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Series 24 > S24Notes > Flashcards

S24Notes Flashcards

1
Q

1 - 1 Public and Private Offerings

A

The Effective Date of an IPO is determined by the SEC (NOT the trade date of the offering).

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2
Q

1 - 2 Public and Private Offerings

A

If the SEC sues an issuer and underwriter for false statements and/or material omissions in a prospectus, the customer can file a lawsuit against both the issuer and the underwriter.

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3
Q

1 - 3 Public and Private Offerings

A

What would preclude an issuer from obtaining WKSI status? Involvement in bankruptcy in the past 3 years.

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4
Q

1 - 4 Public and Private Offerings

A

A non‐EGC ($1B in revenues under the JOBS Act) IS subject to the quiet period. An Emerging Growth Company is NOT.

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5
Q

1 - 5 Public and Private Offerings

A

Prospectus Delivery requirement for a Reporting Company follow‐on offering is 0 days from the offering date.

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6
Q

1 - 6 Public and Private Offerings

A

Prospectus Delivery requirement for an IPO that will be listed is 25 days from the offering date.

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7
Q

1 - 7 Public and Private Offerings

A

Prospectus Delivery requirement for an unlisted follow‐on offering is 40 days from the offering date.

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8
Q

1 - 8 Public and Private Offerings

A

Prospectus Delivery requirement for an IPO that will NOT be listed is 90 days from the offering date.

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9
Q

1 - 9 Public and Private Offerings

A

An issuer that loses its WKSI status after filing an Automatic Shelf Registration (ASR) may continue that offering until the next Form 10‐K is filed.

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10
Q

1 - 10 Public and Private Offerings

A

A registered representative (RR) receives a check from a client to reserve shares of an IPO during the cooling‐off period. What do you instruct the RR to do? Return the check.

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11
Q

1 - 11 Public and Private Offerings

A

Reg. A (maximum of $5 million) offerings can be offered to the public.

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12
Q

1 - 12 Public and Private Offerings

A

The look‐back period for a Reg. A offering is 12 months.

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13
Q

1 - 13 Public and Private Offerings

A

A Reg. 147 offering is used for intrastate offerings.

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14
Q

1 - 14 Public and Private Offerings

A

A partnership may purchase a 147 offering even if some partners are not in‐state residents.

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15
Q

1 - 15 Public and Private Offerings

A

Reg. D buyers sign an investment letter (lock‐up letter).

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16
Q

1 - 16 Public and Private Offerings

A

Private placement/Reg. D‐‐Issuers must issue stop transfer instructions to transfer agent to ensure that no illegal sales take place.

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17
Q

1 - 17 Public and Private Offerings

A

Can a Purchaser’s Representative be affiliated with the issuer? No, unless the representative is related to the investor.

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18
Q

1 - 18 Public and Private Offerings

A

If a partnership is formed to buy a Reg. D offering, each individual partner is counted as a separate investor.

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19
Q

1 - 19 Public and Private Offerings

A

If an existing partnership purchases a Reg. D offering, the partnership will count as one purchaser.

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20
Q

1 - 20 Public and Private Offerings

A

A 144 offering is NOT appropriate for a company looking to raise capital.

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21
Q

1 - 21 Public and Private Offerings

A

Shares sold under the 144 exemption become part of the public float.

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22
Q

1 - 22 Public and Private Offerings

A

The holding period on restricted stock is waived in a 144 sale if the owner is deceased.

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23
Q

1 - 23 Public and Private Offerings

A

There are NO volume restrictions on a 144A transaction, but the shares remain restricted.

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24
Q

1 - 24 Public and Private Offerings

A

Reg. S equity offerings can be resold in the U.S. 12 months from the completion of the distribution.

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25
Q

2 - 1 Underwriting

A

A tender offer is NOT considered to be a type of distribution. An at‐the‐market offering is.

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26
Q

2 - 2 Underwriting

A

An Escrow Account is NOT required for a Firm‐Commitment underwriting.

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27
Q

2 - 3 Underwriting

A

Your firm enters a stabilizing bid, then the independent market maker moves its bid down. You can maintain your bid.

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28
Q

2 - 4 Underwriting

A

The sales concession is lost under a penalty bid.

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29
Q

2 - 5 Underwriting

A

An investor who shorts a security that is distributing additional new shares can buy it back anytime in the secondary market.

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30
Q

2 - 6 Underwriting

A

All‐or‐none and mini‐maxi are contingencies. Contingent underwritings require an escrow account.

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31
Q

2 - 7 Underwriting

A

A Market‐Out clause protects the underwriter from event risk during the underwriting.

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32
Q

2 - 8 Underwriting

A

A Section 11 (Due Diligence) defense protects the underwriter from false statements made by the issuer in offering documents.

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33
Q

2 - 9 Underwriting

A

The final settlement of a syndicate account must occur within 90 days following the date on which the securities are delivered to the underwriter.

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34
Q

2 - 10 Underwriting

A

Underwriting compensation of options or warrants with a duration of greater than 5 years is considered unreasonable.

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35
Q

2 - 11 Underwriting

A

Securities received as underwriting compensation are restricted for 6 months from the effective date.

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36
Q

2 - 12 Underwriting

A

FINRA’s Corporate Financing Rule requires the filing of the underwriting agreement (if not eligible for an exemption).

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37
Q

2 - 13 Underwriting

A

When might the participation of a qualified independent underwriter be required? When there is a conflict of interest involving the issuer and underwriter of a security.

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38
Q

2 - 14 Underwriting

A

The Reg. M exemption applies to actively traded securities (ADTV $1MM and MV of public float $150MM).

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39
Q

2 - 15 Underwriting

A

The Reg. M Passive Market Making is allowed up to the Daily Purchase Limit.

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40
Q

2 - 16 Underwriting

A

The Reg. M stabilizing bids are allowed to remain in effect for an unlimited period.

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41
Q

2 - 17 Underwriting

A

Under the New Issue Rule, sharing a household with a non-immediate family member does not constitute material support.

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42
Q

2 - 18 Underwriting

A

Foreign broker‐dealers may join a syndicate even if they are not FINRA members.

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43
Q

2 - 19 Underwriting

A

The New Issue Rule applies to equity IPOs only.

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44
Q

2 - 20 Underwriting

A

Persons who own more than 10% of a BD are restricted persons in regard to the New Issue Rule even if they do not work at the firm.

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45
Q

2 - 1 Underwriting

A

Employees of an issuer who help distribute a new issue and are compensated are deemed agents.

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46
Q

3 - 2 The Securities Exchange Act of 1934 and Related Rules

A

A corporate insider receives restricted stock as compensation in his/her 401(k) plan. This is NOT reportable on Form 4.

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47
Q

3 - 3 The Securities Exchange Act of 1934 and Related Rules

A

The Hart‐Scott‐Rodino Act concerns itself with large merger and acquisition transactions.

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48
Q

3 - 4 The Securities Exchange Act of 1934 and Related Rules

A

The HSR waiting period is typically 30 days.

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49
Q

3 - 5 The Securities Exchange Act of 1934 and Related Rules

A

A company that is repurchasing its own common stock in the secondary market can execute transactions at the higher of the last transaction or the current bid price (not the ask price).

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50
Q

3 - 6 The Securities Exchange Act of 1934 and Related Rules

A

Under Sarbanes‐Oxley (SARBOX), both the Chief Executive Officer (CEO) and Chief Financial Officer(CFO) must certify the information contained in Form 10‐Qs and 10‐Ks.

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51
Q

3 - 7 The Securities Exchange Act of 1934 and Related Rules

A

Companies can execute a going private transaction if they get below 300 shareholders.

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52
Q

3 - 8 The Securities Exchange Act of 1934 and Related Rules

A

Going‐private transactions save on Forms 10‐Q, 10‐K, 8‐K filing costs.

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53
Q

3 - 9 The Securities Exchange Act of 1934 and Related Rules

A

Insiders may be short against the box for up to 20 days to clear stock through legal.

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54
Q

3 - 10 The Securities Exchange Act of 1934 and Related Rules

A

Tender offers must remain open for at least 20 business days.

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55
Q

3 - 11 The Securities Exchange Act of 1934 and Related Rules

A

If a tender offer is amended, it must remain open for at least 10 additional business days.

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56
Q

3 - 12 The Securities Exchange Act of 1934 and Related Rules

A

Management must give its opinion to shareholders of a tender target within 10 business days.

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57
Q

3 - 13 The Securities Exchange Act of 1934 and Related Rules

A

Form 13D should be filed within 10 days of acquiring more than 5% of company’s voting securities.

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58
Q

3 - 14 The Securities Exchange Act of 1934 and Related Rules

A

A Fairness Opinion must disclose if the writer will receive additional compensation based on the completion of the deal.

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59
Q

4 - 1 Supervision and Research

A

Under the JOBS Act, EGCs are exempt from the quiet periods with regard to publishing research on IPOs.

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60
Q

4 - 2 Supervision and Research

A

May a research analyst whose firm is participating in a non‐EGC offering attend or participate in a road show or pitch meeting? No.

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61
Q

4 - 3 Supervision and Research

A

It is OK for a BD to trade prior to a research report issuance if information barriers exist.

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62
Q

4 - 4 Supervision and Research

A

Research reports should be written in plain English (not at a specific grade level).

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63
Q

5 - 1 General Supervision

A

For what period does FINRA BrokerCheck provide information on a registered person? 10 years.

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64
Q

5 - 2 General Supervision

A

A Series 6 RR may not sell REITs to customers.

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65
Q

5 - 3 General Supervision

A

A Series 26 or 24 registered principal may supervise a Series 6 RR.

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66
Q

5 - 4 General Supervision

A

A Series 26 registered principal can supervise a Series 7 RR under limited circumstances (Sales of Investment Company and Variable Products).

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67
Q

5 - 5 General Supervision

A

A Series 27 principal may not supervise sales activities.

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68
Q

5 - 6 General Supervision

A

The firm’s AML officer does NOT need to be registered.

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69
Q

5 - 7 General Supervision

A

Business card titles must be approved by the RR’s firm.

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70
Q

5 - 8 General Supervision

A

Who supervises the sales activities of a managing partner/director at a brokerage firm? The Chief Compliance Officer.

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71
Q

5 - 9 General Supervision

A

Who supervises a producing branch manager? The regional manager at a different location.

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72
Q

5 - 10 General Supervision

A

Would a representative who collects or receives a fee for selling variable annuities be required to register as an investment adviser? No.

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73
Q

5 - 11 General Supervision

A

An associated person of a foreign BD may visit with U.S. clients if chaperoned by a registered person of a U.S. BD.

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74
Q

5 - 12 General Supervision

A

A current copy of the FINRA Manual must be made available to customers upon request. Electronic availability is allowed.

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75
Q

5 - 13 General Supervision

A

FINRA members must provide customers with an annual disclosure containing the FINRA BrokerCheck hotline and FINRA’s Web site address.

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76
Q

5 - 14 General Supervision

A

U5 Forms are to be retained for 3 years.

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77
Q

5 - 15 General Supervision

A

An individual must requalify as a registered person after two years of inactivity.

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78
Q

5 - 16 General Supervision

A

Special Inactive Status also applies to terminated individuals (2 years from the U5 filing).

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79
Q

5 - 17 General Supervision

A

AML written procedures need NOT be filed with a regulator.

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80
Q

5 - 18 General Supervision

A

May a firm amend a U5 after a representative has left the firm? (Yes).

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81
Q

5 - 19 General Supervision

A

A firm is under an ongoing obligation to amend a U5 (no time limit).

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82
Q

5 - 20 General Supervision

A

Form U6 adds information from Code of Procedure and/or Code of Arbitration proceedings.

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83
Q

5 - 21 General Supervision

A

BrokerCheck information can be amended by an RR through a Broker Comment Request Form.

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84
Q

5 - 22 General Supervision

A

A bank invites an RR to meet with bank clients on bank premises for a single day. This would be considered to be an office of convenience. The representative should have any clients who decide to open an account sign the disclosure that investment products are not bank obligations.

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85
Q

5 - 23 General Supervision

A

To offer wrap accounts, a Series 7 RR must also be registered with a Series 65 or 66 (Investment Adviser RR).

86
Q

5 - 24 General Supervision

A

A person who supervises a broker‐dealer’s financial responsibility and record‐keeping functions must be registered as a Series 27 principal.

87
Q

5 - 25 General Supervision

A

IAs are defined under the ABC test (Advice, Business, and Compensation).

88
Q

5 - 26 General Supervision

A

A single‐location firm’s Business Continuity Plan (BCP) should have contact information for clearing‐firm personnel.

89
Q

5 - 27 General Supervision

A

An amended Form BR must be filed within 30 days of moving a branch location.

90
Q

5 - 28 General Supervision

A

Firms may provide a link to FINRA and SIPC on their Web sites.

91
Q

6 - 1 Business Contact Rules

A

Private securities transactions by RRs where compensation is received must be disclosed by the RR, approved in writing by the firm, and supervised by the firm as if these transactions were its own.

92
Q

6 - 2 Business Contact Rules

A

Outside business activities need NOT be approved by the firm nor reported to FINRA. The RR must provide prior written notice to the firm.

93
Q

6 - 3 Business Contact Rules

A

When may borrowing and lending occur between an RR and a client? When the RR and the customer have an outside business interest together.

94
Q

6 - 4 Business Contact Rules

A

Payment for a Wall Street Journal subscription or a laptop computer is NOT acceptable in a soft‐dollar arrangement.

95
Q

6 - 5 Business Contact Rules

A

Payment for portfolio management software is acceptable in a soft‐dollar arrangement.

96
Q

6 - 6 Business Contact Rules

A

A client who normally buys fixed‐income securities asks about reverse convertible securities. The client should be advised to learn more about them before investing; such as they are structured products issued by banks and broker‐dealers and may subject the investor to loss of principal. (They may NOT be appropriate.)

97
Q

6 - 7 Business Contact Rules

A

A BD, a bond trader, and a bond consultant would all be subject to the political contribution rule. An attorney would not.

98
Q

6 - 8 Business Contact Rules

A

Political contributions apply to Municipal Finance Professionals (MFPs) and are capped at $250 (per official/per election) only to a candidate for whom they can vote.

99
Q

6 - 9 Business Contact Rules

A

Phone charges and travel to conferences are not acceptable soft‐dollar arrangements. Providing third‐party research is acceptable.

100
Q

6 - 10 Business Contact Rules

A

An institutional client assures you that he can make his own suitability decisions. After discussions, you determine that he can’t. Are you absolved from your suitability duties? No, you are not.

101
Q

7 - 1 Communications with the Public

A

Correspondence (material distributed or made available to 25 or fewer retail investors) is subject to review and supervision.

102
Q

7 - 2 Communications with the Public

A

Retail Communication (material distributed or made available to more than 25 retail investors) may be subject to specific approval and filing requirements.

103
Q

7 - 3 Communications with the Public

A

Institutional Communication (material distributed or made available only to institutional investors) is subject to review and supervision only.

104
Q

7 - 4 Communications with the Public

A

CMOs may NOT be compared to any other type of fixed‐income investment such as bonds or CDs.

105
Q

7 - 5 Communications with the Public

A

An RR cuts and pastes chat‐room comments to your firm’s preapproved Web site page. Is this allowed? No!

106
Q

8 - 1 Investment Company / Variable Products

A

8 How long does a principal have to approve/deny a client’s variable annuity application based on suitability? 7 business days.

107
Q

8 - 2 Investment Company / Variable Products

A

A fixed annuity bonus rate is a teaser and is not permanent.

108
Q

8 - 3 Investment Company / Variable Products

A

The maximum growth rate permitted in a variable product illustration is 12%.

109
Q

8 - 4 Investment Company / Variable Products

A

Who approves the opening of the account with the purchase of a variable annuity? A Series 24 or 26 principal.

110
Q

8 - 5 Investment Company / Variable Products

A

What is the concern with an RR switching a client from one annuity contract to another under a 1035 Exchange? Churning.

111
Q

8 - 6 Investment Company / Variable Products

A

Does an investor in a closed‐end fund sell at the NAV? No. She sells at the current bid price since these products are traded on an exchange.

112
Q

8 - 7 Investment Company / Variable Products

A

A mutual fund wholesaler hosts a lunch at your office. Who may eat the lunch? Anyone, whether registered or not.

113
Q

8 - 8 Investment Company / Variable Products

A

An RR recommending a large dollar purchase of Class B shares is likely transacting a breakpoint sale.

114
Q

8 - 9 Investment Company / Variable Products

A

Breakpoints can be obtained even if the customer buys shares through different broker‐dealers.

115
Q

8 - 10 Investment Company / Variable Products

A

Breakpoints are created by the fund distributer, not the broker‐dealer.

116
Q

8 - 11 Investment Company / Variable Products

A

RRs may purchase mutual fund shares at or near the NAV.

117
Q

8 - 12 Investment Company / Variable Products

A

RRs may continue to collect commissions on existing mutual fund assets after retirement.

118
Q

8 - 13 Investment Company / Variable Products

A

REITs pass through income, NOT losses.

119
Q

8 - 14 Investment Company / Variable Products

A

Broker‐dealers involved in the sale of nontraded REITs to investors are required to provide valuations within 18 months after cessation of the offering of shares.

120
Q

8 - 15 Investment Company / Variable Products

A

Market orders have priority over marketable limit orders.

121
Q

8 - 16 Investment Company / Variable Products

A

Upon joining a new firm an RR is permitted to facilitate a bulk transfer of variable annuity or mutual fund accounts provided she has written prior consent from each customer.

122
Q

9 - 1 Equity Trading

A

The Nasdaq Market Center Execution System does not display orders for odd lots.

123
Q

9 - 2 Equity Trading

A

Marketable limit orders are not displayed. They are executed.

124
Q

9 - 3 Equity Trading

A

Market Orders are not displayed on Nasdaq. They are executed.

125
Q

9 - 4 Equity Trading

A

The highest market‐maker bid and the lowest market‐maker offer is called the inside market. Also called the NBBO (national best bid and offer).

126
Q

9 - 5 Equity Trading

A

The Consolidated Tape reports transactions executed on the exchanges and in the Third Market.

127
Q

9 - 6 Equity Trading

A

The ADF quotes Nasdaq and CQS stocks ‐ NOT OTC equities.

128
Q

9 - 7 Equity Trading

A

Unexcused withdrawal for a CQS market maker is 1 business day.

129
Q

9 - 8 Equity Trading

A

On the NYSE, a DMM (Designated Market Maker) can buy for his own book.

130
Q

9 - 9 Equity Trading

A

How are open orders handled when a company announces a reverse stock split? They are cancelled.

131
Q

9 - 10 Equity Trading

A

DPPs can be quoted on the OTCBB, are updated twice per day, and are not firm quotes.

132
Q

9 - 11 Equity Trading

A

Market makers may NOT accept any form of payment from issuers in return for making markets.

133
Q

9 - 12 Equity Trading

A

ATS must register as either a broker‐dealer or an exchange.

134
Q

9 - 13 Equity Trading

A

The Order Protection Rule (Manning Rule) does NOT apply between trading desks when the firm has sufficient information barriers in place.

135
Q

9 - 14 Equity Trading

A

Displaying customer limit orders is required within 30 seconds.

136
Q

10 - 1 SEC Trading Rules

A

The Order Protection Rule requires executing customer orders within 60 seconds of the execution of a proprietary trade that would have satisfied the customer’s order.

137
Q

10 - 2 SEC Trading Rules

A

Definition of a block‐sized order for the limit order display rule = 10,000 shares or at least $200,000 in market value.

138
Q

10 - 3 SEC Trading Rules

A

Basic VWAP calculation is : Total dollar value of shares traded / number of shares traded.

139
Q

10 - 4 SEC Trading Rules

A

The Easy to Borrow List is updated daily.

140
Q

10 - 5 SEC Trading Rules

A

Market center reports on efficiency of executions are published monthly (Rule 605).

141
Q

10 - 6 SEC Trading Rules

A

Order routing reports are published by BDs quarterly (Rule 606).

142
Q

10 - 7 SEC Trading Rules

A

Order tickets should designate whether discretion was employed in a discretionary account.

143
Q

10 - 8 SEC Trading Rules

A

Order tickets should designate whether a trade was solicited or unsolicited.

144
Q

11 - 1 SRO Trading Rules

A

MOC/LOC orders on the NYSE can be entered (and/or cancelled) up until 3:45 pm. They may be cancelled for a legitimate error until 3:58 pm. On Nasdaq they can be entered or cancelled up until 3:50 pm, and maybe cancelled for a legitimate error up until 3:55 pm.

145
Q

11 - 2 SRO Trading Rules

A

According to the Limit Up/Limit Down Rule, if a limit state exists for 15 seconds, a five‐minute trading pause goes into effect.

146
Q

11 - 3 SRO Trading Rules

A

An unexcused withdrawal for a Nasdaq market maker is 20 business days.

147
Q

11 - 4 SRO Trading Rules

A

The 5% Markup Rule applies to secondary‐market dealer transactions.

148
Q

11 - 5 SRO Trading Rules

A

Short positions (both customer and proprietary) are reported to FINRA twice per month.

149
Q

11 - 6 SRO Trading Rules

A

Marking the close is a violation that may be used by a margined client to prevent a maintenance call.

150
Q

11 - 7 SRO Trading Rules

A

Under FINRA’s debt markup policy, an interest‐rate or credit ratings change may make dealers’ cost irrelevant on a bond resale.

151
Q

11 - 8 SRO Trading Rules

A

GTC orders are listed on a client statement.

152
Q

11 - 9 SRO Trading Rules

A

GTC orders have exposure only between 9:30 am and 4:00 pm unless the customer requests otherwise.

153
Q

11 - 10 SRO Trading Rules

A

Markups and markdowns on bonds are based on the bond’s prevailing market price, otherwise known as its contemporaneous cost or proceeds.

154
Q

11 - 11 SRO Trading Rules

A

Trade reporting for both NMS (TRF) and OTC (ORF) equities is required within 10 seconds of execution.

155
Q

11 - 12 SRO Trading Rules

A

The order‐entry side of the trade must affirm (lock in) trades within 20 minutes for clearing purposes.

156
Q

11 - 13 SRO Trading Rules

A

It is a violation for a client (or related clients) to simultaneously enter a buy and a sell order in the same stock at the same price. This is known as painting the Tape, a wash sale, or a matched order.

157
Q

11 - 14 SRO Trading Rules

A

Which is considered to be front‐running? Buying a call option on the same security. (Exercising a call is not a violation.)

158
Q

12 - 1 Trade Reporting

A

Clearly erroneous trades must be reported to FINRA within 30 minutes.

159
Q

12 - 2 Trade Reporting

A

After‐hours Nasdaq trades are reported within 10 seconds up until 8 pm.

160
Q

12 - 3 Trade Reporting

A

When a BD reports a trade through TRACE, when will FINRA disseminate the information? Immediately.

161
Q

12 - 4 Trade Reporting

A

TRACE reporting must be made by both parties within 15 minutes.

162
Q

12 - 5 Trade Reporting

A

Bond trades executed prior to 8:00 am or after 6:15 pm must be reported within 15 minutes of the next TRACE opening.

163
Q

12 - 6 Trade Reporting

A

OATS requires members to synchronize their terminal clocks daily by 9:30 am to within 1 second of the NIST standard. OATS also includes orders that were not executed.

164
Q

12 - 7 Trade Reporting

A

Mail may be retained for 2 months (if traveling domestically), or 3 months (if traveling abroad).

165
Q

12 - 8 Trade Reporting

A

A Reg. SP notice provided at the time of account opening and annually thereafter.

166
Q

12 - 9 Trade Reporting

A

529 account assets are the property of the donor.

167
Q

13 - 1 Customer Accounts

A

UTMA/UGMA assets are the property of the child.

168
Q

13 - 2 Customer Accounts

A

Asset distribution due to death of a child in a UTMA/UGMA account is determined by state law.

169
Q

13 - 3 Customer Accounts

A

A customer has both deductible and nondeductible IRA contributions and wishes to take a distribution after age 59 1/2. The distribution must be taken on a pro‐rata basis.

170
Q

13 - 4 Customer Accounts

A

What is the lifetime allowance for distributions taken prior to 59 1/2 for a first‐time homebuyer without penalty? $10,000.

171
Q

13 - 5 Customer Accounts

A

An individual living solely off portfolio income is not permitted to fund an IRA. (Earned income is needed. Alimony is considered earned.)

172
Q

13 - 6 Customer Accounts

A

The maximum IRA contribution for an individual age 50 or older is $5,500 plus $1,000 catch‐up.

173
Q

13 - 7 Customer Accounts

A

All appreciation (trading profits, dividends and interest) earned in traditional IRAs is taxed as ordinary income when withdrawn.

174
Q

13 - 8 Customer Accounts

A

A Required Minimum Distribution may be met through an in‐kind distribution (removal of securities).

175
Q

13 - 9 Customer Accounts

A

A Currency Transaction Report (CTR) (FinCEN 104) is filed for currency deposits exceeding $10,000 within 15 days of the transaction.

176
Q

13 - 10 Customer Accounts

A

Client eligibility for new issues is confirmed annually by the firm (not the RR).

177
Q

13 - 11 Customer Accounts

A

Client information should be verified every 3 years.

178
Q

14 - 1 Operational Issues

A

DVP account trades settle regular‐way according to the security traded (not 35 days).

179
Q

14 - 2 Operational Issues

A

DVP account statements should have no positions or money balances.

180
Q

14 - 3 Operational Issues

A

Complaint reports (summary) are sent to FINRA quarterly even if a firm has no complaints.

181
Q

14 - 4 Operational Issues

A

A give‐up relationship is between brokers for the purpose of clearing trades.

182
Q

14 - 5 Operational Issues

A

A step‐out relationship is at the request of a client to transfer all or part of a trade to another BD.

183
Q

14 - 6 Operational Issues

A

When a client sells short on the ex‐dividend date, the lender (original person long) of the security receives the dividend.

184
Q

14 - 7 Operational Issues

A

A Prime Broker provides clients with a centralized location for clearing trades executed through multiple BDs.

185
Q

14 - 8 Operational Issues

A

What is DTCC? A repository for securities.

186
Q

14 - 9 Operational Issues

A

An ACATS account transfer is initiated by the receiving broker (vs. the carrying broker).

187
Q

14 - 10 Operational Issues

A

Unlisted private placements are NOT subject to Regulation T.

188
Q

14 - 11 Operational Issues

A

A nonclearing firm keeps client records in an omnibus account.

189
Q

14 - 12 Operational Issues

A

Checks/statements will have information about both the clearing firm and the introducing firm.

190
Q

14 - 13 Operational Issues

A

Certain accounts such as UTMA/UGMA, IRA, and retirement plan accounts may not use margin.

191
Q

14 - 14 Operational Issues

A

On the ex‐dividend date, buy limit and sell stop orders are reduced in penny increments by enough to cover the entire dividend (i.e., a 4.5‐cent dividend would result in a 5‐cent reduction).

192
Q

15 - 1 Margin

A

Hedge funds are the most likely users of portfolio margin.

193
Q

15 - 2 Margin

A

In a portfolio margin account, warrants can be used as an offset, but rights cannot.

194
Q

15 - 3 Margin

A

A new issue listed on Nasdaq is marginable after 30 days.

195
Q

15 - 4 Margin

A

The maintenance requirement for a leveraged ETF is the long (25%) or short (30%) requirement times the leverage factor of the ETF.

196
Q

15 - 5 Margin

A

SMA calculation for a long margin account is client equity minus the required equity (market value x 50%).

197
Q

15 - 6 Margin

A

ETFs and mutual fund shares are marginable securities (eligible to be used as collateral).

198
Q

15 - 7 Margin

A

Leveraged ETFs have a maintenance requirement that is 2x or 3x the normal requirement based on the multiplier.

199
Q

15 - 8 Margin

A

An individual who executes 6‐day trades over a 3‐day period is categorized as a Pattern Day Trader. (4‐day trades in a 5‐day period).

200
Q

15 - 9 Margin

A

Uncovered call positions are executed in a margin account.

201
Q

15 - 10 Margin

A

Day trading buying power is 4 times the minimum maintenance excess.

202
Q

15 - 11 Margin

A

Individuals must be approved for uncovered option writing to be eligible for portfolio margin.

203
Q

15 - 12 Margin

A

When a firm changes its WSP, how long must the old WSP be retained? 3 years.

204
Q

15 - 13 Margin

A

A BD’s stock certificate is a lifetime record to be maintained.

205
Q

15 - 14 Margin

A

Customer complaints must be retained for 4 years at the OSJ.

206
Q

15 - 15 Margin

A

The net capital requirement for a prime broker is $1.5 million.

207
Q

15 - 16 Margin

A

A portfolio margin account must maintain minimum equity of $5,000,000.

208
Q

16 - 1 Financial Responsibility

A

The minimum net capital requirement for a market maker is $100,000. The maximum is $1 million.

209
Q

16 - 2 Financial Responsibility

A

The minimum net capital requirement for a market maker is $1,000 / stock @ $5 or less; $2,500 / stock > $5. Min. = $100k. Max = $1 mil.

210
Q

16 - 3 Financial Responsibility

A

The net capital requirement for a carrying BD is $250,000.

211
Q

16 - 4 Financial Responsibility

A

The net capital requirement for a block positioner is $1 million.

212
Q

16 - 5 Financial Responsibility

A

Trial balances used to calculate net capital are filed monthly.

Series 24 (1 decks)

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