Must know review

Question 1

Ex-dividend date is set by ?

Answer 1

In addition to these dates (declaration date, record date, and payable date), there is a fourth date—the ex-dividend date—which is set and published by the market where the security principally trades (e.g., the ex-dividend date is set by the NYSE if the stock is listed, and by FINRA if the stock trades over the counter).

Question 2

Ex-Date

Answer 2

The ex-date is the date on which the stock begins to trade without (ex) the dividend (if stock is bought on the ex-date, the buyer will not receive the dividend). To receive the dividend, the stock must be bought before the ex-date.

Question 3

Under Uniform Practice Rules, the ex-dates for cash and stock dividends as well as for related distributions (e.g., stock splits) are as follows:

Answer 3

For regular way trades—one business days prior to record date

For cash settlement trades—one day after the record date

Question 4

For cash dividends in which the value of the dividend is 25% or more of the market value of the stock, or where the number of shares in a stock dividend or stock split represents a 25% or more increase, the ex-date is

Answer 4

For cash dividends in which the value of the dividend is 25% or more of the market value of the stock, or where the number of shares in a stock dividend or stock split represents a 25% or more increase, the ex-date is one business day after payable date.

Question 5

Buying on the ex-date in a regular way trade will entitle the buying member to the upcoming dividend as the trade will settle after record date T/F ?

Answer 5

Buying on the ex-date in a regular way trade will not entitle the buying member to the upcoming dividend as the trade will settle after record date.

Question 6

The basic rule—to receive the dividend, the buyer must purchase the stock before

Answer 6

The basic rule—to receive the dividend, the buyer must purchase the stock before the ex-date

Question 7

The order of dates is

Answer 7

DERP

Question 8

The opening quotes for a Nasdaq stock are adjusted downward on the morning of the

Answer 8

The opening quotes for a Nasdaq stock are adjusted downward on the morning of the regular way ex-date to reflect the value of the upcoming cash dividend.

Question 9

Under SEC rules, customer fails-to-deliver must be bought in after how many business days from settlement date ?

Answer 9

Under SEC rules, customer fails-to-deliver must be bought in after 10 business days from settlement date.

Reference: 4.14.16 in the License Exam Manual

Question 10

If more than how many dollars in value is paid for the testimonial, the fact that it is a paid testimonial must be disclosed in the communication ?

Answer 10

If more than $100 in value is paid for the testimonial, the fact that it is a paid testimonial must be disclosed in the communication.

Question 11

Does payment for order flow need to be disclosed on confirmations ?

Answer 11

If applicable, payment for order flow must be disclosed on confirmations. Reference: 3.1.6 in the License Exam Manual

Question 12

When must a firm submit its proposed sub loan agreement to FINRA ?

Answer 12

The member firm must submit to FINRA its proposed subordinated loan agreement no later than 10 business days before the expected effective date.

Reference: 2.11 in the License Exam Manual

Question 13

Is whether the member a market maker required on the order ticket or confirm ?

Answer 13

Whether the member is a market maker in the security bought or sold is not required on an order ticket (but it is required on the confirmation).

Question 14

The standard haircut on actively traded common stock is what percentage ?

Answer 14

The standard haircut on actively traded common stock is 15%.

Question 15

If stock owned by the firm has a limited trading market, the haircut is ?%.

Answer 15

If stock owned by the firm has a limited trading market, the haircut is 40%.

Question 16

True/False - All non exempt securities must be registered with the SEC prior to public sale ?

Answer 16

All non exempt securities must be registered with the SEC prior to public sale.

Reference: 5.1.1 in the License Exam Manual

Question 17

How long must customer account records be kept ?

Answer 17

Customer account records (such as the new account form) are 6-year records. The six years toll from when the account is closed.

Reference: 2.15.1.2 in the License Exam Manual

Question 19

FINRA RULE 3130

Answer 19

Member firms, under FINRA Rule 3130, are required to designate and notify FINRA on Form BD a principal to serve as chief compliance officer (CCO) and to have the chief execu

tive officer (CEO) certify annually that the member firm has in place processes to establish,

maintain, review, test, and modify its supervisory procedures. The CEO also must conduct

one or more meetings with the CCO during the 12 months preceding certification and submit

a report to the firm’s board of directors (BOD) and audit committee within 45 days of the

certification.

Question 20

Switching

Answer 20

Selling shares of one mutual fund to buy shares of another is known as switching and is a supervisory concern. Although the customer may have legitimate reasons for making the exchange, she may incur additional sales charges and tax liabilities.

Reference: 2.22.12.9 in the License Exam Manual

Question 21

T1 Halt

Answer 21

News pending : Trading is halted pending the release of material news

Question 22

Form 3

Answer 22

A legal document used by officers, directors, and principal stockholders of more than 10% of a corporation to file an initial statement of beneficial ownership of equity securities. The form is filed with the SEC.

An insider of an issuer that is registering equity securities for the first time under Section 12 of the Exchange Act must file this Form no later than the effective date of the registration statement.

Question 23

Form 4

Answer 23

A legal document used to update Form 3 when there are changes in the beneficial ownership of a corporation. Filed within two business days of any change.

Question 24

Form 8K

Answer 24

A legal document used to report events of consequence that occur in a corporation; such events include changes in control of the corporation or in its name, address, financial standing, board of directors, or auditors. Syn . “current report”

Question 25

Form 10C

Answer 25

A legal document used by an issuer of securities quoted on Nasdaq to report a change of more than 5% in the amount of securities it has outstanding

Question 26

Form 10K

Answer 26

An annual audited report. A Form 10K is due within 90 days of year-end.

Question 27

Form 10Q

Answer 27

A quarterly report containing a corporation’s unaudited financial data. A Form 10Q is due 45 days after the end of each of the first three fiscal quarters.

Question 28

Form 13F

Answer 28

SEC required form for investment managers, who in the course of its business, exercises discretion over $100 million.

Question 29

Form BD

Answer 29

The Uniform Application for Broker-Dealer Registration. Broker-dealers must file this form to register with the SEC, SROs, and states through the Central Registration Depository (CRD) system, operated by FINRA. BDs are required to promptly update Form BD whenever the form becomes inaccurate or incomplete

Question 30

Form F-6

Answer 30

SEC required form to both register American Depositary Receipts and to provide current information to the public similar to Form 8-K

Question 31

Form 112 (CTR)

Answer 31

A currency transaction report for those transactions in currency of more than $10,000.

Question 32

Form 20F

Answer 32

SEC form to both comply with SEC requirement to file annual reports within four months of the end of the company’s fiscal year and as a registration statement of foreign private issuers.

Question 33

Form 5

Answer 33

Insiders must file a Form 5 to report any transactions that should have been reported earlier on a Form 4 or were eligible for deferred reporting. If a Form must be filed, it is due 45 days after the end of the company’s fiscal year.

Question 34

REG SHO Close out procedures

Fail Type = Short sales - clearing agency

What is the deadline ?

Who closes the fail ?

Answer 34

Deadline is t+3

Failing party closes the short sale

Question 35

REG SHO Close out procedures

Fail Type = Long sale - clearing agency

What is the deadline ?

Who closes the fail ?

Answer 35

What is the deadline ? t+5

Who closes the fail ? Failing Party

Question 36

FINRA 11810 Close out procedures

Fail Type = ex clearing

What is the deadline ?

Who closes the fail ?

Answer 36

Deadline 3 biz day after fail with notice by noon, 2 business days prior

Who closes - non failing party

Question 37

Threshold Security - when must a fail be closed out ?

Answer 37

After 13 settlement days by the failing party

Rule REG SHO

Question 38

Fail type - customer to broker dealer

Deadline ?

Answer 38

Deadline = After 10 business days from settlement

Who closes = Broker dealer

Rule is 15c3-3

Question 39

Trial Balance

Answer 39

A trial balance is a report, taken from a firm’s general ledger, that includes the firm’s balance sheet, income statement, and net worth accounts. From the information in the trial balance, a firm can prepare a net capital computation. SEC rules require that members prepare trial balances at least monthly.

3 year record

Question 40

Immediate family members

Answer 40

Immediate family members are a person’s parents, mother-in-law or father-in-law, spouse, sibling, brother-in-law or sister-in-law, son-in-law or daughter-in-law, children, and any other individual to whom the person provides material support.

Material support means providing more than 25% of a person’s income in the prior calendar year directly or indirectly. Members of the immediate family living in thesame household are deemed to be providing each other with material support.

Question 41

Exception to restricted person for IPOs

Answer 41

There is an exemption granted to employees of a limited business broker-dealer, which is defined as a firm engaged solely in the purchase and sale of investment company/variable contract securities, direct participation program securities, or both.

Question 43

DE MINIMIS RULE

Answer 43

If the beneficial interests of restricted persons do not exceed 10% of an account, the account may purchase a new equity issue. Restricted persons will be able to have an interest in an account that purchases new equity issues if no more than 10% of the account’s beneficial owners are restricted persons

Question 44

Securities purchased in a standby arrangement are restricted for resale for a period of

Answer 44

Securities purchased in a standby arrangement are restricted for resale for a period of three months. Syndicate members are likely buyers in a standby arrangement