Greenlight 2

Question 1

Regulation S purchasers:

Answer 1

Purchasers must be non U.S. citizens, resale can go to US citizens with some restrictions

Question 2

If a registered representative is terminated by a firm and then hired by another firm, the new firm has how many days to review the individual’s Form U5?

Answer 2

60 days

If a member firm hires a person was previously registered
with FINRA, the member firm must obtain and review the latest Form U5, including any amendments to the
form. Review of Form U5 must be completed within 60 days of the date that the person files an application
for registration

Question 3

A brokerage firm with a net capital requirement of $50,000 must maintain a fidelity bond of:

Answer 3

A FINRA member firm that has a net capital of less than $250,000 must
maintain a minimum coverage which is the greater of; 120% of the member firm’s required net capital or
$100,000. For example, if a member firm has a net capital requirement of $50,000 its fidelity bond coverage is
$100,000 (120% of $50,000 is $60,000 which is less than $100,000.

Question 4

An introducing firm is considering underwriting a firm deal. The firm has used 3 temporary subordination agreements in the past 10 months. The firm may enter into a 4th agreement:

Answer 4

The broker-dealer is limited to no more than three such agreements in any 12-month period and the duration of a temporary subordination agreement may not exceed 45 days.

Question 5

Which of the following transactions required a customer to be designated as a pattern day trader?

Answer 5

Four or more trades executed over five business days

Question 6

Nasdaq TotalView is a quotation display service that’s available to professional and non-professional traders

Answer 6

shows the entire Nasdaq book for a particular security

Question 6

Question 6

The prohibition on purchases or bids doesn’t only apply to the subject security
(security that’s the subject of a distribution), it also applies to any reference securities into which the subject security may be converted.

Answer 6

For example, if an ABC Company convertible bond is being distributed, the bond is the subject security and ABC common stock is the reference security

Question 7

If a broker-dealer allows its customers to receive or transmit wire transfers, it must collect information about transfers for:

Answer 7

$3,000

Question 8

The non-reporting issuer is permitted to use an FWP after _______________________________ concurrently delivered.

Answer 8

the filing of a registration statement as long as a statutory prospectus is

Question 9

When a customer sells securities through a broker-dealer, a mandatory buy-in is required if the broker-dealer does not receive securities from the customer by the:

Answer 9

10th business day after the settlement date

Rule 15c3-3 requires a broker-dealer to obtain possession of securities within a reasonable time. If a customer sells securities and fails to deliver the securities within 10 business days of the settlement date, the broker-dealer must buy-in the customer. Under exceptional circumstances, the broker-dealer may apply to FINRA for an extension.

Question 10

Minimum net capital under the alternative computation is $.

Answer 10

$250,000

Rule 15c3-1 (the net capital rule) requires a broker-dealer to maintain a specific minimum dollar amount of net capital. A clearing firm is required to maintain at least $250,000 under the standard method of computing net capital. There is an alternative method of calculating net capital, based on the Reserve Formula of Rule 15c3-3, which also requires a minimum of $250,000.

Question 11

The Code of Procedure deals with ____________ violates SRO rules.

Answer 11

disciplinary action if a member firm or one of its employees

The FINRA Department of Enforcement may schedule a hearing to determine the action that should be taken if a member or one of its employees has committed a sales or trade practice violation. A customer complaint may result in enforcement action or the customer may file for arbitration, which is used to settle monetary disputes

Question 12

If an associated person is subject to statutory disqualification, what is the obligation of the employing member firm?

Answer 12

Update Form U4 within 10 days

If an associated person is subject to statutory disqualification, his employer is required to update Form U4 within 10 days.

Question 13

The ABC Fund has just created an advertisement that will be distributed by a broker-dealer. This communication:

Answer 13

Must be filed with FINRA by the fund only

If a fund (sponsor) prepares the retail communication and it’s subsequently used by a broker-dealer, the sponsor (not the broker-dealer) is required to file the retail communication. Remember, prior to its use by the member firm’s salespersons, the retail communication must be approved internally by a principal of the broker-dealer

Question 14

All retail communications related to investment companies must be filed with an SRO __________.

Answer 14

within 10 business days of initial use

Question 15

How many days does a member have to decrease the staffing levels below the Taping Rule threshold?

Answer 15

30 days

The firm may avoid these requirements by decreasing staff levels below the threshold within 30 days of notification. If the percentage staffing levels of the disciplined representatives is not reduced below the threshold, taping of telephone conversations must begin within 60 days of the original notification date.

Question 16

If the underwriter of a best-efforts deal fails to sell the entire offering, what will any client who purchased the securities receive?

Answer 16

Securities from the offering.

A best-efforts deal doesn’t require the sale of any specific amount. If a client purchases securities in this type of offering, the client will receive the securities and any unsold portion is returned to the issuer.

If the underwriting was contingent on selling a minimum amount and the underwriter failed to reach that level, all clients’ funds must be returned in their entirety with no deductions permitted for offering expenses.

Question 17

A registered representative decides to take an extended leave of absence to care for an elderly parent.

Answer 17

When a registered representative leaves a brokerage firm for any reason, she must:
-formally resign from the brokerage firm
-the firm must file a termination notice with FINRA (Form U5),
-with a copy provided to the RR.

An individual who wanted to return to a brokerage firm as a registered representative without having to requalify would need to do so within a TWO-YEAR period.

Question 18

A customer wants to sell shares of stock and receive the proceeds of the sale on the same day. His broker-dealer discovers that another one of its customers is willing to purchase the stock and pay for it on the same day. This transaction will be considered complete:

Answer 18

Once the customer is recorded as the owner

Cash settlement (same-day settlement) is complete when the customer is recorded as owner of the stock.

Question 19

A husband and wife maintain a joint cash account and a joint margin account at a member firm. In addition, each maintains an individual cash account. SIPC would cover:

Answer 19

Both individual cash accounts separately and the joint accounts combined

Question 20

SIPC provides coverage for separate customers. Separate customers would include:

Answer 20

-an individual who maintains an account in his own name
-and also has an account with a spouse

However, an individual who has a cash account and a margin account in his own name would be considered a single customer, and the accounts are combined for SIPC coverage.

Question 21

In an online chat room, a registered representative posts an entry recommending a particular security. Under FINRA rules, the entry is:

Answer 21

Not required to be approved by a principal, but the proper disclosures must be made.

If a security is recommended, the associated person must have a reasonable basis for the recommendation and must disclose whether she has a financial interest in the security or any derivative of the security being recommended

Question 22

A securities contract that has not been completed by the selling broker-dealer may be closed out by the buyer no sooner than:

Answer 22

Three business days after settlement

According to FINRA, a buy-in may be executed no earlier than three business days following the settlement date.

Question 23

Which of the following must be filed by a passive investor that has acquired greater than 5% of a reporting company?

Answer 23

Form 13G is filed by passive investors who have acquired greater than 5% ownership in an issuer.

Form 13D would be filed by activist investors once they reach that threshold.

Form 3 is the initial filing for insiders (e.g., greater than 10% ownership).

Form 13F is a quarterly holdings report filed by certain institutions managing $100 million or more

Question 24

For a delivery of mutilated securities to be considered a good delivery, they can be authenticated by all of the following, EXCEPT:

Answer 24

For a delivery of mutilated securities to be considered a good delivery, they can be authenticated by the trustee, registrar, transfer agent, or issuer.

Broker Dealer CANNOT do it!

Question 25

Max sales charge for mutual funds vs variable annuities?

Answer 25

8.5% for Mutual Funds

Variable must be REASONABLE

Question 26

In order for a broker-dealer to engage in passive market making, there must be:

Answer 26

at least one other market maker that’s independent

Question 27

Order Ticket included items:

Answer 27

RR and client identifiers

The type of account (cash, margin, DVP etc.

solicited or unsolicited

do-not-reduce instructions

The trade date

Question 28

Any retail communication that includes a recommendation must be _________by a principal

Answer 28

preapproved

Question 29

A broker-dealer executing a net basis transaction is required to:

Answer 29

Provide a confirmation, but is not required to disclose compensation

Question 30

Section 13(d) of the Exchange Act requires anyone who acquires more than 5% of an issuer’s equity securities to notify:

Answer 30

The issuer

Each exchange on which those securities are traded

The SEC

Since the issuer is notified, shareholders need not be notified directly. There is also no need to notify the media.

Question 31

A child with a UGMA account dies at age 13 without a will. To whom do the assets revert?

Answer 31

To whomever state law dictates

Question 32

A customer has a long margin account with a market value of $20,000 and a debit balance of $18,000. The broker would be required to call for a minimum of:

Answer 32

The minimum equity requirement in a long account is 25% of the market value.

If the market value is $20,000, this would mean a minimum equity requirement of $5,000. The actual equity in the account is $2,000 (market value of $20,000 minus debit balance of $18,000).

The customer would be called for an additional $3,000. This would reduce the debit balance to $15,000 and result in equity of $5,000

Question 33

FINRA members must maintain a record of total short positions in any security that’s listed on a national securities exchange (e.g., NYSE and Nasdaq) and OTC equity securities for both customer and proprietary accounts.

How often should it be filed?

Answer 33

must be filed with FINRA twice each month and must be reported by the close of business on the second day after the calculation.

An OTC equity security is defined as any security that’s not listed on a national securities exchange.

Question 34

What pricing criteria are used when marking-to-the market?

Answer 34

A comparison of the contract price to the market price

Question 35

FINRA’s Corporate Financing Department is responsible for

Answer 35

ensuring the fairness of the underwriter’s compensation.

Question 36

How often are broker-dealers required to file short positions?

Answer 36

Twice per month with FINRA

These reports must be filed with FINRA within two business days after preparation.

Question 37

A broker-dealer has had a fail-to-deliver position in an OTC equity security that’s been on the threshold security list for 13 consecutive settlement days. What action is the broker-dealer required to take?

Answer 37

Immediately close out the fail.

Question 38

Regulation A offerings are different from registered offerings:

Answer 38

Offering Circular rather than prospectus

Securities that are purchased in a Reg. A offering can be resold immediately.

Reg. A issuers may use general solicitation and advertising prior to the filing of an offering statement with the SEC

Question 39

When executing a transaction in a debt security for a customer, the dealer is NOT required to use its contemporaneous cost as the prevailing market price:

Answer 39

If there is a significant change in the general level of interest rates

Question 40

If a registered representative disagrees with information that’s found on BrokerCheck, her firm should:

Answer 40

File an updated Form U4

Question 41

If a person is no longer registered and disagrees with information found in BrokerCheck:

Answer 41

the individual must file a Broker Comment Request Form since a Form U4 cannot be filed.

Question 42

A U.S. issuer conducts an offering of corporate bonds in Spain. How long is the holding period if a broker-dealer wants to offer the securities to an investor in the U.S.?

Answer 42

40 days

There is a distribution compliance period (holding period) of 40 days for debt securities and a one-year period before an equity security sold pursuant to Regulation S may be resold in the U.S.

Question 43

Factors that are considered in obtaining best-execution:

Answer 43

include price,

relative liquidity and volatility of the security,

general character of the market,

size and type of transaction,

number of primary markets checked,

and the locations, accessibility of the member organization to primary markets,

and the terms and conditions of the order.

Question 44

A company listed on the NYSE is in the process of raising capital by selling additional shares of common stock. The company may release forward-looking statements:

Answer 44

At any time

Question 45

Broker-dealers must designate a principal to oversee their firm’s supervisory control system and report to senior management on the results of such surveillance. Senior management must be apprised of the status of the supervisory control system every:

Answer 45

12 months

Question 46

Final determination on whether a security is in good deliverable form is made by the:

Answer 46

Transfer agent

Question 47

A corporation has common stock and convertible bonds that are listed for trading on Nasdaq. Under Rule 101 of Regulation M:

Answer 47

A reference security is a security into which the subject security can be converted, exchanged, or exercised, or which, to a significant extent, determines the value of the subject security.

For example, if a convertible bond is being distributed, the underlying common stock is a reference security and subject to the restrictions of Rule 101.

Together, subject and reference securities are referred to as covered securities by Regulation M

Question 48

although common stock would be a reference security if a derivative (e.g., a convertible, right, or warrant) were the subject security, the reverse is not true.

Answer 48

For example, if ABC Company is issuing common stock, ABC Company convertibles are not reference securities

Question 49

If an exchange-listed security is traded in the over-the-counter market, the trade is considered to have been executed in:

Answer 49

The third market

Question 50

A member firm that is required to make substantial adjustments to its fidelity bond must:

Answer 50

Immediately notify FINRA

Question 51

Part II of a Financial and Operational Combined Uniform Single (FOCUS) report is filed:

Answer 51

By clearing firms on a quarterly basis

Part IIa is for intro firms

Question 52

Under Regulation SHO, if a broker-dealer has a fail-to-deliver position at a clearing firm in a threshold security that was sold under a Rule 144 exemption, it’s required to close out the position in:

Answer 52

35 consecutive settlement days

Question 53

A research analyst may not participate in investment banking pitches because:

Answer 53

There is a conflict of interest that could lead to biased communications

Question 54

When do equity trades in a COD account typically settle?

Answer 54

Within two business days of the trade date

Question 55

Under the Customer Limit Order Protection Rule (the Manning Rule), if a market maker executes an order for its own account that would have satisfied a customer’s order being held by the firm, it’s required to execute the customer’s order within:

Answer 55

60 seconds

Question 56

An introducing firm is considering underwriting a firm deal. The firm has used 3 temporary subordination agreements in the past 10 months. The firm may enter into a 4th agreement:

Answer 56

Under no circumstances

Temporary subordination agreements, which may not exceed 45 days in duration, may be utilized for underwriting purposes only. The firm may only use up to three temporary subordinated loans each year.

Question 57

Trades done on any alternative trading system (ATS) must be reported to the ______as soon as practical, but no later than ____ seconds after execution.

Answer 57

TRF or ORF

10 seconds

Question 58

A brokerage firm with a net capital requirement of $50,000 must maintain a fidelity bond of:

Answer 58

$100,000

A broker-dealer that has a net capital of less than $250,000 must maintain a minimum coverage which is the greater of 120% of the members net capital requirement or $100,000. 120% of $50,000 is $60,000, which is less than $100,000.

Question 59

If a registered representative is terminated by a firm and then hired by another firm, the new firm has how many days to review the individual’s Form U5?

Answer 59

60 days

Question 60

A customer sells $10,000 of stock and with the proceeds purchases $10,000 of another stock. If the broker-dealer charges a total markup of $875.00, this would equal:

Answer 60

8.75%

A proceeds transaction is one in which a broker-dealer sells stock for a customer and uses the proceeds of the sale to purchase other stock. The broker-dealer is required to consider the entire dollar amount charged in the transaction when determining the amount of markup that it will charge.

The markup as a percentage is computed as though the customer had made only a single transaction. In this case, since the sale involves $10,000 of stock and the markup is $875.00, the percentage would be 8.75%.

Question 61

A broker-dealer must provide a statement advising a customer to report any inaccuracy or discrepancy in that person’s account:

Answer 61

Each time an account statement is sent

This type of advisory statement must be included each time an account statement is sent to a customer (which is at least quarterly).