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Series 7 Exam > Introduction to the Securitites Industry > Flashcards

Introduction to the Securitites Industry Flashcards

1
Q

Primary Market

A

covers the sale of securities by issuers to investors

ex: IPO

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2
Q

Secondary Market

A

a system for the trading of financial instruments between investors

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3
Q

Securities Act of 1933

A
  • regulation of primary market

- concerned with full and fair disclosure

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4
Q

Securities Act of 1934

A
  • regulation of secondary market
  • created SEC
  • regulatory oversight of extension of credit to Federal Reserve Board
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5
Q

Maloney Act of 1938

A
  • enabled the creation of non- exchange SRO
  • ex: NASD in 1939
  • ex: MSRB in 1975
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6
Q

NASD

A
  • National Association of Securities Dealers

- 1939 as SRO for OTC market

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7
Q

MSRB

A
  • Municipal Securities Rulemaking Board

- 1975

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8
Q

FINRA

A
  • Financial Industry Regulatory Authority

- 2007 NYSE and NASD merged to create FINRA

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9
Q

Trust Indenture Act of 1939

A
  • added security for bond investors

- requires agreement between issuing corporation and a trustee in case of the corporation’s liquidation

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10
Q

Investment Company Act of 1940

A
  • covers companies that are formed to pool investors’ money and invest that money in securities
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11
Q

Investment Advisers Act of 1940

A
  • regulate firms that sell their investment advice for a fee
  • also defines investment adviser and specifically exempts broker-dealer, lawyers, accountants, teachers, engineers, and publishers
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12
Q

Securities Investor Protection Act of 1970 (SIPA)

A
  • enabled the creation of industry-funded insurance
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13
Q

Employee Retirement Income Security Act of 1974 (ERISA)

A
  • covers the administration of private qualified retirement accounts such as the popular 401K
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14
Q

Securities Acts Amendments of 1975

A
  • created Municipal Securities Rulemaking Board (MSRB)

- SRO for firms that transact business in municipal securities

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15
Q

Insider Trading Act of 1988

A
  • although covered in Acts of 33’ and 34’, the 1988 Act sets out criminal penalties as high as $5 million and/or 20 years in jail
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16
Q

Federal Telephone Consumer Protection Act of 1991

A
  • any person who calls prospects for profit must maintain a do-not-call list and refrain from calling those who requested to be placed on the list
17
Q

Penny Stock Rule of 1991

A
  • covers the selling of certain low-priced securities to potential new customers
  • rules require a firm to have signed disclosure document stating investors understand the risk
18
Q

Form U4

A
  • form used to register with FINRA
19
Q

MSRB Representative Qualifications

A
  • may have either a Series 7 or Series 52 registration
  • must also serve a 90 day apprenticeship
  • principals: series 53
20
Q

FINRA Representative Qualifications

A
  • principals: series 24

- employees: series 7

21
Q

Accounts Requiring Employer Approval

A
  • any broker dealer employee attempting to open an account must disclose that she is employed by a broker-dealer and opening firm must notify employer firm and await instructions
  • MSRB: duplicate confirmations MUST be sent
  • FINRA: duplicate confirmations sent only if REQUESTED
  • employee accounts that deal with only mutual funds are exempt
22
Q

Gifts and Compensations

A
  • member firm personnel may not give a gift of material value exceeding $100 per recipient per year to personnel employed by another member firm
23
Q

FINRA Disciplinary Proceedings

A
  1. Department of Enforcement notifies respondent
  2. respondent has 25 days to file response
  3. Failure to respond generated 2nd notice
  4. respondent has 14 days to respond
  5. If no response, assumed guilty. Other request a hearing
24
Q

Sanctions

A

A Hearing Panel may impose the following:

  • censure a member firm of person
  • fine a member firm or person
  • suspend for definite period or until conditions met
  • expel
  • suspend or bar an associated person with any member firm
  • impose any other fitting sanctions
  • ** FINRA may not sentence an RR to imprisonment
25
Q

Appeals

A
  • once panel has rendered a decision, respondent has 25 days to file an appeal with National Adjudicatory Council (NAC0
  • right to appeal NAC decision to SEC
  • right to appeal SEC decision in federal court
26
Q

Acceptance, Waiver, and Consent

A
  • person does not dispute
  • must sign AWC
  • may impose fine of not more than $2,500 and/or censure the member or associated person
27
Q

Code of Arbitration

A
  • settlement of disputes through arbitration
  • National Arbitration Committee will appoint panel of three
  • can be simplified to one for disputes less than $25,000
  • finding FINAL
  • outside customers can’t be brought to arbitration without written consent, and then majority of arbitrators must be from outside securities industry

Series 7 Exam (3 decks)

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