Missed Questions Chapters 1-8 Flashcards
A registered representative of the firm being forced to forfeit commissions on the sales of securities due to inappropriate sales practices requires what action with their U4?
FINRA requiring broker dealers to report this type of occurrence within 30 days and needing to update form U4
A broker dealer has established a page on a social media site which allows customers to post comments. This firms responses to these comments are considered:
Retail communications
It’s defined as retail communication, but it is managed in a manner that is similar to correspondence – subject to review and supervision
Firms and registered representatives are not permitted to release client information to third parties
This includes spouses, without the written consent of the account owner
An example of something that would not be an exception is
Releasing information to a parent
POV: an issue that’s eligible to register it sale of securities on form S-3 has a public float of $750 million but it has NOT issued debt since it became a reporting company- can it issue a free writing prospectus??
Yes, it is permitted to use a FWP at any time because it is a WKSI and meets the following criteria of $700 million+ of common equity outstanding (which is public float) or $1 billion of debt, but not both
Since it has the one part of this that’s needed, it is a WKSI and qualifies for automatic FWP
A ______ is broad and defined as any written or electronic communication that includes an analysis of equity securities of individual companies or industries, and provides information that’s reasonably sufficient in which to base and investment decision
Research report
A principal is reviewing a newsletter that a registered representative will be sending out via email to its clients. The newsletter contains in-depth information and opinions/recommendations on four different stocks- what is this considered, and does it require approval?
This is considered a research report and it is required to be preapproved by a principal
Who can be permitted to be the emergency contact for a member firms business continuity plan?
One registered principal and one member of senior management who has knowledge of the member’s business operation
FINRA requires at least one of these individuals to be senior management and a registered principal of the member firm – if the second contact person is not a registered principal, he must be a member of senior management who has knowledge of the firms business operations
If a research analyst has placed a sell recommendation on a security, the analyst is permitted to:
Sell short
An analyst with a sell recommendation may hold, sell, or sell short, the subject security
A broker dealer is serving as the lead underwriter for an IPO. The new issue is expected to be priced at $22. Who can potentially buy shares below the public offering price?
A broker dealer that’s a member of the selling group
Only FINRA members are permitted to receive a concession or allowance, and it must be based on the member firms participation in the underwriting
This is all set in the selling group agreement
A broker dealers clients have posted positive comments on the personal social networking page of one of the firms registered representatives
What is this considered?
This is not considered retail communication because posts on social media side that are made by customers or any other third parties are referred to as third-party posts
It would become retail communication if the firm becomes entangled or has adopted the third-party content
If a registered person at a broker dealer was terminated and three years later, there’s a customer complaint that’s filed against this person, The firm must:
Report this to FINRA and file an amended form U5
A stabilizing bid is not permitted for:
An OTC equity security
Stabilizing bids are permitted for all exchange listed securities
If fingerprints are illegible:
Firms are not required to submit a fourth fingerprint card for the individual after 3 successive good faith attempts to be fingerprinted
How often does a supervisory branch office that supervises one or more non-branch locations need to be inspected?
Annually
How often does a branch office that doesn’t supervise one or more non-branch locations need to be inspected?
Every three years
How often does a non-branch location need to be inspected?
On a periodic regular schedule
Supervision of real time communication through social networking sites is regulated in a manner that similar to:
Correspondence
Meaning it is subject to review and supervision, but does not require principal approval prior to use
If a research analyst whose firm will be participating as an underwriter for an emerging growth company (EGC) , they can:
Comment on the company in a public appearance on the day after an IPO
The Sarbanes-Oxley Act requires two of the following people to certify the truthfulness of its companies quarterly in annual reports:
CEO and CFO
A broker dealer just received notification that a registered representative of the firm is resigning to join a new firm. As a result the firm:
Must provide the representative with a copy of the termination notification (U5) that it files with FINRA and also notify FINRA within 30 days
A stock buyback requires the issuer to reduce its outstanding shares of stock by buying back shares in the open market over a certain amount of time or by making a tender offer
is this an example of investment banking?
No this is not an example of investment banking
Who can supervise individuals who transact business and mutual funds?
A general security principle or an investment company products/variable contracts limited principle
Series 24 and series 26
A registered representative is planning on holding investment workshops at an upscale hotel once a month: this location would be considered
An office of convenience
Which means a non-branch location
The quiet period that applies to a co-managers publication of a research report following a non-actively traded follow on offering is:
Three days
A broker dealer sells a new issue of convertible bonds to a hedge fund investor. If the broker dealer is a member of the syndicate, the firm is entitled to the:
Underwriting fee and concession
Only the syndicate manager is entitled to the management fee
A selling group member is only entitled to the concession
What triggers the need for a company to file a schedule 13 D?
A hedge fund that holds 5.5% of the companies common stock
Any person who becomes the beneficial owner of more than 5% of any class of equity security must file a statement of beneficial ownership on schedule 13 D with the issuer
A research analyst is not allowed to do with an emerging growth company?
They cannot attend a roadshow in connection with the company’s initial public offering
To properly supervise, a producing branch manager, what must be included in a member firms written procedures?
Prohibiting any employee who performs a supervisory function from supervising his own activities and from having his compensation or continue employment, determined by a person he supervises
When it comes to the disclosures on the account statement of a customer who owns shares of an unlisted REIT –
Firms may use an estimated value based on the assets and liabilities of the REIT that’s performed at least annually, conducted by a third-party expert service, and derived from a methodology that conforms to standard industry practice
A registered representative cannot borrow funds from or lend funds to:
A customer that is an institutional investor
A registered representative can do this when:
- the customer has a personal relationship with the RR where in the loan would not have been solicited, offered, or given if the relationship did not exist
- the loan is a business relationship other than that of the member firm customer
If a registered principal recently started his employment with the broker dealer and has an existing brokerage account that was open before his new employment, what must he do?
You must obtain written consent from this new employer within 30 days of starting at the new firm and must notify the executing firm of his new employment
A brokerage firm places an online advertisement, which indicates that it’s now a market maker and a specific stock. This retail communication should or shouldn’t be filed ?
Is not required to be filed
A registered representative copies and pastes an article that was prepared by a non-affiliated online publication. The article will be sent to 30 existing retail customers and examines, fixed income and equity investing. This type of communication:
Requires principal approval, but is not required to be filed with Frah because of the independently prepared prints
What is the maximum amount of time that FINRA has to review and process a broker dealer membership application after its received through the FINRA Gateway system?
180 calendar days
A company is NOT required to file form 8-K for a person acquiring more than ___% of the stock of the firm
A person acquiring more than 5% of the stock of the firm
Form 8-K Would need to be filed for the company changing it’s accountant, one of the directors of the company resigning, the company being involved in a bankruptcy proceeding, and other material events that could affect the financial condition or the value of its shares
What type of investment company purchases their shares at their net asset value?
No load mutual funds
Rule 100(b) of regulation FD lists various categories of persons to whom selective disclosure cannot be made unless a specific exclusion is present. These categories are entities that may be reasonably expected to trade on the non-public information that has been released.
Some exclusions to this rule could be:
Temporary insiders, someone who expressly agrees to maintain the information and confidence, and disclosures to an entity, whose primary business is the issuance of credit ratings
The maximum underwriting compensation on public offerings of DPP’s is:
No more than 10% for a soliciting dealers and wholesalers, plus 0.5% for due diligence expenses
If a newly hired research analyst owned shares of a company, when is she able to divest her holdings and initiate coverage with a buy recommendation?
Only if the analysts firm has a plan that has been approved by legal or compliance
A RR is making a public appearance at a seminar and hands out copies of the presentation which includes promotional information about the firms fixed income business. How is communication treated under FINRA rules?
A principal is not required to preapproved the public appearance itself, but must provide approval of the presentation material
When can a broker dealer recover a portion of a commission on a new issue that was flipped?
If the managing underwriter has assessed a penalty bid on the entire syndicate
Flipping is defined as the initial sale of a new issue that was purchased in an offering, and the sale occurs within 30 days following its offering date as an IPO
This measure is intended to discourage flipping and stabilize the price of the new issue
A US based broker dealer wants to issue a research report on a US-based company that’s filing an S –3 registration statement. The broker dealer has not issued reports on the company with any reasonable regularity. According to SEC rule 139:
The broker dealer cannot issue a report during the registration.
This is because the broker dealer has not issued reports with any reasonable regularity
Breakpoint take into consideration
Rights of accumulation
A corporate insider who purchased shares of his company stock one week prior to the company announcement of a large increase in earnings is allowed to do this if:
The corporate insider had established a pre-written plan to buy shares on a certain date
10b5-1 plan
A person must file form 3 with the SEC:
Within 10 days of becoming a Director
A firm as a dealer for the shares of an IPO that will be listed on NASDAQ, but the firm is not part of the underwriting syndicate. A prospectus must be provided to any purchaser in the aftermarket for:
25 days
prohibits a broker dealer from selecting investment company shares to sell to customers based on the amount of commission business received or to be received from the investment company- this is what?
Anti-reciprocal rule
A registered representative is asked by the sponsor of an oil and gas limited partnership to market the partnerships units to clients. Since the partnership is not being sold through the representative broker dealer, the sponsor will compensate the representative directly, but only if the RR is able to sell the units.
What needs to happen in order for the representative to participate?
The broker dealer must provide written approval for the transactions and must record the transactions on its books
A broker dealer has several branch offices throughout the United States. One of its branch offices, conducts, market, making activities, but does not maintain custody of customer securities this specific office:
Must be designated as an office of supervisory jurisdiction (OSJ) And have an on-site principal
The reason they need an on-site principal is because due to the market making activities so they can be supervised
If a broker dealer is engaged in a follow on offering of an issuer and a hedge fund, customer wants to sell short 75,000 shares of the stock, the broker dealer needs to:
Accept the order
I had fun. Customer is permitted to sell short within the five business day restricted. Prior to pricing as long as it does not purchase the securities being offered in the follow on.
A new FINRA member firm is preparing a television advertisement to promote its services. What steps must the firm take to comply with FINRA regulations regarding the filing of this retail communication?
It must file the television advertisement with FINRA at least 10 business days prior to its first use because this is a new business for the first year They must file everything.
A broker dealer has a registered person who has just become subject to statutory disqualification. If the firm wants to continue employing this person in a registered capacity:
It IS required to institute heightened supervision procedures, and are required to be tailored based on the nature of the RR’s activities
The effective date of an initial public offering is
Determined by the SEC after the filing of the most updated registration statement
An initial public offering may be used to raise capital in the US under what method?
Regulation A
Tear to permits the issue to raise up to $75 million in a 12 month period by filing a form 1-A
A member firm has decided to terminate its research coverage on a company. Which of the following actions must affirm take to be in compliance with industry rules?
Provide a final report
This is so they can provide its customers in the same manner, ordinarily used when presenting its findings. The final report must be similar in depth compared to its past reports and must include a recommendation, unless it is impractical to do so.
Can a wife of an employee of a broker dealer who is a Director of the issuer purchase and equity IPO?
Yes
Restricted persons are permitted to purchase IPOs under certain exemptions, including an issue or directed sale. This exemption allows a registered representative to purchase shares of an equity IPO if the issuer is that person’s employing broker dealer.
Who is least likely to file the required compensation disclosures?
A selling shareholder
What is an example of a trade that wouldn’t fall under the jurisdiction of the SEC?
A trade between two parties outside of the US
If at least one party is in the US, they are under the jurisdiction of the SEC
According to rule 147:
A corporation must have its principal office in the state of the offering in order to be considered a resident of that state
A corporation that’s headquartered in state A can still purchase and IPO offering, even if it does 70% of its business in state B
Rule 104 of regulation M defines stabilizing as
Affecting a purchase to maintain the price of a security
How often does SEC require reporting of a 10-Q filing?
It is filed three times and dated as of the fiscal quarter
What is NOT considered a type of distribution?
A tender offer
Under regulation M, when does the restricted period generally begin?
The later of five business days prior to pricing OR whenever the broker dealer becomes a participant
It ends when the broker dealers participation is over
An investment banking firm is conducting a regulation, S offering for a US corporation. The offering will be made in London. Which of the following persons or entities may participate in the offering as a buyer?
A non-US person
The committee that reviews research analyst compensation may not consider ____?
The contribution, the analyst made by increasing the number of merger and acquisition transactions
When it comes to rule 144A transactions:
An investor that buys the securities may resell them without a volume restriction
144A = QIBs and there is no holding. Requirement for restricted stock.
A shelf registration may be used by
A well-known seasoned issuer and a seasoned issuer
What type of transaction has no new capital raised by a company?
A 144 sale
this permits, the resale of restricted/unregistered and control stock under certain conditions and the seller is not the issue
Private placement
A corporation has an ADTV value of $3 million and public float value of $125 million. What’s the restricted period for the distribution participants in the issue?
One day
Under regulation D, what is an example that is not considered a single purchaser?
A partnership that’s formed to purchase the private placement securities
A broker dealer may be required to file a suspicious activity report when:
A transaction or an aggregate value of transactions equals or exceeds $5000
A registered representative is suspended from a broker dealer for 90 days. What can he do during this Period?
He can sell insurance products
Who needs to be fingerprinted?
Employees who sell securities, regularly have access to keeping, handling, processing securities, original books, and records, relating to securities, and have direct supervisory responsibility over those who sell security or have access to securities books and records
Can registered representatives hold mutual fund investments outside of their firm without getting written permission?
Yes
This also applies to variable annuity transactions
The investment analysis tool that’s available to investors it needs to be:
Made available to FINRA upon request if access is provided to retail investors
There is no need to file the tool itself or report any written templates
A broker dealer must verify what on a person‘s employment as disclosed on form U4
The most recent three-year Of employment.
A broker dealer has established a relationship with a bank to offer its brokerage services on the premises of the bank. In order to do so, they need to:
Make sure the SEC and FINRA have access to the bank premises and be permitted to review the broker dealers books and records
An email solicitation that sent to 30 portfolio managers of registered investment companies is considered:
An institutional communication
The reason is this and not retail, is because these are only institutional investors
Simplified arbitration may be used to settle disputes involving claims of:
$50,000 or less
Simplified arbitration may be used to settle disputes involving claims of:
$50,000 or less
At the firms, annual compliance seminar, they would not discuss:
Product knowledge
The priority is regulation and compliance
A registered representative has an opportunity to earn a fee by arranging loans for a local business from a accredited brokerage customers. This activity is regulated as:
Private securities transaction that requires the approval of the RR’s broker dealer and requires recording the transaction on the broker dealers books
A member firms business continuity plan must address at a minimum which element in case of a significant business interruption?
Communications with the SEC and SIPC
Does a dispute between a member firm and FINRA need to be settled through arbitration?
No
That would be settled through the code of procedure
True or false: denial of a registration by the commodity futures trading commission (CFTC) is grounds for statutory disqualification
True
A registered representative sent an identical instant message to 35 retail customers. This instant message is considered:
Retail communication and must be approved
If someone buys a reverse convertible security, they are anticipating:
A stable value in the underlying asset
Think knock in levels- around the knock in level or above = good
Below = bad
A broker dealer plans to issue retail communication that that contains bond fund volatility ratings. When must the broker dealer file this type of communication?
Within 10 days of the first use
A producing branch manager also services retail brokerage accounts on behalf of his family. Under SRO rules, how does he get supervised?
The manager may be supervised by a regional manager
When can an issue were used in omitting or summary prospectus?
With sales of investment company securities, and variable contracts
A registered representative has received a notice that a tax lien has been levied against her. What does this mean for her U4?
An updated form U4 must be filed within 30 days
