Part 4: Supervision of Communications with the Public

Question 1

Investment company and direct participation program retail communications must be submitted within ______________

Answer 1

10 business days of first use.

Question 2

Options and securities futures retail communications must be filed ______________

Answer 2

10 business days before use.

Question 3

All retail communications must be submitted to the Department _____________ in the first year of BD operations. Following that year, assuming the firm demonstrated good taste and decorum, no further filing is needed. Ads are always subject to a spot check.

Answer 3

10 business days before first use

Question 4

Prior approval of a research report can be granted by ___________

Answer 4

a research principal, and with limited exceptions, a general securities principal.

Question 5

Tombstones and prospectuses are regulated under ____________-

Answer 5

the Securities Act of 1933

Question 6

A syndicate manager or co-manager may not publish a research report on the subject issuer for how many days following an initial public offering (IPO)?

Answer 6

10 days

Question 7

An analyst is about to issue a bullish research report on ABC common stock. Under FINRA rules, the analyst and household members are prohibited from purchasing the stock for __ days after issuance.

Answer 7

5

Question 8

Participation in an internet chat room is considered a ___________

Answer 8

public appearance.

Question 9

Communication directed to at least 15 persons that provides analysis of distinct stocks that may be used by listeners to make an investment is defined as a ___________

Answer 9

research report

Question 10

If there was a paid testimonial of greater than $____, that fact must also be disclosed

Answer 10

$100

Question 11

Collateralized mortgage obligations, direct participation programs, and investment company products such as mutual funds, exchange-traded funds, variable insurance products, unit investments trusts, et cetera, are subject to postfiling requirements for retail communications unless they incorporate a ranking or comparison that is not generally published or is the creation of the investment company or its underwriter. In such case, they must be submitted __ business days prior.

Answer 11

10

Question 12

Any communication between research analysts and investment banking personnel regarding research reports must be made through a ______ or _______ officer of the member firm.

Answer 12

legal or compliance officer

Question 13

FINRA rules prohibit analysts and members of their households from investing in a company’s securities for __ days before and __ days after the analyst issues a research report on the company.

Answer 13

30; 5

Question 14

Blogs are generally considered to be ______ content.

Answer 14

Interactive

Question 15

Static content includes these for example: _______, ______, & _______

Answer 15

profiles, blogs, & backgrounds.

Question 16

Regarding the Do Not Call Registry: a business relationship exists if the person to be contacted has made a financial transaction or had a security position or account activity within the prior __ months; your firm was the broker-dealer of record for that person within the prior __ months; or the person, within the prior __ months, has contacted your firm to inquire about its services.

Answer 16

18 months; 18 months; 3 months

Question 17

A member firm is a market maker in ABCD stock. The firm intends to participate as an underwriter in an issue of ABCD bonds. Under SEC Rule 138, is this allowed?

Answer 17

It is: the firm can accept solicited or unsolicited orders for the stock ONLY IF the new bonds are nonconvertible (since they are not equivalent securities).

Question 18

Research reports: a client communication distributed to at least ___ persons that analyzes individual securities and provides information on which to base an investment decision

Answer 18

15

Question 19

True or False:
A research report distributed by a member firm on the common stock of a listed company must include whether, within the past year, the member was part of a selling group offering the issuer’s securities.

Answer 19

False.
Under FINRA rules, research reports must disclose whether the member is a market maker in the security being recommended, whether a control relationship exists between the member and the issuer of the recommended security, the market price of the recommended security as of the report date, and whether the member was a manager or co-manager of any offering of the issuer within the prior year.

Question 20

Is the portfolio analysis tool considered to be a recommendation?

Answer 20

Yes. An example of what the regulators have determined to be a recommendation would be if a broker-dealer provides a portfolio analysis tool that allows a customer to specify an investment goal and input personalized information such as age, financial condition, and risk tolerance.

Question 21

FINRA disseminates TRACE-generated reports to the public how soon after receipt?

Answer 21

immediately after receipt.

Question 22

A research analyst placed a buy recommendation on MNO stock. The analyst has a personal holding in MNO. Is the analyst permitted to sell his personal holding of MNO stock?

Answer 22

A research analyst is prohibited from trading counter to a recommendation. BUT from time to time there could be a legitimate reason to do so…..in which case they must get approval from the compliance dept.