Section 4: 18,19 General Securities Regulation

Question 1

What is an SRO?

Answer 1

self regulating organization such as the CBOE and FINRA

Question 2

who must register for the Security investor Protector Corporation?

Answer 2

Non bank broker dealers

Question 3

What is form U4 used for?

Answer 3

data compilation of representatives or players in the industry

Question 4

when should a U4 form be amended?

Answer 4

within 30 days of the event

Question 5

What is U5 form used for?

Answer 5

to register the termination of an employee

Question 6

For how many years is an employee subject to jurisdiction after being terminated?

Answer 6

2 years

Question 7

Which branches should be registered as offices of supervisory jurisdiction?

Answer 7

principal and regional

Question 8

What are the two components of the continuing studies requirements ?

Answer 8

regulatory element ( must be taken within 120 days of second anniversary and 3 years there on ) 
Firm element ( must be submitted each year after completing Needs analysis)

Question 9

what form may be submitted to ask for relief of statuatory disqualification?

Answer 9

MC 400

Question 10

What is the status of a person who does not pass the regulatory element of the continuing studies program and for how long can that person remain in such state?

Answer 10

CE inactive - 2 years

Question 11

what act regulates securities that are already issued?

Answer 11

34 act

Question 12

What type of activities are considered manipulative and fraudulent?

Answer 12

pegging, painting the tape, matched orders and wsh sales

Question 13

Are rumors allowed?

Answer 13

no

Question 14

What does the misappropriation theory say?

Answer 14

it is illegal to misappropriate (steal) information from employer and trade on it

Question 15

What is a violation of duty of trust?

Answer 15

when the receiver of sensitive information uses that infor to trade. Even if it was not specifically categorized as restricted, the information should have been kept secret given the duty of trust between the giver and receiver of information

Question 16

What are the civil penalties for fraudulent activity?

Answer 16

up to 3 time sthe profit or loss in a fee

Question 17

What are the criminal penalties for fraudulent activities?

Answer 17

up to 5 mn in a fee and 20 years in prison. If you are a corporation the fee may increase to 25 mn

Question 18

What agreement overlooks money laundering?

Answer 18

the Bank Secrecy Act managed by the FinCEN ( financial Crimes enforcement network)

Question 19

When a company receives more than 5000 of deposit in an account it must file this to FinCEN. true or false?

Answer 19

false. it must be more than 10000 for one customer per day.

Question 20

What does the USA patriot act cover?

Answer 20

antimony laundering practices and customer identification program

Question 21

Who can be an AML compliance officer?

Answer 21

registered principal

Question 22

what is the customer identification program for?

Answer 22

keep information on customers up to date and avoid doing business with people involved with terrorist activities

Question 23

Can an employee open securities accounts outside of their member institution?

Answer 23

yes. but they must be reported and members of NYSE must also get approval of employer.

Question 24

Do you need authorization to undergo outside business activities?

Answer 24

no. just notification to employer

Question 25

what is the limit amount for gifts for a person per year?

Answer 25

100

Question 26

What are the requirements for a broker dealer to share an account with customers?

Answer 26

consent from both the employer and the customer and sharing must be proportional to financial contributions made to account

Question 27

Is arbirtration optional under FINRA?

Answer 27

no. It is mandatory and more convenient. (cheaper)

Question 28

Who manages arbitration?

Answer 28

National Arbitration and MEdiation Committee

25 members unconnected from both inside and outside of the industry

Question 29

when are arbitratorys from outside of the industry included?

Answer 29

if claim involves an associated person or a customer

Question 30

if claim is less than 50000 how many arbitrators are needed?

Answer 30

1

Question 31

what is the maximum number of years that can pass for a claim to be valid?

Answer 31

6

Question 32

What if the claim is between 50000 and 100000?

Answer 32

one arbitrator or 3 if parties sign to it

Question 33

What if the claim is for more than 100000?

Answer 33

3 arbitrators or 1 if parties sign to it

Question 34

What is the predispute agreement clause on form u4?

Answer 34

employees agree to be subject to arbitration.

Question 35

How is mediation initiated?

Answer 35

by filing a request for mediation to FINRA and fees from 150 to 500

Question 36

what is the difference between arbitration and mediation>?

Answer 36

only one mediator that meets with parties separately until mutually acceptable solution is reached

Question 37

for how many years most records need to be maintained?

Answer 37

3 years with the 2 first having easy access . some need 6 years and some 4 years ( customer complaints)