Questions From Quizzes/Exams Flashcards

Question

All of the following associated persons must be fingerprinted EXCEPT a person who solely: A. Solicits customer orders B. Transfers securities C. Processes customer transactions D. Handles customer securities and funds

Answer 1

C All officers and employees of a broker-dealer must be fingerprinted except for those persons not engaged in the sale of securities AND those persons who do not regularly have access to the keeping, handling, or processing of monies, securities, or the records of original entry. Thus, a person who solely processes customer transactions (e.g. Preparing confirmations) need not be fingerprinted.

Answer 2

False. The agreement must be written. Verbal repurchase agreements are prohibited as they are considered guarantees.

Answer 3

1. Anytime a change or amendment is made to the OS - or | 2. Any time a new purchase is made - periodic of non-periodic.

Answer 4

False The Office of Supervisory Jurisdiction must inspect customer account records "periodically" to detect and prevent irregularities or abuses. In addition, the member firm must inspect each OSJ at least annually, to ascertain that these procedures are, in fact, being carried out.

Answer 5

True. In addition, the member firm must inspect each OSJ at least annually, to ascertain that these procedures are, in fact, being carried out.

Answer 6

it does not wish to go through the cost and time of registering the issue with the SEC. So-called "letter stock" is private placement stock sold under Regulation D. An "investment letter" that accompanies these issues explains that the securities are not SEC registered and cannot be resold in the public markets unless they are either registered or sold under an exemption such as Rule 144.

Answer 7

C. The prospectus delivery rules following the effective date are as follows: IPO of the security that is NOT exchange listed (e.g., OTCBB and Pink Sheets): 90 days Add on Offering of a security that is NOT exchange listed: 40 days Security that is exchange listed: 25 days

Answer 8

False If a customer receives a maintenance call, the customer may "cross guarantee" and use the equity in any other accounts that the customer maintains at the same firm, with the exception of a pattern day trading account. Pattern day trading margin requirements are kept independent, and the customer can only use the financial resources available in the pattern day trading account to meet any maintenance calls.

Answer 9

Supervisory branches must be inspected at least annually; non-supervisory branches must be inspected at least every 3 years.

Answer 10

supervisory branches must be inspected at least annually; non-supervisory branches must be inspected at least every 3 years.

Answer 11

True The notice must be given promptly, but no later than 30 days after the event

Answer 12

Hard to borrow

Answer 13

False. There is no requirement to disclose the mark-up in a principal transaction unless the security is included in the NASDAQ System.

Answer 14

False There is no requirement under this rule to disclose the names of the syndicate members, nor their participation percentages.

Answer 15

False There is no prohibition on margin transactions in discretionary accounts; nor is there a prohibition on a customer entering an order of his or her own choice in a discretionary account.

Answer 16

False There is no requirement to disclose on a customer confirmation if the order was solicited or unsolicited.

Answer 17

I, II, and III When a new issue is "in registration," an offer or sale of the issue cannot be made. This is allowed only when the registration becomes effective. Prior to the effective date, the following are not legally considered to be offers: the mailing of a preliminary prospectus (red herring); the acceptance of an indication of interest (which is completely non-binding); and the publication of a "tombstone announcement" - which is so limited in nature that it is not considered an advertisement. The acceptance of a deposit is prohibited, since this is considered to be a binding contract of sale. This cannot occur until the effective date.

Answer 18

D. The FINRA 5% Policy applies to over-the-counter and exchange transactions in all securities except municipals. It does not apply to prospectus offerings (new issues).

Answer 19

True If 5 years is an option on the test - that is the answer.

Answer 20

B. The "Manning Rule" is another name for the Limit Order Protection Rule, which prohibits member firms from trading ahead of customer limit orders.

Answer 21

D. The annual compliance review is supposed to cover rules and regulations - not product knowledge.

Answer 22

A. Under Rule 144, control stock that is purchased in the open market can be sold immediately (if they are bought in the open market, the shares must be registered). However, the 1% and 4 week trading average limits on sale must still be met. Restricted stock (unregistered stock acquired through a private placement) can only be sold under Rule 144 after having been held for 6 months, fully paid.

Answer 23

VWAP (Volume Weighted Average Price) transactions, which are typically large institutional orders, that when executed, could move the price of the stock that is the subject of the order.

Answer 24

D. When opening a customer account, the customer's identity must be verified promptly after account opening. This is done by matching the customer information to a valid government issued photo ID. A birth certificate does not have a photo (but it does have a footprint!).

Answer 25

The 529 rollover rules only allow 1 rollover per beneficiary per year. It makes no difference how many 529 plans are set up for the same beneficiary.

Answer 26

B. The Consolidated Quotations Service provides bid and ask quotes with sizes for all market makers in exchange listed stocks. These market makers are the Specialists/DMMs on the New York Stock Exchange, Specialists on regional exchanges where the stock may also be listed (e.g., the Philadelphia Exchange), and Third Market Makers such as Weeden and Jefferies and Co.

Answer 27

B. It makes no difference if mutual fund dividends are reinvested or not - they are taxable. The maximum tax rate on cash dividends is currently 15%.

Answer 28

There is no requirement to disclose the spread to customers in competitive bid offerings; this is only required for negotiated offerings.

Answer 29

True. Any non-qualified withdrawal is also subject to these taxes. The tax does not apply if the beneficiary received a scholarship and thus the funds were no longer needed to pay for school; if the funds are rolled-over into the plan of another state; or if any unexpended funds are rolled into a 529 plan for a relative that will be a college student.

Answer 30

False. The principal does not have to personally handle customer complaints - this work can be delegated to someone else. However, the principal is responsible for the complaint's handling and resolution

Answer 31

True These are tightly regulated by the Securities Act of 1933, so FINRA does not need to perform further oversight. Announcement of changes (such as change of address, phone numbers, new office, new employees, employee promotions) also are not covered by the Interpretation since they are not promotional.

Answer 32

A Rule 204 of Regulation SHO mandates the buy in of all short sales where there is a fail to deliver on "T+4" (the morning of the business day after settlement), which is the same as S+1.

Answer 33

I, II, III, IV The BOM has responsibility for account approval and transaction approval in customer accounts; for ascertaining the good character, business repute, qualifications, and experience of each applicant for registration in the branch; and for reviewing incoming correspondence directed to representatives in the branch and outgoing correspondence from representatives to their customers. As far as having responsibility for maintaining personnel files of branch employees, this one is “debatable,” but we think that the answer is “yes” to this one as well. Most personnel record information originates in the branch, and the records are usually kept at both the branch location and a central HR location.

Answer 34

False. MSRB Rule G-27 (Supervision) requires that order tickets be approved by the principal "promptly"; and that customer accounts be reviewed "frequently."

Answer 35

B - There is no requirement to note the time of order entry. The following are required to be on agency order tickets: Terms and conditions of the order. Date and time of receipt of the order. The price at which the trade was executed. The date of execution, and to the extent feasible, the time of execution. If the account is that of a partnership, corporation, a joint account, or an order entered pursuant to a power of attorney, the name and address (if other than the account address) of the person entering the order. If the order is canceled by a customer, the record must show the terms, conditions and date of cancellation, and to the extent feasible, the time of cancellation. If the trade is discretionary, the ticket must be designated as such.

Answer 36

I, II, III, and IV The NASDAQ System accepts market, marketable limit, and limit orders. It allows proprietary trades and agency trades.

Answer 37

II and IV The FINRA 5% Policy applies to over-the-counter and exchange transactions that take place in the secondary market - the trading market. It does not apply to "redeemable securities" such as mutual funds (open end investment companies) and unit investment trusts. It does apply to securities that are traded, such as closed end funds and Real Estate Investment Trusts.

Answer 38

True The representative must have a reasonable basis to believe that: the customer has been informed, in general terms, of the material features of the product; the customer would benefit from one or more of the product’s features; and the particular variable product as a whole, the underlying separate accounts to which funds are allocated, and riders to the policy are suitable.

Answer 39

False... There may only be one rollover in any 12 month period for the same beneficiary. There is no limit on the frequency of rollovers where there is a change of beneficiary designation, as long as the new beneficiary is a qualifying family member.

Answer 40

False There is no requirement to disclose current yield on a confirmation.

Answer 41

The 5% Policy applies to all over-the-counter and exchange transactions that take place in the secondary market except for those in municipal securities. It applies to over-the-counter riskless transactions (a dealer buying a security for a customer after receiving a sell order in the same security from another customer - since the dealer is "matching" the orders and is not taking the position into inventory, it is a riskless trade). It applies to proceeds transactions (where a customer directs a dealer to sell one position and use the proceeds to buy another position). The 5% Policy does not apply to prospectus offerings, so it does not apply to registered primary distributions or registered secondary distributions.

Answer 42

False Contributions to Coverdell accounts must stop once the beneficiary reaches age 18. Distributions must be completed upon reaching age 30.

Answer 43

I only. Cash dividends are credited to SMA, increasing the balance that can be borrowed, for 30 days. At the same time, they reduce the debit balance. If the customer borrows the dividends within the 30-day time limit, then SMA is reduced and the debit increases to its previous balance. Interest charged on the debit is added to the debit balance, but has no effect on SMA. Stock dividends received have no effect on the debit, nor on SMA. The number of shares increase, but the aggregate market value in the account would theoretically be unchanged for the stock dividend. A decline in the market value of securities has no effect on SMA. SMA "locks" at its existing level if the market value declines.

Answer 44

1000 hours

Answer 45

II and IV TRACE stands for “Trade Reporting And Compliance Engine” and is FINRA’s system for collecting trade reports on corporate and agency bond issues traded OTC. Both investment grade and non-investment grade bond trades are reported, and both convertible and non-convertible issues are reported through TRACE. The time frame for required TRACE trade reports is not the usual 10 seconds. TRACE reports must be made "as soon as practicable" after execution.

Answer 46

False The MSRB defines as "quotes," which must be bona fide, as any bid for a security; offer of a security; publication of a "bids wanted" notice; or publication of an "offers wanted" notice.

Answer 47

I, II, and III

Answer 48

I, II, III, and IV

Answer 49

3:45pm ET. | Note: NASDAQ allows such orders to be placed/cancelled til 3:50pm

Answer 50

3: 50pm | note: NYSE allows these orders only until 3:45pm

Answer 51

I, III, IV, II

Answer 52

1 day for validation. The firm then has 3 days from the validation date to complete the transfer of the securities. (Under MSRB rules, a firm has 3 days to validate the positions. After validation, a firm has another 4 days to xfer the securities)

Answer 53

Under MSRB rules, a firm has 3 days to validate the positions, then 4 days after validation to complete the xfer. (Under FINRA rules, a firm has 1 day to validate the securities then 3 more days to complete the xfer)

Answer 54

D Margin securities are pledged as collateral by the customer to the brokerage firm in return for the margin loan. These securities are never registered in customer name. If this were done, then the firm would need the customer's signature on the securities to sell them, in the event of the customer failing to meet a margin call. Margin securities can be held in bearer name, member firm name, or nominee name (e.g. Depository Trust Corp.). Thus, if the securities need to be liquidated, they can be sold without any hold-ups.

Answer 55

D. As a general rule, interpositioning a third firm between the customer and the market maker is prohibited unless it can be demonstrated that the use of the "middleman" firm will result in a better execution for the customer.

Answer 56

False Stabilizing bids can be placed at or below (typically just below) the Public Offering Price. They can never be placed above the Public Offering Price.

Answer 57

II and IV only While the MSRB does not define Official Statements and Offering Circulars as "advertising," it does define abstracts of these as advertising, subject to review and approval by a municipal securities principal. This makes sense, because an abstract prepared by a municipal firm might contain inaccurate statements or might omit important information. The actual Official Statements or Offering Circulars are prepared in conjunction with the Bond Counsel, and must meet rigid legal disclosure requirements and State disclosure requirements.

Answer 58

False. The 5% Policy applies to all over-the-counter and exchange transactions in the secondary market EXCEPT for those in municipal securities.

Answer 59

III and IV SEC Rule 145 requires the registration of securities issued in connection with mergers and acquisitions, liquidations, or exchanges. This rule has no effect on stock splits or changes in par value.

Answer 60

False. All of the reasons above are true except #5. Disclosing a mark-up is not a reason for a higher mark-up than normal on a trade.

Answer 61

I, II, and III All municipal firms are subject to the CE requirements of MSRB Rule G-3.

Answer 62

False. Member firms are free to change their minimum maintenance margins at will. There is no requirement to give the customer advance notice of a change.

Answer 63

B. MSRB rules require that when executing a transaction for a client, the firm must obtain a price for the customer that is fair and reasonable in relation to prevailing market conditions.

Answer 64

B. The managing underwriter will act as the stabilizing underwriter in a new issue offering. At any time, only one firm (the manager) can maintain a stabilizing bid.

Answer 65

B. Portfolio margin, which is risk-based as opposed to strategy-based, reduces margins for hedged stock positions and hedged stock portfolios. To hedge stock positions, both listed options and unlisted derivatives may be used. Portfolio margins cannot be used for bond positions. This is the case because they already have very low margins (for example, the margin on corporate bonds is the greater of 7% of face or 20% of market value).

Answer 66

False. Investment Advisers must operate on a fiduciary standard while Broker-Dealers must operate on a suitability standard

Answer 67

C. To be considered "current" under SEC rules, customer statements must be posted no later than settlement date.

Answer 68

C. To stop managing underwriters from "hyping" an underwriting once sale of the issue commences, the managing underwriter is prohibited from issuing a research report on that company, or from making public appearances where it comments on that company, for the 10 days following the effective date for an initial public offering; and for the 3 days following the effective date for a secondary (add-on) offering.

Answer 69

B. Prior to the sale date of a competitive bid issue, the syndicate accepts "pre-sale" orders to build a "book" of customer orders. The credit for these orders is shared among all syndicate members based on their participation percentage. Immediately following the sale date, if the issue is not completely "pre-sold," the manager establishes an order period, and will accept Group Net; Designated; and Member Takedown orders. The orders that benefit the most syndicate members get highest priority. Group Net Orders are credited to the syndicate account as a whole (similar to Pre-Sale Orders); while the credit for a Designated Order has been directed to be split among designated syndicate members (say 2 or 3 specific members); while the credit for a Member Order only goes to that single syndicate member. Thus, Group Net Orders benefit the syndicate as a whole; while designated orders benefit some members of the syndicate; and Member orders only benefit one syndicate member.

Answer 70

False. Section 529 plans can only be established by States. Prepaid tuition plans, however, can be established by both colleges and universities, as well as States.

Answer 71

transfers a personal interest in a security to a third party, giving that party the right to substitute another name in the company's records

Answer 72

B. The MSRB requires that syndicate members who place Group Net orders with the manager for new issue allocations must disclose the identity of the customer for whom the order is being placed at the "time of order submission."

Answer 73

B. Upon receiving a written customer complaint, the municipal firm must promptly send to the customer a copy of the "Investor Brochure" which details how complaints may be resolved

Answer 74

i, ii, & iii The cost of distributing a mutual fund (that is, the cost of compensating a sales force) can be paid from up-front sales charges, contingent deferred sales charges, and from annual 12b-1 distribution fees

Answer 75

I, II, III, IV The key to this situation is that the broker-dealer is underwriting the non-convertible bonds of the company. Since these cannot be converted into the common stock, there are no prohibitions on the broker-dealer from recommending the purchase of the common stock; from soliciting orders to buy the common stock; from accepting unsolicited orders to buy the common stock; or from distributing research reports on the common stock prior to the effective date. Please note that if the underwriting was for a convertible issue, all of these activities would be prohibited

Answer 76

C. A "When, As and If Issued" security is a new issue that has not yet been issued for trading. These are most often exempt bond offerings that are "presold" to investors before the actual issuance date of the securities. When the securities are actually issued, the FINRA Uniform Practice Code Committee sets a settlement date - typically 3 business days from, issue date.

Answer 77

I, II, and IV To open a new margin account, a new account form must be completed; the customer must sign a hypothecation agreement (margin agreement); and the customer must receive a credit disclosure form. There is no legal requirement for the customer to sign a loan consent form, though very few firms will open a margin account without one. If the customer signs a loan consent form, the firm is permitted to loan out that customer's securities on short sales

Answer 78

A. Unit Investment Trusts issue securities that represent an undivided interest in a fixed portfolio that are redeemable with the Sponsor at the current market value of the unit. There is no management of the portfolio, as is the case in a Management Company. Trusts do not have a Board of Directors. They are run by a Board of Trustees.

Answer 79

C. The MSRB permits the use of the MSRB name on a broker-dealer's advertising and website, but only by stating "MSRB Registered." The firm is not an MSRB member - FINRA is a membership organization and a firm can state that it is a FINRA member. The MSRB is simply a rulemaking board with which any broker-dealer that effects municipal transactions or engages in municipal securities business must be registered

Answer 80

True | note: The Code of Arbitration is used to handle disputes from member to member, such as settlement problems.

Answer 81

I and III A newer variation on a salary reduction plan such as a Keogh or SEP permits investments in annuity contracts. The annual contribution amount is limited as with all qualified plans, and the contribution reduces reported income for that year, so the contribution is made with “pre-tax” dollars. Earnings build tax deferred and when distributions commence (which must occur by age 70 ½), 100% of the distribution is taxable.

Answer 82

D. The 5% Policy only applies to transactions that take place in the secondary market - either on an exchange or over-the-counter. The 5% Policy applies to over-the-counter principal and agency transactions; riskless or simultaneous transactions; proceeds transactions; and third market transactions. A third market trade is an over-the-counter trade of an exchange listed security. The policy does not apply to trades of municipal securities; nor does it apply to new issue prospectus offerings

Answer 83

I and III Under MSRB Rule G-8, copies of agency and principal order tickets must be maintained separately and must be retained for 4 years. Note, in contrast, that the SEC rule for retention of records is 3 years.

Answer 84

A. Rule G-15 requires disclosures of concessions on customer confirmations as an aggregate dollar amount.

Answer 85

False Any person who owns restricted (unregistered) shares of a company's stock must hold the stock fully paid for 6 months before the securities can be sold under a Rule 144 exemption.

Answer 86

I, II and III The Non-NASDAQ OTC Bulletin Board is FINRA's electronic version of the printed "Pink Sheets." It includes stocks that do not qualify for NASDAQ listing (usually because the price of the issue is too low). In the Bulletin Board would be found any type of quote for these securities - as long as the quote is identified. In addition, "BW" - Bid Wanted or "OW" Offer Wanted listings would be found for these securities. Such listings do not have a price.

Answer 87

B. The circuit-breaker rule shuts the markets for 15 minutes if the S&P 500's index drops by 7%, and shuts them again if it drops by 13% from the prior days' closing value. After reopening, if the index drops by 20%, the markets are closed for the remainder of the day.

Answer 88

D. If information is discovered by a member firm about a terminated registered representative that has not been disclosed on the U-5 filing made with FINRA within 30 days of the termination of that individual, an amendment must be filed with FINRA by the member firm within 30 days of discovery of the new information.

Answer 89

I, II and III The Non-NASDAQ OTC Bulletin Board is FINRA's electronic version of the printed "Pink Sheets." It includes stocks that do not qualify for NASDAQ listing (usually because the price of the issue is too low). In the Bulletin Board would be found any type of quote for these securities - as long as the quote is identified. In addition, "BW" - Bid Wanted or "OW" Offer Wanted listings would be found for these securities. Such listings do not have a price.

Answer 90

B. The circuit-breaker rule shuts the markets for 15 minutes if the S&P 500's index drops by 7%, and shuts them again if it drops by 13% from the prior days' closing value. After reopening, if the index drops by 20%, the markets are closed for the remainder of the day.

Answer 91

D. If information is discovered by a member firm about a terminated registered representative that has not been disclosed on the U-5 filing made with FINRA within 30 days of the termination of that individual, an amendment must be filed with FINRA by the member firm within 30 days of discovery of the new information.

Answer 92

False 529's are state sponsored education savings plans. Coverdells are federal plans.

Answer 93

8:1 During the first year, aggregate indebtedness cannot exceed 8 times the firm's net capital. After the first year, they can't exceed 15:1.

Answer 94

False. It is NOT considered to be an offer to sell.

Answer 95

I, II, III, IV The non-NASDAQ "OTC Bulletin Board" is an electronic version of the Pink Sheets. It shows quotes for securities that do not qualify for NASDAQ listing. On the OTC Bulletin Board can be found firm quotes with size for these non-NASDAQ securities. In addition, dealers can place "BW" and "OW" entries for positions (Bids Wanted and Offers Wanted), and can place unpriced indications of interest in securities positions.

Answer 96

B. To train other municipal representatives, a person must have a Series 53 - Municipal Principal license. The Series 52 Municipal Representative license is needed by those persons who trade, sell, underwrite, and do research on municipal securities, as well as those who act as financial advisors.

Answer 97

True Because there is such a high degree of uncertainty surrounding these calls.

Answer 98

For the life of the firm.

Answer 99

False. Munifacts is an electronic reporting service used by professional bond traders to analyze the details of bond offerings

Answer 100

False. The Bond Buyer is a daily newspaper about the municipal bond industry covering municipal bond new issue offerings, news, trends and analysis

Answer 101

False The Bond Buyer is available in newsprint and on the web, and is used by industry professionals - not by the general public.

Answer 102

False. UITs and face amount certificate companies are trusts. Management companies are not. Thus, management companies have a Board of Directors. UITs and face amount certificate companies have a Board of Managers.

Answer 103

1. Variable annuities | 2. Mutual funds

Answer 104

I only. The SIPC logo is required on all broker-dealer advertising that is larger than 10 square inches. It is not required to be placed on firm stationery, research reports, or market letters (though the firm may choose to do so).

Answer 105

B. The SEC requires that the issuer give the exchange enough advance notice of a Record Date for a distribution such as a dividend, so that the exchange can set an appropriate ex date. The SEC rule requires that issuers declare dividends at least 10 days in advance of the proposed Record Date.

Answer 106

Semi-annually

Answer 107

False. The annual balance sheet must be audited, while the semi-annual balance sheet is unaudited.

Answer 108

C. The name of the person at the member firm who prepared a market letter is not required to be disclosed; just the name of the firm is required on the market letter as well as the date of publication. If another firm or person has prepared the market letter, this must also be disclosed.

Answer 109

I, II, and IV Included in the MSRB's definition of advertising are market letters, research reports, seminar texts, and speeches relating to investing. Internal memos made available to the public would also fall into the definition. If these memos were only distributed within the firm, they would be excluded. Also excluded are letters of an individual nature to customers.

Answer 110

I and II If a coupon bond is in default, it must be delivered with all unpaid coupons attached, thus Choice III is incorrect. If the trade settles on, or after, the interest payment date, the seller has earned the interest for the entire preceding 6-month interest period, and claims the interest due by detaching and cashing that coupon. Thus, Choice I is correct. If it is within 30 days of an upcoming interest payment, the MSRB permits the seller to detach the upcoming coupon and substitute a bank check, making Choice II correct as well.

Answer 111

A. Registered bonds are issued in $1,000 denominations of multiples of $1,000, up to $100,000 per bond.

Answer 112

I, II and III

Answer 113

B. FINRA Uniform Practice Rules allow reclamation of securities for minor irregularities within 15 days of the date of the original delivery. If the irregularity is severe - such as the wrong certificate delivered, or an over-delivery, the reclamation period is 30 months.

Answer 114

I, II, III, and IV

Answer 115

I, II, and III

Answer 116

I, II, and III Under FINRA Rule 5130, all officers and employees of FINRA member firms and their "immediate family" are prohibited from buying new issues from underwriters. Immediate family includes spouses, siblings, parents, children, and anyone who is supported to a material extent. It does not include uncles, aunts, grandparents and grandchildren (unless they are supported by the employee).

Answer 117

I and IV DTCC (Depository Trust and Clearing Corporation) holds securities positions for its member firms and, as the clearing agent, transfers ownership as trades occur between these firms. All securities deposited to DTCC must be "eligible" for automated clearance and settlement. This means that they must be held at DTCC in street name and can either be physical certificates in street name or can be book-entry shares held in DRS (the Direct Registration System). DTCC will not hold securities that cannot be readily transferred. These are securities with resale restrictions and include private placement securities and Rule 144 issues (since they can only be transferred by meeting all of the Rule 144 requirements, such as the minimum 6 month holding period and sales only permitted every 3 months in limited amounts). Rule 144A issues are private placements that trade between QIBs on PORTAL - and DTCC will accept these.

Answer 118

A. PIPE stands for a Private Investment in Public Equity. It is a fast injection of capital into a publicly traded company, where the company issues private placement unregistered shares at a discount to the private institutional investor. As a condition of the capital injection, the private equity firm requires that the company file a shelf registration for those shares, which allows the private equity firm to "cash out" its holding, if it so chooses, over the upcoming 3 years.

Answer 119

A. Under Rule G-15, if a customer requests information relating to a trade that occurred within the past 30 calendar days, the firm must provide the information within 5 business days of request. If the request relates to a trade that occurred more than 30 days ago, the response period is extended to 15 business days.

Answer 120

D. The ex-date for a stock dividend or stock split is different than that for a cash dividend. The ex-date for a stock split or stock dividend is set at the day after the Payable Date. This creates a problem. Assume that the company sets the Record Date at March 1st; and the Payable Date at March 31st. Anyone who buys the stock and settles on the Record Date of March 1st or before will be on the shareholder list to receive the additional shares on the Payable Date. There is no impact on these people. But anyone who buys the stock, settling anywhere from March 2nd (day after Record Date) through March 31st (Payable Date) will pay the full unadjusted price for the stock, but will not be on the record books to receive the additional shares when the stock split or stock dividend is paid (on March 31st). This isn't fair, and these customers can claim the additional shares with a due bill. Anyone who buys, settling on the ex date of April 1st or later, will pay the reduced price, for the proper number of shares and a due bill is no longer required. The additional length of time between Record Date and Payable Date gives the transfer agent and paying agent plenty of time to handle the complex and tedious process of issuing new shares and distributing them to the existing shareholders.

Answer 121

D. The SEC rule on any changes in account information (17a-3) is that the change must be reflected in the account within 30 days. Of course, most firms would make this change faster, but the rule gives 30 days to complete changes in account information.

Answer 122

D. The penalty for a controlling person being convicted of insider trading violations is the greater of 3 times the profit made or loss avoided; or $25,000,000.

Answer 123

I, II, III, IV ``` A security is considered to be mutilated if the following cannot be ascertained: Name of issuer Par value Signature Coupon rate Maturity date Payment Date for a coupon Certificate number or coupon number Seal of issuer ```

Answer 124

B. If a Municipal Finance Professional and any other person sign a check for a campaign contribution drawn on their joint account and submit it to an issuer official as a contribution, each person is deemed to have made ½ the contribution under an MSRB interpretation. Thus, ½ of the $500 contribution = $250 - the maximum that can be contributed without subjecting the member firm to a ban.

Answer 125

I and II If a broker-dealer terminates a registered employee, a U-5 must be filed with FINRA within 30 days; and a copy of the U-5 must be given to the employee by that broker-dealer. If the employee associates with another firm, it is not the responsibility of the ex broker-dealer to provide a U-5 copy to the new firm. However, the new firm may request a copy from the employee and can also retrieve a copy of the U-5 from Web-CRD (Central Registration Depository).

Answer 126

I and II only Currently, dual registration is technically permitted, though many states do not allow this. The requirements are that the current employer (broker-dealer) be notified of the registration with the new broker-dealer and that FINRA be notified. This is accomplished by noting, and disclosing, the dual registration on the U-4 Form that is filed with the new broker-dealer. There is no notification required to the SEC directly - the U-4 filing with FINRA meets the disclosure requirement. Nor is there any requirement to inform the public that a person is dual registered.

Answer 127

False. No requirement for disclosure in general obligation bonds. Source of income must be disclosed on revenue bonds.

Answer 128

I, II, and III Basically, MSRB rules require that the customer always get the "best" price, hence the yield shown on a confirmation will always be the lowest possible yield and the price will always be the lowest price (which ensures that the yield will at least be the minimum amount). For trades effected at par, no yield is shown, since it cannot be any different than the nominal (stated) rate of interest that also must be shown on a trade confirmation.

Answer 129

II and III only No requirement for signature on cash accounts

Answer 130

True. Since transactions are complete on settlement, this gives the firm up to 3 business days to get the customer the trade confirm for a regular way stock trade.

Answer 131

False. Disclosure of the dated date is only required for new issues, since this is the date from which interest accrues on the issue.

Answer 132

I and II If a broker-dealer terminates a registered employee, a U-5 must be filed with FINRA within 30 days; and a copy of the U-5 must be given to the employee by that broker-dealer. If the employee associates with another firm, it is not the responsibility of the ex broker-dealer to provide a U-5 copy to the new firm. However, the new firm may request a copy from the employee and can also retrieve a copy of the U-5 from Web-CRD (Central Registration Depository).

Answer 133

I and II only Currently, dual registration is technically permitted, though many states do not allow this. The requirements are that the current employer (broker-dealer) be notified of the registration with the new broker-dealer and that FINRA be notified. This is accomplished by noting, and disclosing, the dual registration on the U-4 Form that is filed with the new broker-dealer. There is no notification required to the SEC directly - the U-4 filing with FINRA meets the disclosure requirement. Nor is there any requirement to inform the public that a person is dual registered.

Answer 134

False. No requirement for disclosure in general obligation bonds. Source of income must be disclosed on revenue bonds.

Answer 135

I, II, and III Basically, MSRB rules require that the customer always get the "best" price, hence the yield shown on a confirmation will always be the lowest possible yield and the price will always be the lowest price (which ensures that the yield will at least be the minimum amount). For trades effected at par, no yield is shown, since it cannot be any different than the nominal (stated) rate of interest that also must be shown on a trade confirmation.

Answer 136

II and III only No requirement for signature on cash accounts

Answer 137

True. Since transactions are complete on settlement, this gives the firm up to 3 business days to get the customer the trade confirm for a regular way stock trade.

Answer 138

False. Disclosure of the dated date is only required for new issues, since this is the date from which interest accrues on the issue.

Answer 139

False. It is customary, but not mandatory, that the customer also signs a loan consent agreement, allowing his or her securities to be lent out on short sales

Answer 140

True Rule G-47 - Time of Trade Disclosure - requires that at, or prior to executing a trade for a customer, all material facts about the transaction must be disclosed either orally or in writing.