of return is required to be shown in an illustration for a variable product?

A

0%

59
Q

What two forms of communication are not subject to pre-use approval by a principal?

A

Institutional communication and correspondence

60
Q

In variable contract retail communication, hypothetical rates of return may show a maximum of ___% if __% is also shown.

A

In variable contract retail communication, hypothetical rates of return may show a maximum of 12% if 0% is also shown.

61
Q

True or False: Investment company retail communication that has been filed by the fund’s sponsor may be used by a BD.

A

True

62
Q

True or False: Mutual fund retail communication must show the maximum sales charge and include all fees and expenses.

A

True

63
Q

True or False: A television ad announcing the services offered by a member firm is considered correspondence.

A

False. It is considered retail communication.

64
Q

If retail investors are provided direct access to an investment analysis tool, when must FINRA be provided equal access?

A

Within 10 business days after first use

65
Q

What retail communications are required to be filed with FINRA at least 10 business days PRIOR to first use?

A

Those for investment companies with self-created rankings, bond funds including volatility ratings, and security futures

66
Q

Define a blind recruitment advertisement.

A

One where a BD does not disclose its name, but instead solicits potential recruits to submit resumes to a box number

67
Q

True or False: The publisher of an independently prepared reprint may not be an affiliate of the member firm using it.

A

True

68
Q

What would trigger the need to refile an investment analysis tool?

A

Material changes to the tool

69
Q

A firm is sending to clients an unaltered article prepared by an unaffiliated entity. What is the document called?

A

An independently prepared reprint

70
Q

True or False: Institutional communication must be preapproved by a principal and filed with FINRA.

A

False. Institutional communication is not required to be preapproved or filed with FINRA.

71
Q

What must a firm do if it makes an investment analysis tool available to retail investors through its Web site?

A

Provide FINRA with both access to the tool and any template for written reports produced by the tool

72
Q

For how long must retail communication, institutional communication, and correspondence be maintained?

A

For three years, but easily accessible for the first two years

73
Q

Is correspondence subject to principal approval?

A

No, but it must be reviewed by the firm.

74
Q

True or False: Institutional communications must always be filed with FINRA.

A

False. Institutional communications are not required to be filed with FINRA.

75
Q

In mutual fund retail communicaiton, performance statistics must cover ____-, _____-, and ___-year periods.

A

In mutual fund retail communication performance statistics must cover one-, five-, and 10-year periods.

76
Q

What forms of communication are NOT required to be approved by a principal or filed with FINRA?

A

Retail communications that do not recommend or promote a BD’s services, institutional communications, and correspondence

77
Q

According to FINRA rules, list some of the persons that are considered institutional investors.

A

Banks, insurance companies, investment companies, investment advisers, FINRA members and their RRs

78
Q

What are some of the specific product disclosures that are required for variable contracts?

A

They are not mutual funds, a client’s goals should be long-term, and surrender charges apply due to early redemption

79
Q

When is communication subject to principal approval?

A

If it is being sent to more than 25 existing or prospective clients in a 30-calendar-day period (retail communication)

80
Q

True or False: An email sent to 25 or more prospects must be approved by a principal.

A

True. This is an example of retail communication which must be preapproved by a principal.

81
Q

Under the communication rules, a written letter or e-mails sent to 25 or fewer retail investors is called _____________.

A

Under the communication rules, a written letter or e-mail sent to 25 or fewer retail investors is called correspondence.

82
Q

True or False: Institutional communications do NOT require written principal approval prior to use.

A

True. It is only retail communications that require the written approval of a principal.

83
Q

Is a principal required to approve a BD’s publicly-available Web site?

A

Yes. The Web site is considered retail communication since it is available to the public.

84
Q

If a testimonial is used that relates to a technical aspect of investing, what is required of the provider?

A

The provider must have the knowledge and experience to form a valid opinion.

85
Q

Define institutional communication.

A

Written or electronic communication that is distributed or made available only to institutional investors

86
Q

True or False: The results provided by an analysis tool must be described as estimates, or statistical probabilities.

A

True

87
Q

Correspondence is communication sent to 25 or fewer retail investors. Must the investors be existing or prospective?

A

The 25 or fewer investors may be any type of investor—existing or prospective.

88
Q

Retail communication for collateralized mortgage obligations (CMOs) must be filed within ____ business days of use.

A

Retail communication for collateralized mortgage obligations (CMOs) must be filed within 10 business days of use.

89
Q

What is the maintenance requirement for all forms of communication with the public?

A

Three years from last use

90
Q

True or False: Annuities are appropriate for investors with a 3- to 5-year investment horizon.

A

False. Annuities are appropriate for investors with long-term goals.

91
Q

Why does a firm run blind recruitment advertisements?

A

To maintain anonymity during the period in which it is recruiting personnel

92
Q

For retail communication regarding variable contract performance, what periods must be covered?

A

One-, five-, and 10-year periods (or the plan’s/policy’s life)

93
Q

True or False: A broker-prepared, widely disseminated free writing prospectus (FWP) must be filed with FINRA before use.

A

False. Broker-prepared, widely disseminated FWPs must be filed WITHIN 10 business days of first use.

94
Q

What is required if an RR sends a letter to his top 30 existing retail clients that includes a security recommendation?

A

Since the letter recommends a security and is sent to more than 25 clients, preapproval by a principal is required.

95
Q

An investment analysis tool made available to retail investors is filed with FINRA within ___ business days after use.

A

An investment analysis tool made available to retail investors is filed with FINRA within 10 business days after use.

96
Q

What is the maximum rate of return that may be shown in an illustration for a variable product?

A

12%

97
Q

True or False: Instant messages sent from an RR’s home are subject the same oversight as if sent from his BD’s office.

A

True

98
Q

An RR posts an entry in an online chat room recommending a specific stock. What is the entry considered?

A

A public appearance

99
Q

If a member firm distributes institutional sales material, it must satisfy what two responsibilities?

A

1) Record the name of the person responsible for its preparation, and 2) educate all RRs who use the material

100
Q

True or False: An investment analysis tool must be filed with FINRA if it is made available to institutional investors.

A

False. The filing requirement is based on the tool being made available to retail investors.

101
Q

True or False: The reprint of an article published by an affiliate of a member is considered independently prepared.

A

False. The reprint of an article published by an affiliate of a member is considered retail communication.

102
Q

Under FINRA rules, participating in an electronic interactive forum is considered a __________________.

A

Under FINRA rules, participating in an electronic interactive forum is considered a public appearance.

103
Q

If not a bank, S&L, insurance or investment co., an entity requires $___ million in assets to be institutional.

A

If not a bank, S&L, insurance or investment co., an entity requires $50 million in assets to be institutional.

104
Q

True or False: When referencing FINRA membership on a Web site, at least one hyperlink to the FINRA Web site is required.

A

True

105
Q

Who is responsible for assuring that investment company retail communication is filed with FINRA?

A

The preparer or the BD who alters the material for its own use

106
Q

On 5/1, Joe e-mails 20 clients to promote a product. On 7/1, the same e-mail is sent to 15 clients. Is approval needed?

A

No. Since the promotional e-mail is sent to 25 or fewer clients over 30-calendar days, only review is required.

107
Q

When is written principal approval required for an independently prepared reprint?

A

Prior to use

108
Q

In what different forms may retail communications be delivered?

A

Both written or electronic

109
Q

Complete this statement: An ad referring to a 6-year-old fund’s ranking based on total return must refer to …

A

the total return for the one- and five-year periods by the same ranking entity.

110
Q

When is a member firm permitted to use testimonials?

A

When the expert’s qualifications are given and mention is made of any compensation paid to the expert

111
Q

Along with Web pages, what are some other examples of retail communication?

A

Notices, circulars, research reports, form letters, telemarketing scripts, and widely distributed instant messages

112
Q

Define correspondence.

A

Material that a member firm makes available to 25 or fewer retail investors within any 30-calendar-day period.

113
Q

An instant message that is sent to 25 prospective customers is considered _______________.

A

An instant message that is sent to 25 prospective customers is considered correspondence.

114
Q

What is required when an e-mail is sent to 40 clients and it makes a mutual fund recommendation?

A

Pre-use approval by a principal

115
Q

Correspondence is generally subject to _______, but not _________.

A

Correspondence is generally subject to review, but not approval.

116
Q

Give some examples of institutional investors.

A

Banks, S&Ls, insurance or investment companies, investment advisers, or entities with at least $50 million in assets

117
Q

What forms of communication are required to be approved by a principal, but NOT filed with FINRA?

A

Email recommendations, telemarketing or sales scripts, independently prepared reprints, and ads promoting products

Series 24 Group Share (42 decks)

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