Securities Industry Regulations

Question 1

Selling away

Answer 1

When RRs are selling investments that the BD does not offer

Question 2

Political contributions

G-37

Answer 2

SEC- contributions are max is 350, 150 if the associate is not allowed to vote

MSRB is max is $250 per election

One exception de minimize rule.

Question 3

How long must a customer complaint be kept for?

Answer 3

4 years

Finra rules. Complaints need to be reported 30 days of the event

Member firms are required to provide quarterly reports

Report is due on the 15th of the month following the calendar quarter.

Question 4

Gifts

Answer 4

Max is $100 pp per year

Dinner is ok
Sporting event tickets ok but must attend with
Considered as business expense

Question 5

Business continuity plans

Answer 5

Finra rules that all customers are provided with a document that explains how a business interruption will be handled

Must be delivered to every customer in writing at account opening, available on website, mailed to customers if requested, available upon request

Reviewed annually

Question 6

Disclosure of financial condition

Answer 6

Must be disclosed every 6 months semiannually and annually at anytime with the most recent balanced sheet if asked

Question 7

Customer confirmations

Answer 7

Member firms must provide customers with confirmations of each transaction

Must include price, number of shares, date of transaction, time of execution, capacity of the firm, commission, mark up or down, price and yield and the settlement date.

May only be sent to 3rd party with written consent

Question 8

Regulation S-P-

Answer 8

Implement policies that restrict a financial institutions ability to disclose non public personal information.

PRIVACY

BDs, investment companies, investment advisers must provide customers with privacy initial notice and annual notice every year after

Question 9

Bank secrecy act

AML

Answer 9

Authorized the treasury to require firms to keep records and file reports about the source, volume and movement of funds in and out of country thru domestic firms

Ex money orders, cashiers checks, between 3k to 10k for up to 5 years record

Question 10

Currency transaction report CTR

AML

Answer 10

Must be completed by firm to file report

More than $10k cash

Must be filed within 15 days

Question 11

Anti money laundering

USA patriot act

Answer 11

Prevent and prosecute money laundering and financing of terrorism :

Compliance program
Ongoing employee training program
Annual independent audit
Development of internal policies

Question 12

Money laundering 3 independent simultaneous steps

Answer 12

Placement- introducing finds to be laundered

Layering- separating proceeds thru complex financial transaction to hide source

Integration- reintroducing new clean funds back into financial system by providing legitimate explanation

Question 13

Office of foreign assets control (OFAC)

Answer 13

Publishes list of individuals and companies associated with certain targeted countries.

• terrorists and narcotic traffickers, individuals called Specially designated nationals (SDNs) must block or freeze assets and report incidents within 10 days occurrence

Question 14

SAR

Suspicious activity report

Answer 14

Report known or suspected violations of law observed by financial institutions to the bank secrecy act

Report must be filed with FINCEN - financial crimes enforcement network within 30 calendar days of $5k or more

Question 15

SIPA - act

Securities investor protection corporation (SIPC)

Answer 15

Protect customer accounts in the event BD goes bankrupt. Insurance coverage on customer accounts held in “street name”

Non profit organization

Protect up to $500k only 250k in cash

Question 16

Disclosure for SIPC

Answer 16

Member firms must advice all new customers in writing at the time of opening an account they can obtain more info by contacting SIPC.

Provide website and phone number

Provide at least once per year

Question 17

Institutional communication

Answer 17

At least 100 participants

Banks, trust companies, insurance companies

Not required to be filed with FINRA

Question 18

Retail communication

Answer 18

Any printed or electronic communication directed to more than 25 retail investors in 30 day period

Sales literature and Ads, emails, text messages, form letters research reports and brochures

Must be approved by principal prior to use and must be kept on file for 3 years. Finra requires to be filed within 10 days of first use , not beforehand

Question 19

Correspondence

Answer 19

Written or electronic communication targeted to one individual 25 or fewer retail customers within 30 days

Question 20

Independent prepared reprints

Answer 20

Any reprint or excerpt of article written by publisher that is not affiliated of underwriter or issued of a security.

Must be less than 25 or less investors