Rules & Regs Flashcards
Death docs
- Affidavit of domicile
- Death certificate
- Letters testamentary
- Inheritance tax waiver
Insiders
10% owners or
Access to non public info, and immediate family
Must file form 3 w/in 10 biz days
U4
Changes notified w/in 30 days, valid for 2 yrs,
Reg element - every 3 years
Firm element - every year
Restricted stock
Stock held by insiders, issued Privately. 6 month holding time frame
Bearer bonds
1k or 5k, coupons, no name
Finra rule 5130 common stock restrictions and exemptions
Common stock IPO, cannot be sold to restricted persons: brokerage firms, ee’s of the former, immediate family, attorneys/accountants that helped w/ UW, PM’s, insiders of BD’s, investment club owners
Exemptions: ee’s, subsidiaries, customers, creditors, suppliers, of the issuer
Does not apply to:
Exempt securities, investment co’s, preferred stock, bonds, adr’s, dpp’s, primary, secondary, combo
Erroneous share report
Incorrect # of shares can reject
Record keeping requirements
6 yrs - most acct stuff 5 yrs - SARs, ID's 4 yrs - complaints 3 yrs - everything 2 yrs - easily accessible
Maloney act
1938, created nasd, forerunner of finra
Sell out
Failure to pay by settlement date
Confirmation
Sent at or prior to completion of transaction
Settlement
Test yourself
Payment extensions for settlement can be provided by?
Finra, fed, any exchange
Account statements frequency
Active - monthly
Inactive - quarterly
Mutual fund - semi annual
AIM
Contemporaneous cost
Used for inactive , non competitive securities
COP - code of procedures
Method if resolving disputes, can be appealed
Order of appeal: panel, nac, sec, fed, supreme
Penny stock
Valued at less than $5, can only be OTC
Risk disclosure doc required for ALL purchases
Suitability statement signed by customer except: Accredited investor Unsolicited Established cust BD transaction
Prime brokerage
500k min or
100k min if with an IA
Simplified arbitration
Member vs non member, less than 50k, 1 person panel
Self regulatory organization SRO
Any exchange, nyse, finra, msrb
New acct signatures
Rep - no
Customer - no (unless margin)
Principal - yes
AML reporting
Report the following:
$10k - submit to CTR to fincen form 112
$5k SAR
$3k - only need to record
Finra rule 5121 UW requirements for IPO
Regulates issue of securities for IPO, must use qualified UW, 3 issues, 3 yrs, 3 same size
For non IPO offerings cannot use UW
Dividends regular way trade
But before the ex date to get divs
Finra rule 2111
3 components of suitability
- Reasonable basis - some investors
- Customer specific - one customer
- Quant suitability - series of transactions
Markdown
Sell at the bid
Transfer agent
Managed certificates, responsible for good delivery, sends divs, sends proxies
Inspections
Osj annually
Branch 3 yrs
Min branch periodic
Dividends cash trade
Buy on or before record date
Finra fees
Assessment vs. Fee
Assessment on transactions
Fees on # of branches and reps
Sarbanes Oxley
2002, regulates reporting of issuers, separation of bankers and analysts, CEO and CFO certify all fin reports
Only security registration also requires majority of board
Deadline to settle trades
35 days but funds must be in bank acct w/in 5 days
Trades subject to 5% policy
- Principal - dealer charges markup/markdown
- Agency - broker charges a commission
- Risk less - simultaneous, firm buys own inventory for resale
- Proceeds - sell used to buy
A-CAT
Written notice to distributing firm, one day to verify, 3 days to send
Simplified industry arbitration
Member vs member, less than 50k, 1 person panel
Insider trades
SEC form 4 w/in 2 biz days after trade
Trades exempt from 5% policy
- New offerings, IPO, primary, secondary, combined
- Member to member
- Exempt securities
Institutional lit
No need for filing or principal approval
Advertisements
Non targeted
Net capital
Minimum requirement, calculated monthly, on balance sheet
Registrar
Maintains list of shareholders, ensures issued shares don’t exceed authorized
Buy in
Failure to deliver certs
Acct frozen 90 days
Rule 144 control stock restrictions
Control stock restriction
Can sell up to 1% of outstanding shares or avg trading volume of last 4 weeks, whichever is Greater
Only pertains to selling of shares
Erasure guarantee
A form of power of substitution used for incorrect spelling of name
Erroneous report rule
Discrepancy on price between report and transaction must be accepted
Fully registered bonds
1k up to 100k, no coupons, named
Dividend calendar
DERP
2 days between ex and record
NYSE sets the ex date, board of directors does the rest
Divs and splits reported to finra/sec w/in 10 biz days prior to record date
Finra investor education and protection rule
Provided annually, finra website and address, disclosure hotline, stmt of availability
Insider trades exemptions
Prearranged trading plan
Cannot short sell
Can sell at loss or Breakeven
Markup
Buy at the ask
Inside info
Released simaltaneously via media, including social or SEC form 8k, w/in 4 days of event
Control stock
Stock held by insiders, purchased Publicy
UGMA
Think Generic, $1050 tax free, $1050 taxed at minor rate of 10%, rest taxed to guardian
SEC
Created 1934, regulates investors, issuers, b/d,
5% owners
File form 13-D with SEC w/in 10 days
Plus each time 1% increase until 10%
Relevant factors for finra 5% guideline
PEAS
Price
Expense
Availability
Size
Contemporaneous price
Used for inactive, competitive securities
Good delivery - lots
Must be multiples, divisors or add up to 100
Lit filing requirements
Most require filing w/in 10 biz days AFTER 1st use
Exemptions: Tombstone No recommends Recruiting Already filed
Sales ads
Targeted
25/30
Principals approve:
New accts
Advertising
Complaints
Trades
DERP
Record date is 2 days after ex
Suitability factors
All of the above excluding educational
Min junk fax fine
$500 per page
