Industry Rules Flashcards
According to FINRA rules, list some of the persons that are considered institutional investors. 6
- Banks,
- insurance companies,
- investment companies,
- investment advisers,
- FINRA members
- RRs of FINRA members
What actions may the hearing panel take regarding rule violations? 5
- Censure,
- fine,
- suspension,
- request to requalify, or
- expulsion of the respondent
When a minor dispute is handled through simplified arbitration, is the ruling final and binding?
Yes, all arbitration decisions are final.
According to the TCPA, what information must telephone solicitors provide to clients? 4
- Their name,
- firm name,
- telephone number or address where they can be contacted, and
- the purpose of the call
Under Penny Stock Rules, when does a customer become established? 2
- When they have purchased 3 different penny stocks on 3 different occasions, or
- they have been a customer for one year
Define institutional communication.
Written or electronic communication that is distributed or made available only to institutional investors
List the three forms of communications with the public.
- Retail communication,
- Institutional communication, and
- Correspondence
True or False: On request, institutional communication may be provided to a retail client.
False. Institutional communication may never be provided to a retail investor.
All forms of communication with the public must be kept for _____ years, but easily accessible for the first ___ years.
All forms of communication with the public must be kept for three years, but easily accessible for the first two years.
Is correspondence subject to principal approval?
No, but it must be reviewed by the firm.
Churning is described as _____________________ designed to _____________________.
Churning is described as excessive trading designed to generate commissions.
Define research reports.
Written or electronic communication about equities, including information for a client to make an investment decision.
Is the 5% policy based upon the current market value of the security or the dealer’s cost?
Generally, the current market value
Industry disputes are handled through ______________.
Industry disputes are handled through Arbitration.
If a BD’s investment company communications include self-created rankings, when must they be filed with FINRA?
At least 10 business days prior to use
When arbitration involves public customers, __________ of arbitrators must be from outside the securities industry.
When arbitration involves public customers, a majority of arbitrators must be from outside the securities industry.
If a client seems confused and demands an unsuitable change of objective, what step should an RR take?
Confusion and/or dementia are concerns that may warrant an RR to request a meeting with the client and a family member.
Define correspondence.
Material that a member firm makes available to 25 or fewer retail investors within any 30-calendar-day period.
For a firm’s first year as a FINRA member, when must its broadly disseminated retail communications be filed with FINRA?
10 business days prior to their first use
May firms allow for the free flow of information between their research department and investment banking department?
No, these two departments must be separated to avoid conflicts of interest.
What are some of the special standards that firms follow in regard to soliciting sales of penny stocks? 4
- Determine suitability,
- principal approval,
- send risk disclosure,
- client’s written authorization for the first 3 trades
What is exempt from the 5% policy? 4
- Trading of municipal bonds,
- new issues,
- registered secondary offerings, and
- mutual funds
May a customer be forced to use arbitration?
No, but signed pre-dispute arbitration agreements are binding.
May an RR and a client share in an account?
Yes, with firm approval and provided the sharing in gains and losses is proportionate to their investment.
