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Series 10 > Part 3: Supervise Sales Practices & General Trading Activities > Flashcards

Part 3: Supervise Sales Practices & General Trading Activities Flashcards

1
Q

If a complaint involves allegations of theft, forgery, or misappropriation of securities/funds - when must the member firm report this to FINRA?

A

Promptly, no later than 30 days

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2
Q

______ means entering orders or falsely reporting trades to affect the closing price of a security.

A

Marking the close

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3
Q

A block is at least _____ shares or any quantity of stock having a market value of $____ or more, whichever is less, that’s acquired by a member in a single transaction

A

10,000 shares; $200,000

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4
Q

A fail to deliver (dealer to dealer) can be bought in no sooner than ___ business days after the settlement date.

A

3
The notice can be given as soon as the business day after settlement, and the buy-in can be effected no sooner than two business days after written notice.

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5
Q

All representations relating to whether an account is eligible to purchase new equity issues at the public offering price must be retained for how many years?

A

3

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6
Q

Who are restricted persons per FINRA Rule 5130?

A

Firms, employees, finders, portfolio managers, and persons owning 10% or more of a firm are restricted persons.
(Immediate family members of such persons are also restricted.)

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7
Q

The purchase and sale of ADRs, as well as the dividends paid to U.S. investors in ADRs, will always be in ___________

A

U.S. dollars.

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7
Q

The purchase and sale of ADRs, as well as the dividends paid to U.S. investors in ADRs, will always be in ___________

A

U.S. dollars.

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8
Q

If the beneficial interests of restricted persons do not exceed ____ of an account, the account may purchase a new equity issue.

A

10%

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9
Q

An order to purchase or sell a stock that specifies a price is called ________

A

a limit order

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10
Q

Regulation SHO for securities on the threshold list (hard to borrow list) requires mandatory buy in if there is a fail to deliver in __ consecutive settlement days, but that is extended to __ settlement days for Rule 144 stock.

A

13; 35

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11
Q

________ requires that broker-dealers disclose order routing information on their nondirected customer orders (including payment for order flow arrangements).

A

SEC Rule 606

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12
Q

Per Rule 606, how often must these reports be distributed to clients?

A

Quarterly.
(These quarterly reports must disclose the market centers to which these orders were directed for execution and the nature of any relationship between the firm and these market centers, including any payment for order flow arrangements.)

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13
Q

Stock purchased in a standby arrangement is subject to a ______ lockup period, which is why it must be purchased in the firm’s investment account not its trading account.

A

3 month

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14
Q

SEC Regulation SHO requires that a threshold list be prepared _____ by the exchanges.

A

daily

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15
Q

The Regulation SHO Threshold list includes equity securities that are hard to borrow, identified by having a clearing short position at the NSCC of ____shares or more and represents at least __% of the total shares outstanding.

A

10,000; 1/2%

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16
Q

__________ describes the splitting of customer orders into multiple orders to maximize payment for order flow.

A

Trade shredding

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17
Q

The price to be reported through FINRA/Nasdaq Trade Reporting Facility (TRF) [includes or excludes?] commissions, markups, and markdowns.

A

excludes

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18
Q

Under Regulation SHO, securities that have large open short positions at a registered clearing agency are termed ____________

A

threshold securities

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19
Q

A _________ is a market order in which the investor has given the authority to choose the price and time to the floor broker to achieve the best possible execution. It is not turned over to the DMM for execution.

A

not held order (NH)

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20
Q

A ______ occurs when a firm executes a customer order at a price when a better price is available.

A

trade-through

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20
Q

A ______ occurs when a firm executes a customer order at a price when a better price is available.

A

trade-through

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21
Q

No employee may make a transaction in the securities of an issuer that appears on the firm’s restricted trading list (watch list) unless _____

A

JK there is no unless, they really can’t do this.

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22
Q

A _________ underwriting allows a corporation to sell as much of a new issue to current stockholders as possible, backed by the underwriter’s promise to purchase any unsold rights.

A

standby

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23
Q

Under FINRA Rule 5130 concerning restrictions on sales of equity initial public offerings (IPOs): who may purchase an equity IPO?

A

Employees of limited business member firms may purchase an equity IPO. (NOT the firm itself)

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24
Q

If a market maker does not maintain a firm quote, it may be sanctioned for _________

A

backing away

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25
Q

The amount withdrawn from a variable annuity is fully taxable as ____________ as earnings are assumed to be withdrawn first.

A

ordinary income

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26
Q

Management company securities are nonexempt and must register with the SEC before public sale using form ____

A

Form N-IA

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27
Q

A management company is not permitted to issue securities to the public unless it has capital of at least ______

A

$100,000

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28
Q

A diversified management company is one that has at least:
__% or more of its assets invested in securities issued by companies other than the investment company itself or its affiliates and
of that percent, no more than __% of the fund’s total assets are invested in the securities of any one issuer,
and the fund may not own more than __% of the outstanding voting securities of any one issuer.

A

75, 5, 10

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29
Q

Under SEC Rule 35d-1, if the name of an investment company suggests investments in a particular industry or sector, __% of its portfolio must be invested in that industry or sector

A

80

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30
Q

The SEC requires that a prospectus in use for more than 9 months cannot contain financial information more than __ months old

A

16

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31
Q

A majority vote of the outstanding shares is required if the management company wishes to change any of these 3 things:

A

its investment objectives, investment adviser, or any of its policies.

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32
Q

The 1940 act requires that at least __% of the board members be unaffiliated with the management company

A

40

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33
Q

How often is NAV computed?

A

Once each business day

34
Q

NAV =

A

total assets - total liabilities ÷ # of shares outstanding

35
Q

FINRA rules require that if a customer redeems shares within __ business days of purchase, the member must forfeit the concession received to the fund or its sponsor.

A

7

36
Q

Under extraordinary circumstances, the SEC has empowered firms to suspend redemptions of redeemable investment company securities…..An exception to this is the 22(e) exemption which is…….

A

During the annuity payout period of a variable annuity contract, it is exempt from any suspension.

37
Q

A mutual fund that has adopted a 12b-1 plan must review amounts expended under this plan __________.

A

quarterly

38
Q

A trailer commission is usually associated with ______ fees charged by mutual funds

A

12b-1

39
Q

According to FINRA, the maximum sales charge on the purchase of open-end investment company shares is _______

A

8.5% of the public offering price

40
Q

Who safeguards the securities held in a mutual fund’s portfolio?

A

The custodian

41
Q

Mutual funds must file _____ reports with the SEC.

A

annual

42
Q

Long-term capital gains by investment companies are distributed ________

A

annually

43
Q

An investment adviser may be compensated on either a fixed-fee basis or on a percentage of assets under management (AUM), not share in capital gains. An exemption to that prohibition, however, is permitted if a client has at least ____________

A

$1 million under management or a net worth of at least $2.1 million.

44
Q

A stabilizing bid may not exceed the __________

A

public offering price

45
Q

12b-1 fees may not be used to pay for __________

A

the portfolio manager’s fees

46
Q

FINRA’s ____________ Committee determines the settlement date for when-issued transactions when a sufficient percentage of the issue is outstanding.

A

Uniform Practice Code (UPC)

47
Q

A ___________ contract is a written agreement between members to buy or sell a security before its issuance.

A

when-issued (WI)

48
Q

An issuer purchasing its own securities may pay no more than the _________ or _________, whichever is higher.

A

highest independent bid; last sale

49
Q

The ask price for a ___________ fund is either the NAV or the NAV + a sales charge

A

open-end fund
(so an open-end fund must cost either more or the same as the NAV…..this is not true with closed-end: closed-end may have a price below the NAV)

50
Q

When any change in the terms of a tender occurs, the new offer must remain open for a minimum of __ business days from the change.

A

10

51
Q

What is a tender offer?

A

a bid to purchase some or all of shareholders’ stock in a corporation

52
Q

A member firm enters simultaneous buy and sell orders on the same stock in rapid succession. This is an example of _______ or _________.

A

wash trading or painting the tape.

53
Q

Gains in a variable annuity are taxed as ___________

A

ordinary income. (there is never a capital gain with a variable annuity)

54
Q

A broker-dealer may NOT solicit transactions in municipal securities for the account of an investment company for _________________

A

sales made or promised by the member firm of shares in the investment company.

55
Q

Repurchase agreements can be used only to hedge long positions in _______ securities, such as municipal bonds.

A

exempt

56
Q

Stabilizing bids may be entered on the Nasdaq system by how many market makers?

A

1

57
Q

Under adverse market conditions, it is not unusual for mutual fund investors who had been investing on a regular basis to cease or reduce their level of financial commitment. This can have the effect of __________

A

net redemptions.

58
Q

A one-sided quote is permitted for ______

A

Over-the-Counter Bulletin Board stocks.

59
Q

Which of the following best describes a 12b-1 fee?

A

A fee charged by some mutual funds to cover sales and distribution expenses

60
Q

The Securities Act of 1933 exempts securities issued by charitable or religious organizations from the registration and prospectus delivery requirements as long as the organizations are ________.

A

nonprofit organizations

61
Q

Letters of intent for a MF may be backdated up to __ calendar days, provided the total investment period used to qualify for the breakpoint does not exceed __ months.

A

90; 13

62
Q

The SEC requires that issuers of unregistered securities file Form D (Notice of Sales Made) within __ days of the first sale.

A

15

63
Q

Principal transactions must be done at an _______ price that is fair and reasonable

A

aggregate

64
Q

Agency transactions must be done for a ______ or service charge that is not in excess of a fair and reasonable amount considering all relevant factors.

A

commision

65
Q

______ is the practice of allocating highly sought-after IPO shares (hot stock) to individuals who are in a position to direct securities business to the firm.

A

Spinning

66
Q

_____ refers to the sale of new issue shares purchased within 30 days following the offering date.

A

Flipping

67
Q

What’s the max sales fee for Class C shares?

A

0.75%

68
Q

If the beneficial owner of street name stock returns a signed proxy statement but fails to indicate how the shares are to be voted, the member must vote the shares how?

A

as recommended by management of the issuer

69
Q

When must trades made at the list offering price be reported?

A

By end of the first trading day

(note: this is an exception to the 15 min rule)

70
Q

Once a tender offer is announced, the target company, within __ business days of the announcement, must provide its shareholders with a statement indicating acceptance or rejection of the offer and the reasons for the position taken.

A

10

71
Q

Specifically excluded from the TRACE real-time reporting dissemination service are _____________ and _____________.

A

debt securities of foreign countries (not foreign companies); money market securities

72
Q

Broker-dealers that have payment for order flow arrangements with market makers must disclose these arrangements in which reports?

A

Rule 606

73
Q

SEC Regulation SHO requires that participants of a registered clearing agency must immediately purchase shares to close out securities with large and persistent failures to deliver, referred to as threshold securities, if the failures to deliver persist for ____ consecutive business days

A

13

74
Q

Under SEC Rule 606, how often are member firms required to make publicly available reports on their order routing methods?

A

quarterly

75
Q

Are breakpoints available to investment clubs?

A

No.

76
Q

Alternative investments include four major categories:

A

real assets, hedge funds, private equity, and structured products

77
Q

Once a tender offer is announced, the target company, within __ business days of the announcement, must provide its shareholders with a statement indicating acceptance or rejection of the offer and the reasons for the position taken.

A

10

78
Q

Interpositioning is not a violation if ______________

A

it results in a better price for the customer.

79
Q

Repurchase agreements can be used only to hedge long positions in _______securities, such as municipal bonds.

A

exempt

80
Q

Open-end companies may issue only _______.

A

common stock

81
Q

Does a trade confirmation need to say if the trade was solicited or unsolicited?

A

No.

82
Q

If an advisory firm is an adviser to a _____________, it is required to register with the SEC, regardless of the amount of AUM.

A

registered investment company

83
Q

Government securities, money market instruments (the promissory note is another way of saying commercial paper), and intrastate offerings are exempt from the registration provisions of the ____Act.

A

1933

Series 10 (4 decks)

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