Regulations - FINRA Rules

Question 1

Any person who solicits orders to buy or sell securities must be _______, as is anyone who makes a recommendation or performs a _______ determination

Answer 1

registered; suitability

Question 2

If a sales assistant wishes to write an order ticket, they must take the _____ - they cannot receive commissions or comp for business production

Answer 2

Series 11

Question 3

To be registered, you must complete a ____ form with employment history and residence history

Answer 3

U-4 form

Question 4

A person is subject to statutory disqualification if he/she has:

Answer 4

• been suspended or expelled from any other SRO (US or foreign)
• is subject of an SEC order suspending or revoking registration
• willfully filed a false or misleading application
• willfully violated securities or commodities laws
• has been convicted or any securities or “money” related misdemeanor or any felony within the past 10 years
• have been temporarily or permanently enjoined from engaging in the securities business

Question 5

Any dispute between a RR and the firm must be handled through _____

Answer 5

bind arbitration

Question 6

For any “intra-industry” disputes, the arbitration panel must consist of ____ “non-public” arbitrators

Answer 6

3 non-public arbitrators

Question 7

Any outside employment is shown on the employee’s _____ form

Answer 7

U-4

Question 8

Regulatory element CE is required on the registrant’s _____ anniversary and every _____ after that

Answer 8

2nd anniversary and every 3 years after that

Question 9

Firm element CE is required _____

Answer 9

annually

Question 10

If you leave for active military duty, you registration becomes _____ and when you return it is reinstated

Answer 10

inactive - firm has to send a letter to the CRD

Question 11

If a person is terminated, a ____ form must be filed with FINRA within _____ of termination. A copy of the form must be supplied to the individual

Answer 11

a U-5 form, within 30 days

Question 12

After ____ years without being associated with a firm that person must retake the appropriate exams

Answer 12

2 years

Question 13

You cannot _____ your licenses with a firm to keep registrations current after leaving the business

Answer 13

“hang”

Question 14

Firms must file _____ with FINRA regarding suspicious events as they are ______

Answer 14

must file reports as the events are happening

Question 15

If a RR has made a violation, the firm must notify FINRA no later than _____ after the event happened

Answer 15

30 days

Question 16

RR are prohibited from giving or receiving gifts in excess of ____ per person per year related to work.

Answer 16

$100

Question 17

The gift limit does not prohibit ________

Answer 17

customer entertainment

Question 18

Gift records must be maintained for ____

Answer 18

3 years

Question 19

Paying for work (work done by a customer for a RR) is permitted if there is a _____ agreement and it is approved by the _____ of the firm

Answer 19

written agreement approved by the principal of the firm – records must be kept for 3 years

Question 20

“Correspondence” is defined as any written or electronic communication made available to _____ or fewer retail investors within any _____ period

Answer 20

25 or fewer within any 30 day period

Question 21

Firms must retain both ____ and ____ communications if you use the same phone or email address

Answer 21

business and personal

Question 22

An RR can open a joint account and share in P&L with a customer with express _____ approval

Answer 22

written

Question 23

For joint accounts with a customer where there is profit sharing, must share in proportional P&L to capital contributed UNLESS that customer is a _____

Answer 23

family member

Question 24

An RR cannot borrow or lend to a customer UNLESS they are a _____ or ______

Answer 24

family member or borrowing institution

Question 25

Lending/borrowing is approved (if have prior approval of the member firm) between: ____ RR at same firm; a ______; and a customer with which you have a ______

Answer 25

2 RRs at same firm; significant other; customer with whom you have a business relationship

Question 26

An RR cannot share commissions with someone who is not _______

Answer 26

registered

Question 27

"Selling away" is when an RR effects a transaction at _____

Answer 27

another firm

Question 28

FINRA only allows Cash on Delivery transactions if:

Answer 28

- the firm has a record of the name and address of the agent and the customer's account number at the agent - order ticket notes COD - confirmation is mailed no later than the next business day to the customer - firm has obtained an agreement from the customer that he has instructed the agent to pay when the securities are delivered

Question 29

Any control relationship between the firm and the issuer must be ______; typically verbally at time of recommendation and then again with a _____ disclosure on the trade confirmation

Answer 29

disclosed, verbally then with a written disclosure

Question 30

If a firm is publicly traded, then orders to buy their stock cannot be ______

Answer 30

solicited

Question 31

A RR cannot give _______

Answer 31

investment advice

Question 32

If a customer consents to arbitration, the panel consists of a majority of _____ arbitors

Answer 32

public

Question 33

For purchases of IPOs, customers must sign a statement that they are not restricted during the _____ preceding the first IPO purchase, then _____ thereafter

Answer 33

12 month; then annually thereafter

Question 34

The three types of communication as defined by FINRA are:

Answer 34

- correspondence - retail communication - institutional communication

Question 35

Correspondence (25 or fewer retail clients within a 30 day period) is _____ subject to FINRA filing rules.

Answer 35

NOT

Question 36

Retail communication is to ____ or more retail clients within a 30 day period.

Answer 36

25 or more - must have less than $50m in assets

Question 37

Institutional communication is made available only to _____ clients

Answer 37

institutional (anyone with $50m or more in assets)

Question 38

The four types of retail communication are:

Answer 38

- advertising (intended for mass market) - sales literature (directed at a specific audience) - independently prepared reprint (a reprint of excerpt of any article where publisher is not affiliated with a FINRA member and report was not commissioned by a FINRA member) - Public appearance

Question 39

In communications, you can say that the ____ is a FINRA member but no the ____

Answer 39

the firm is a FINRA member, not the RR

Question 40

Copies of communications must be kept for ______

Answer 40

3 years

Question 41

Research reports must be written or approved by a FINRA qualified _______

Answer 41

supervisory analyst

Question 42

A member firm acting as a manager or co-manager in an underwriting syndicate cannot issue a research report on that company for _____ following the effective date for an IPO and _____ following the effective date for a follow on offerin

Answer 42

10 days; 3 days

Question 43

If a recommendation is made, it must be disclosed if the member organization or an affiliate owns more than ____ of the common stock of the issuer

Answer 43

1%

Question 44

It must also be disclosed, if making a recommendation, if the member firm has performed or is expected to perform IB services within the past ____ or future ____; or if they have received compensation from equity offerings in the past _____

Answer 44

in the past 12 months or future 3 months, or if they have received comp from equity offerings in the past 12 months

Question 45

The SEC defines a research report as any report that provides enough information to make an ______ and is distributed to at least _____

Answer 45

make an investment decision and is distributed to at least 15 people

Question 46

If a RR gets a 3rd party research report to give to a client, it must be approved by the _______

Answer 46

supervisory analyst

Question 47

Research reports, along with corresponding communications and approvals, must be kept for _____

Answer 47

3 years

Question 48

Reg AC stands for _____

Answer 48

Analyst Certification

Question 49

Whenever a research analyst makes a public appearance, a record must be made within _____ of the end of that calendar quarter which includes a statement by the research analyst that the views are his own and that they aren't compensated for their views

Answer 49

30 days

Question 50

If a complaint is filed with the District Hearing Panel, at least _____ notice must be given to both parties

Answer 50

1 month's notice

Question 51

If either party is displeased with the District Hearing Panel's decision, an appeal can be made to the _____, then if that is unsatisfactory they can appeal to the _____

Answer 51

National Adjudicatory Panel; then to the SEC (then to the Federal Court)

Question 52

Once a decision is final, the ______ decides the appropriate penatly

Answer 52

FINRA

Question 53

The max fine for a MINOR penalty is _____

Answer 53

$2,500