series 24 trending topics Flashcards
If a person is seeking information on insider purchases, which filing is the BEST source for such information?
Form 4.
true or false: A predispute arbitration clause may limit the type of arbitration claim the customer may file.
false
When must a BD ask the Securities Information Center about newly delivered securities?
- securities delivered by a customer are registered in street name
- securities delivered by a customer unknown to the BD
- the securities are worth at least $10k
A BD that sells mutual funds is required to submit payments received from customers to the investment company no later than:
3 business days following the receipt of the customer’s order.
Name 6 conditions under which FINRA may consider a firm to be approaching “financial or operational difficulty.”
- Net capital of less than 150% of the minimum required for 15 consecutive business days.
- AI / NC ratio exceeds 10:1 for 15 consecutive business days.
- A reduction in excess net capital of 25% in the preceding two months or 30% in three months.
- A substantial change in the way the BD processes its business which increases the potential risk of loss to customers.
- The books and records are not maintained.
- Inability to clear and settle transactions promptly.
A registered representative uses instant messages as a means of communication with 50 of her high-net-worth clients. This type of communications is considered:
A retail communication and is subject to review (not pre-approval).
Name 11 things that may be included in an advertisement for a new issue.
- name of the issuer
- full title of the security
- amount being offered
- description of issuer’s business
- price
- date of sale
- identity of underwriters
- contact info
- schedule of the offering
- primary exchange
- names of sellers, if in prospectus
How long is the look-back period for a Reg A offering?
12 months
For how many days must the customer hold mutual fund shares before the BD may extend credit on them?
30 days
What is a branch office?
An office where the firm’s associated personnel regularly conduct the business of effecting transactions or inducing the purchase/sale of securities.
true or false: Accepting a customer’s personal check requires written approval by a supervisor.
false
true or false: A 24 must approve an instant message from an RR to a retail investor before being sent.
false. It should be reviewed by a 24.
Corporate debt with a maturity of N days or less is exempt from registration. What is another name for this type of debt?
270 days. Commercial paper.
Name three scenarios where a preliminary proxy is not required.
- The proxy relates to the election of directors.
- The proxy relates to approval of the company’s accountants.
- A proposal put forth by the shareholders under SEC’s rule 14a-8.
What must a new corporate insider do?
File a form 3 with the SEC within 10 days.
During its first year of business, the maximum aggregate indebtedness to net capital ratio must be less than what?
8:1
Retail communications that pertain to which products must be filed with FINRA within 10 days of being published?
- Registered investment companies (provided the communications do not include fund-created rankings or comparisons)
- publicly traded DPPs
- SEC-registered CMOs
- Any security registered with the SEC that’s an ETF or ETN.
- Any template for written reports produced by an investment analysis tool.
- Broker prepared, widely disseminated free writing prospectuses.
For how long must a tender offer remain open? What if the offer changes?
At least 20 days. If it changes it must be extended by at least another 10 days.
true or false: The holding period on restricted stock is waived in a 144 sale if the owner is deceased.
true
How long does a BD have to honor a client’s request to be added to the “do not call list”?
30 days
true or false: Rights are eligible for portfolio margining.
false
What is a pattern day trader’s buying power? What happens if he exceeds his buying -power limitations?
Four times the trader’s maintenance margin excess, determined at the close of the previous day. He must meet a day trading margin call within 5 business days. During that time his day trading buying power is limited to two times the trader’s maintenance margin excess.
What is simplified industry arbitration?
Between member firms and/or associated persons with a dollar amount not exceeding $50k.
Suppose a BD has aggregate indebtedness of $5850000 and net capital of $450000. Within how long must it notify the SEC?
Within 24 hours. It is not a net capital deficiency. It must file an Early Warning Notice with the SEC and FINRA.
What is a shelf registration? What rule allows them?
A procedure that allows firms to file one registration statement covering several issues of the same security. SEC Rule 415, adopted in the 1980s, allows a corporation to comply with registration requirements up to two years prior to a public offering of securities. With the registration “on the shelf,” the corporation, by simply updating regularly filed annual, quarterly, and related reports to the SEC, can go to the market as conditions become favorable with a minimum of administrative preparation and expense.
Is a company allowed to make a personal loan to its CEO?
no, never
According to SEC Rule 10b-18, an issuer may repurchase its securities in the marketplace provided:
- It purchases <=25% of an ADV.
- It does not purchase during the open, or the last 10 minutes before 4pm for an actively traded security.
- The issuer does not purchase at a price higher than the highest independent transaction price.
- The issuer uses only one BD or ECN to execute the transactions on any single day.
What is the minimum net capital to participate in a firm-commitment underwriting?
$100k
How should a BD calculate its markup for a proceeds transaction?
As if the customer’s sale as if done for cash when computing its markup. Ie if the customer sells $10k worth of securities, then the markup should be a percentage of $10k.
true or false: A BD working in a bank must have clients sign a statement that they are aware their investments are not FDIC-insured.
false
When estimating the value of a nontraded REIT or DPP, how old can the data be?
No more than 18 months old.
If a penalty is assessed by a Hearing Panel, it generally becomes effective:
No less than 30 days after the penalty is assessed.
When would a BD not be able to accept a $99 gift from a distributor?
If the gift is conditioned on the attainment of a sales target.
A BD has been notified that it is subject to the Taping Rule. The firm decides to terminate a group of registered representatives in order to avoid being subject to the rule. In this case, the firm may NOT rehire the terminated employees within:
180 days
stopping stock is best described as:
a price guarantee for a public order
true or false: During a road show, institutions may receive one-on-one presentations.
true
What SEC rule provides an exemption from registration for securities being sold on an intrastate basis? For how many months after the last date of sale by the issuer must a resident of the state hold the securities before selling them to a non-resident?
SEC Rule 147 and Rule 147A. 6 months following the last date of sale by the issuer.
true or false: If a member firm will be imposing a penalty bid, it must notify FINRA.
true
true or false: A RR becomes a Certified Financial Planner. He must notify FINRA.
false
A BD makes a material change to its investment analysis tool. When should it (have) filed the change with FINRA?
within 10 business days of the change
For Reg D offerings, what is an accredited investor?
- $1M net worth, or
* $200k annual income ($300k for a married couple) in each of the last two years with the expectation it will continue.
What is the regulatory minimum net capital for a carrying firm?
$250k
TRUE or FALSE: If the SEC sues an issuer and underwriter for false statements, then the customer may not still file a lawsuit against the issuer and the underwriter?
false
What would be found on a client’s DVP account statement?
credits and debits
Company XYZ has bonds convertible into common stock. If a company issues common stock, what are the reference securities? What are the covered securities?
The only covered security is the common stock. There is no reference security.
What may happen to a FINRA member who has failed to pay required fees or assessments?
The member may be suspended or expelled upon 15 days written notice from FINRA.
The final settlement of a syndicate account must occur within how many days following the date on which the securities are delivered to the underwriter?
90
An insider sells some stock. Within how many days must he complete a form 4?
Within 2 business days of execution.
How can an ineligible issuer become eligible?
Filing a registration statement or annual report with audited financial statements.
If a tender off will be extended, by when must the extension be announced.
By 9am the day after the expiration of the tender offer.
true or false: With written permission, a BD may commingle the securities of customers.
true
For how long must the securities borrowed and loaned ledger be retrained?
3 years
What defense protects the underwriter from false statements made by the issuer in offering documents?
A Section 11 (Due Diligence) defence
An initial notice is sent to a member firm how many days before a registered person’s anniversary date to complete his Regulatory Element of Continuing Education? How long does he have to complete it?
30 days before. 120 days to complete.
The Securities Exchange Act of 1934 requires all of the following EXCEPT:
a. The contents of the prospectus for the sale of 10M shares of additional stock by Gargantua Industries, whose stock trades on the NYSE.
b. The filing of a report with the SEC by a new member of Gargantua’s board.
c. The registration of a new broker-dealer subsidiary of Bantam Brokerage.
d. The filing of an annual financial report with the SEC by Gargantua Industries.
a
TRUE or FALSE: A sale made under Rule 144 raises capital.
false
By when must a customer take a distribution from his IRA?
By April 1st in the year after client turns 70.5.
In a transaction in an account opened under the Uniform Gifts to Minors Act, who must sign the security?
the custodian (not necessarily the parent)
How often should branch offices that do not supervise be reviewed?
At least every three years.
Is a seasoned issuer eligible for shelf registration?
Yes
Must independently prepared reprints, distributed to retail clients, be filed with FINRA?
no
When a member firm issues a research report, it must be approved by whom?
A supervisory analyst (series 16)
Give some examples of services not allowed under a soft-dollar arrangment.
- paying a fund’s accounting fees
- advertising and marketing expenses
- travel expenses, meals, and entertainment
- administrative expenses
- employee salaries
- professional licensing fees
- computers
- correction of trading errors
Name three properties of predispute arbitration clauses.
- All parties are giving up the right to sue in court. Arbitration awards are final and binding.
- Arbitrators do not need to explain their decisions.
- Within 30 days of signing the agreement, the customer must receive a copy. The customer must acknowledge receipt.
What is a series 27?
A financial operations principal.
true or false: A BD must submit a copy of its training plan to FINRA.
false
How often must a trial balance be prepared?
Monthly
What is a 12b-1 fee?
An ongoing asset-based sales charge that is deducted from a mutual fund investor’s account on a quarterly basis.
A BD must borrow, or arrange to borrow, securities prior to effecting a short sale after having a fail-to-deliver position in a threshold security for how many days?
13 consecutive settlement days
Company XYZ issues bonds convertible into common stock. What are the reference securities? What are the covered securities?
The reference security is the common stock. The covered securities are both the convertible bonds and the common stock.
After failing a FINRA exam 3 times, how long must you wait to take it again?
6 months
On is the value of a customer’s variable annuity based?
The number of accumulation units multiplied by the net asset value per unit.
What is the maximum size of a Reg A+ offering offered to the public?
$50 million.
When must a Suspicious Activity Report be filed? How long does a BD have to file it?
If a transaction involved at least $5k, and the member firm knows or has reason to believe the funds are derived from an illegal activity designed to avoid filing other forms, or has no legitimate lawful purpose. It must be filed no later than the 30th day after the member firm discovers the activity.
When is a WKSI permitted to use a free writing prospectus?
Either prior to or after the filing of a registration statement.
When is a publicly traded company required to register with the SEC?
- It trades on an exchange, OR
* Total assets more than $10M held by either (i) at least 2k people or (ii) 500 not accredited investors.
true or false: A BD must inform clients about their business continuity plan when they open their account.
true
What is the minimum equity for a pattern day trader?
$25k
true or false: When crossing a block on the NYSE outside the prevailing NYSE quotation, the member is required to check if the DMM has any interest in participating in the transaction.
false
When is an RR of a foreign BD permitted to make sales calls in the US?
When accompanied by an RR of a US BD.
When would a member file a Form 211 with FINRA.
To begin quoting an OTC security that does not satisfy the piggyback exemption under SEC Rule 15c2-11.
true or false: Depositions are part of the arbitration procedure?
false
True or false: a retired RR may sometimes receive continuing commissions for mutual fund sales.
True, paid from 12b-1 fees.
true or false: When crossing a block on the NYSE outside the prevailing NYSE quotation, the member is required to notify the DMM.
true
Compensation disclosures must be filed with FINRA under what time frame?
No later than one business day following the filing of the registration statement with the SEC or any state securities commission. If the securities are exempt from registration, then at least 15 business days prior to the anticipated offering.
A registered person employed by a member firm has been arrested and charged with a felony that does not involve securities. What should the member firm do?
Disclose this on a Form U4.
What is the maximum size of a Reg A offering offered to the public?
$5 million.
true or false: A revolving subordinated loan allows prepayments within the first year.
true
true or false: The Code or Arbitration will apply to disputes between a member firm and FINRA.
false
Concerning an account transfer, upon receipt of a transfer instruction form (TIF), when must the carrying firm validate or take exception? Within how many days of the validation must they complete the transfer?
One business day. Within three days of the validation.
When is an associated person of an issuer considered a RR?
If he received compensation to distribute a new issue.
When is it unnecessary to notify the SEC regarding sales under Rule 144?
If the sale is both less than 5k shares and $50k.
true or false: A revolving subordinated loan may only be used for underwriting purposes.
false
A pooled account is not required to register as an investment company if it does not make a public offering and has no more than how many investors?
No more than 100 investors.
An RR copies and pastes an article prepared on equity investing by a nonaffiliated online publication to 50 of her best customers. Does this communication require principal approval?
yes
Ned has entered an order to sell 700 shares of GLO with his BD. He has told the firm he is in possession of the securities and has agreed to deliver the certificates to the BD prior to settlement. If Ned does not deliver the certificates, what is the BD’s responsibility?
Purchase 700 shares of GLO in Ned’s account no later than 10 business days following the settlement date.
According to SEC Rule 15c3-1, when may a BD use a temporary subordination agreement in order to increase net capital?
To undewrite a firm-commitment issue.
For how long is a Reg 147 offering restricted from out of state resales?
6 months
A BD would like to move a branch location from an office complex to a houseboat located in a marina. Within how many days must it notify FINRA?
30 days
What percentage of income do REITs distribute to unit holders?
At least 90%.
true or false: a tender offer is a type of distribution.
false
What FINRA rule specifies what information a managing underwrite is required to file with FINRA for an offering of securities? What is its number?
The Corporate Financing Rule. FINRA rule 5110.
A corporation’s shares are quoted on the OTCBB. A BD selling the securities in the aftermarket is required to deliver a prospectus within how many days following the effective date of the registration?
40 days
When a RR leaves a BD, what must the BD do?
Notify FINRA within 30 days on form U5. Provide the former RR with a copy of the form.
How often is a 606 report filed? Who files it? What does it contain? What securities are included?
Quarterly. A BD. Nondirected customer order-routing information. Exchange listed equities and exchange listed options.
What are the hours of the ADF system?
8am to 6:30pm
TRUE or FALSE: In the Code of Arbitration, customers may appeal arbitration decisions to a court.
false. The Code of Arbitration does not provide for appeals by any party.
How many shareholders must a REIT have in its second taxable year? What is the restriction on concentration?
At least 100. Five or fewer individuals may not own more than 50% of the common stock.
On the death of a customer, what documents are required by a transfer agent?
An inheritance tax waiver, an affidavit of domicile, letters testamentary, and a death certificate.
What are the requirements to be a WKSI?
Either $700M of equity or sold $1B of bonds the past three years.
What is the minimum net capital to establish a reserve account for customers?
$250k
What should a RR do if he disagrees with information found on BrokerCheck?
file an updated U4
true or false: During a road show, only live group presentations may be made.
false
In a tender offer, what must the acquirer file?
A schedule TO is filed by the acquirer in order to provide the terms of the transaction to the shareholders.
How frequently must a BD’s business continuity plan be reviewed?
annually
A customer instructs her BD to stop sending brokerage related mail, since she accesses all information from the internet. What should the firm do regarding this request?
The BD may honor the request.
TRUE or FALSE: A partnership may purchase a 147 offering even if some partners are not in-state residents.
true
What must be provided to a customer each calendar year?
- The FINRA website address.
- The BrokerCheck hotline number.
- A statement as to the availability to the customer of an investors brochure that describes BrokerCheck.
A market maker must immediately display any customer limit order that would improve that market maker’s quote. How long is “immediately”?
30 seconds
Securities received as underwriting compensation are restricted for how many months from the effective date?
6 months
true or false: If the offering of a private placement under Regulation D exceeds $1M, the issuer is required to provide a disclosure document to nonaccredited investors.
false: It should be $5M.
What is an ineligible issuer?
One that is not permitted to use a free writing prospectus.
What is another name for a Suspicious Activity Report? What act requires them?
FinCEN Form 101. The Bank Secrecy Act.
What does NAC stand for?
National Adjudicatory Council
What losses will SIPC cover?
Up to $500k for each separate customer. No more than $250k may be cash. Only for securities held in street name. Not futures.
A BD receives customer securities and customer funds. What is its minimum net capital requirement?
$250k
true or false: LEAPS are eligible for portfolio margining.
true
What is the daily purchase limit of a passive market maker?
max of 30% of it ADTV or 200 sahres
true or false: corporate debt is eligible for portfolio margining.
false
What is the acronym associated with the process of a client instructing his bank to deliver securities against payment by the clearing firm?
RVP
What percent of an account can owned by restricted persons and still purchase shares of an IPO?
at most 10%
How is Regulation S used?
By issuers to raise additional capital from foreign investors.
What kind of transactions in a TRACE-eligible security may be reported T+1?
A List or Fixed Offering Price Transaction, or Takedown Transaction.
If a BD is going to use an electronic means of storing its records, the SEC must be able to review the records how often?
Immediately
What is the maximum volume on a 144A transaction?
There is no maximum.
Suppose a client fails to pay for a security prior to its sale. What is that called? What happens to the client?
A free-riding violation. The account is frozen for 90 days, meaning the customer must pay for all purchases in advance.
By when must a customer be provided with a copy of a signed predispute arbitration clause?
Within 10 business days of a request, or within 30 days of signing, whichever is earlier.
A BD executes a cross trade, facilitating person B selling stock to person A. true or false: The BD must disclose to persons A & B that it was a cross trade.
true
How many days from the offering date does a Reporting Company have do deliver prospectuses after a follow-on offering?
0 days.
Within how many days after the Hearing Panel has stopped accepting evidence must it render a decision?
60 days
A retail communication is prepared by an investment company sponsor and used by a BD. Who must file the communication with FINRA?
Only the sponsor.
What is lost under a penalty bid?
The sales concession.
If a BD has $6 of net capital, how many prop trades may it do per year?
No more than 10 per year.
What’s a schedule 13G?
A 13D filed by passive investors, eg an index fund.
The amount of restricted securities that may be sold within a three-month period under Rule 144 is:
The greater of 1% of the shares outstanding or the average weekly volume of trading in the previous four weeks.
When may a testimonial be used?
If the provider has the knowledge and experience to form a valid opinion.
A firm is the managing underwriter of an IPO of a security that is listed on the NYSE. For how many days after the effective date must the firm deliver a prospectus to any purchaser?
25 days
true or false: A firm must disclose its clearing firm to FINRA.
true
What protects the underwriter from event risk during the underwriting?
a market-out clause
How long is the quiet period for an IPO? For a secondary offering?
10 calendar days. 3 calendar days, just or the manager and comanager.
A syndicate manager anticipates that the closing of the offering will be delayed beyond the date specified in the offering documents. What must he do?
Notify FINRA’s Operations Department immediately.
What are the 4 steps performed during the underwriting of securities by a WKSI?
- The issuer files an S-3 registration statement.
- The issuer files a preliminary prospectus supplement.
- The managing underwriter distributes a pricing term sheet.
- The managing underwriter distributes the concession to the other members of the syndicate.
true or false: Mutual fund exchange privileges impose additional sales charges.
false
For how long must files related to a RR be retained after he departs a BD?
3 years
What should a BD do if it discovers itself in possession of counterfeit securities?
A report must be filed within one day with the agent o the issuer, the SEC, and the FBI.
Name one way an issuer may become “ineligible”.
If it filed for bankruptcy within the past three years.
How much net capital is required to be a MM in a stock less than $5? More than $5?
$1000. $2500.
Name six points that must be stated in a Margin Disclosure Document.
- You can lose more funds than you deposit.
- The firm can force the sale of securities in your account.
- The firm can sell your securities without contacting you.
- You are not entitled to choose which securities are sold to meet a margin call.
- The firm can increase its house maintenance margin requirements at any time without advance notice.
- You are not entitled to an extension of time on a margin call.
true or false: A seasoned issuer may use a pay-as-you-go registration.
false, only a WKSI
A customer of both an introducing firm and a carrying firm finds an error in her account statement. She should contact who?
both the carrying firm and the introducing firm
true or false: A carrying firm may protest an account transfer because of an account title mismatch.
true
true or false: A NASDAQ market maker may request an excused withdrawal if its relationship with its clearing firm is involuntarily terminated.
true
What is SEC Rule 15c3-1?
The SEC Net Capital Rule.
true or false: A market maker must notify FINRA before being a passive market maker in a stock.
true
Before becoming a NASDAQ market maker, a BD must first get permission from FINRA to act as a market maker.
true
What is a statutory disqualification?
A RR convicted of a felony or certain misdemeanors. They are barred from the securities business for 10 years from conviction. A waiver may be aplied for to FINRA. The SEC may reject an approved waiver.
true or false: An RR posted comments on an online interactive social media website. This required principal approval.
false
A customer initiates an arbitration claim. When would there be a hearing?
Only if the customer demands one, consents to one, or the arbitrator calls for one.
The emergency contact for a member firm’s business continuity plan must be:
two registered principals
Under what IRS regulation do REITs operate?
IRS Regulation M
What would preclude an issuer from obtaining WKSI status?
Involvement in bankruptcy in the past 3 years.
What is the minimum requirement to be a seasoned issuer? What registration statement form is used by a seasoned issuer?
$75 million in voting and non-voting common equity. An S-3. (Foreign issuers use an F-3.)
If a RR sends a communication packet to her clients via email, then this communication is classified as a:
graphic communication
Who must receive a notice concerning carrying agreement reports before July 1 each year?
The CEO and the chief compliance officer.
true or false: A BD working in a bank must display the name of the BD at the bank.
true
forward looking information released by an issuer can include:
- earnings forecasts
- future management plans
- statements about future economic performance
- information in reports filed with the SEC
Contingent underwritings require an escrow account. Name two types of contingent underwritings.
mini-maxi and all or none
What does a customer need to open an account as a guardian?
A copy of the court appointment.
true or false: A carrying firm may protest an account transfer because of an unsettled trade.
false
What kind of plan allows corporate insiders to defend themselves against insider trading?
A Rule 10b5-1 plan.
Participants in large M&A transactions must notify whom? When should they be notified?
The Federal Trade Commission and the Department of Justice. 30 days prior to completion of the deal for stock transactions. 15 days prior for cash transactions.
An investor purchasing a reverse convertible security would be most interested in what?
High current income.
How often must members report their short interest to FINRA?
twice a month, by the close of business on the second day after the calculation
To whom does Regulation FD apply?
Issuers of securities
BD X is a syndicate member for a new offering. For how many days must the customer hold the securities before the BD may extend credit on these securities?
30 days
When is a “seasoned issuer” allowed to use a free writing prospectus?
Only after the filing of a registration statement.
Name a report that BD which do not clear or carry accounts must file. How often?
FOCUS Report IIA. Quarterly.
Under Rule 144A, what is a QIB?
3 part “and” test:
- Only certain types of institutions are eligible: insurance companies, registered investment companies, pension plans, corporations, RIA.
- The buys must be purchasing for its own account or the account of other QIBs.
- The buys must own at least $100M of securities not affiliated with the buyer.
A broker dealer has its own “or” test:
- Owns $10M of securities not affiliated with the BD.
- Or acts as a riskless principal for other BDs.
Banks must also have a net worth of $25M.
An investment company can be a QIB by being a part of a family that in aggregate meets the $100M test.
true or false: Quoting firms in OTC equity securities are permitted to withdraw their quotes without a reregistration penalty.
true
Name two methods to issue securities which are exempt from SEC registration, but still subject to filing requirements under FINRA rule 5110.
- Regulation A offerings
* Rule 147 offerings
What tests qualify somebody to supervise individuals selling corporate securities who have a Series 7?
Series 10 or 24.
true or false: Shares sold under the 144 exemption do not become part of the public float.
false
true or false: Members are required to report to their customer that an order was stopped.
true
For reg M, what is the definition of actively traded securities
A$V of $1M and public float of $150M.
What SEC acts regulate mutual funds?
The Securities Act of 1933. The Investment Company Act of 1940.
A issuer is selling securities that have been registered under the Securities Act of 1933. What may the issuer state about the SEC?
The SEC has reviewed the prospectus to determine that it is complete.
When recommending an exchange of one variable annuity for another, what must the RR do?
- Inquiry whether the customer engaged in an exchange within the previous 36 months.
- The inquiry and the customer’s response must be documented in writing.
When is a limited partnership not an ineligible issuer?
If it’s selling its securities through a firm-commitment underwriting.
12b-1 charges may be used to pay what kind of expenses? Name three examples. Name on expense that may not be paid from 12b-1 charges.
Distribution expenses. Example include: commissions (including trailers), advertising and sales literature, the prospectus for prospective shareholders. 12b-1 charges may not be used to pay accounting fees.
If a market maker trades in front of a resting customer order at the same price, how long does he have to satisfy the Manning Rule?
60 seconds
When can a stabilizing bid be initiated higher than the highest independent bid in the security’s principal market?
i) the security traded in its principal market on that day or the previous day
ii) the current ask is >= last price
iii) the bid must always be <= last price and <= public offering price.
To whom can a member appeal if the NAC determines the associated persion should remain disqualified?
The NAC decisions can be appealed to the SEC.
true or false: US Treasury bonds are TRACE eligible.
false
What are some reasons a carrying firm may protest an account transfer?
If basic account information does not match the information on record at the carrying firm: eg tax ID number, account title, account number.
What three requirements must be satisfied for any company listing on NGS?
- minimum $4 price
- 3 or 4 market makers
- subject to corporate governance
What is the proper sequence of registration in a custodial account name?
custodian’s name
minor’s name
appropriate state
eg “Seena San Fillippo C/F Esa Tikkanen under UGMA of Tennessee”
A client of ABC BD thinks he lost money because ABC was putting an artificial price cap on a security. The statute of limitations for taking civil action in this instance is:
Three years from the violation or one year from discovery.
When may a distributor be reimbursed for attending an educational meeting?
- An RR has permission from his BD.
- Attendance is not tied to a sales target.
- The location of the meeting is appropriate, such as the office of the distributor.
TRUE or FALSE: A foreign finder may refer a US-based customer to the member firm.
FALSE
How soon after arbitration must awards be paid?
30 days.
When must somebody file a 13F?
If they have investment discretion over at least $100M in equity securities.
How is an unseasoned issuer allowed to use a free writing prospectus?
After the filing of a registration statement and by including a statutory prospectus.
true or false: Research analysts may participate in road show presentations.
false
A communication that mentions the investment objectives and desirability of owning shares of a registered investment company is called:
generic advertising
true or false: A foreign BD may join a syndicate to sell outside the US even if they are not FINRA members.
true
The time limitation for submitting disputes to arbitration is:
6 years from the time the act occurred.
When is a BD required to register as an investment adviser?
- If it charges a separate fee for providing financial planning or advisory services.
- Or exercises discretionary authority over a client’s funds.
- Or promotes wrap accounts.
Name 4 way to issue securities that exempt from FINRA rule 5110 filing requirements.
- Reg D offerings.
- municipal securities
- tender offers
- offers of NYSE, AMEX, NASDAQ global market securities (not NASDAQ CM)
A BD receives customer securities for immediate transfer to a clearing firm. What is its minimum net capital requirement?
$50k
true or false: A debt security issued by a GSE is TRACE eligible.
true
true or false: A departing RR must sign his U5.
false
A corporation is about to go public. Its shares will be quoted on the OTCBB. A BD selling the securities in the aftermarket is required to deliver a prospectus within how many days following the effective date of the registration?
90 days
What is a proceeds transaction?
A customer sells securities and uses the proceeds to purchase other securities.
What is Section 4(6) of the Securities Act? What Section looks very similar to me? What is a difference between 4(6) and Regulation D?
Section 4(6) provides a registration exemption for offerings to accredited investors, if the aggregate offering is <=$5M, and there is no advertising. Section 4(5) looks very similar. Regulation D allowed up to 35 non-accredited investors.
What act requires financial institutions to file reports and keep records concerning cash transactions?
The Bank Secrecy Act.
Who must review the compensation of a research analyst? How often?
A committee that reports to the firm’s board of directors, and has no investment bankers. Annually.
true or false: An escrow account is required for a firm-commitment underwriting.
false
Who pays the filing fee of an arbitration hearing?
The party initiating the claim.
What is another name for the Nasdaq Market Center Execution System?
Single Book
What is the OATS business day?
4:00:01pm to 4pm the next day
What may prevent the receiving firm from accepting an asset transfer?
The clients account may be deemed too risky under the receiving firm’s credit policies.
The purchaser must be given a copy of the final prospectus (which includes the public offering price) by no later than when?
The time a sale is confirmed.
What may prevent the delivering firm from making an ACAT asset transfer?
A lien or injunction against the client’s accout.
What would NOT be found on a client’s DVP account statement?
A closing balance.
When FINRA reviews the qualifications of an applicant, names three things it will consider. Name one thing it will not consider.
It will consider the training the applicant will receive from the member firm, experience, competence or knowledge of the industry. It will not consider educational background.
Information barriers are required between which two parts of a broker dealer?
Research and trading.
Suppose there’s a market wide trading halt for the remainder of the day. How should pending and new customer orders be handled?
Day orders should be treated at GTC orders and held for execution at the next trading session. Orders tied to the close should be cancelled. No new closing-price orders should be accepted.
By when must a form D be filed?
No later than 15 days after the first sale of securities under regulation D.
What is a “disciplined firm”?
Either had their licenses revoked or been expelled by an SRO.
Rule 17a-11 requires reports be sent to the SEC if:
- An independent auditor discovers material inadequacies in its internal accounting procedures.
- The firms debt-to-equity ratio exceeds 70% for more than 90 days.
- Its dollar amount of net capital is less than 120% of the minimum requirement.
- It ratio of aggregate indebtedness to net capital exceeds 12 to 1.
Who should you notify is one of your customers is on the Office of Foreign Assets Control list?
The Treasury Department
What is a blockbuster trade? How long is a BD given to accept or decline a blockbuster trade?
A trade of $1M or more. 15 minutes.
When issuing a research report, the member firm must indicate in the report if it was a manager or comanager of any underwriting of any class of the corporation’s securities within how long?
The preceding 12 months.
What does PIPE stand for?
Private Investment in Public Equity
For which orders may the name of the customer be allocated on a business day other than the trade date?
An account for an investment adviser.
A BD receives a written customer complaint concerning a RR who recently left to join another BD. true or false: The BD must notify the RR of the complaint.
false
A membe firm intends to provide access to an interactive analysis tool through its Web site. This activity is permitted if FINRA’s Advertising Regulation Department has access to the tool:
Within 10 business days of first use.
A firm is the managing underwriter of a follow-on offering of a security that is listed on the NYSE. For how many days after the effective date must the firm deliver a prospectus to any purchaser?
0 days
When may DPP quotes be updated?
8:30-9:30am and noon-12:30pm
Who may authenticate mutilated securities to be considered good delivery?
- the trustee
- registrar
- transfer agent
- issuer
A person who has sold a security based on untrue statements faces liabilities based on:
The investment amount, a reasonable amount of interest on the investment, minus any amount of income received from the investment.
What is an Emerging Growth Company? What act is this term from? What are two excemptions allowed to EGCs?
Total annual revenues less than $1B during the most recent year. The JOBS act.
- Research analyst may participate in a pitch meeting with investment bankers for an IPO.
- There is no quiet period following a securities offering.
Who determines the Effective Date of an IPO?
the SEC, not FINRA or the issuer
What is a BD required to do under the Alternative Net Capital Requirement?
Maintain net capital of the max of $250 and 2% of the aggregate debit items.
Name two things which may be omitted from an automatic shelf registration.
- Whether the offering is a primary offering or a secondary offering.
- Description of the securities offered.
What must be disclosed to the customer when transacting business in penny stocks?
Both the compensation the RR and the BD will receive for the transaction.
true or false: Road shows may not be hold prior to a new issue’s effective date.
false
For how long must written complaints from customers be kept?
4 years
In order to refer to past specific recommendations that were profitable, what other information must be provided?
- A list of all recommendations for the same type of security for the past year.
- The security name, date, buy/sell/hold, price at the time of the rec.
- Legend warning investors not to assume the future recommendations will be profitable.
A member BD arranges a private placement for company X. Suppose the BD owns p% of company X. For what p must the BD file a disclosure with the Corporate Financing Department and investors? What rule requires this?
> =50%. FINRA rule 5122.
Within how many months of issuance must a non-traded REIT be priced?
18 months
The responsibility to notify a customer whose account is carried on a fully disclosed basis, or the existence of a clearing arrangement, falls upon:
The carrying firm.
What is the minimum net capital for a BD that carries account but does not hold customer funds or securities?
$100k
What is SEC rule 10b-18?
It provides safe harbor for common stock buybacks, ie the issuer will not be accused of manipulation. It is only for common stock.
true or false: An ATS is required to register as a BD.
true
What is a free writing prospectus?
Any written communication that constitutes an offer to sell or a solicitation to buy the securities relating to a registered offering of securities.
When must a form 144 be filed?
When somebody selling stock using Rule 144 sends the order.
true or false: In order to implement a portfolio margin program, a firm must obtain approval from FINRA.
true
true or false: An underwriter may use its own money to cover the shortfall of an all-or-none underwriting.
false
When must a preliminary proxy be filed, and with whom?
At least 10 days before investors are sent the definitive proxy. To the SEC.
A BD reports a net transaction to FINRA how?
As two transactions
For how long must stock be held before it can be sold using Rule 144?
Six months usually. One year for a non-reporting company.
When may a corporate officer sell short shares in her own company?
If the delivery can be made within 20 days in a short-against-the-box transaction.
TRUE or FALSE: REITs register with the SEC and file 10k and 10Q reports.
true
true or false: A carrying firm may protest an account transfer because of a nontransferable asset.
false
Members must report their short interest to FINRA in what securities?
Any exchange listed or OTC security.
What is the maximum front end cost of a non-traded REIT?
15%
What is “switching”?
The practice of selling one mutual fund and reinvesting the proceeds in another fund.
true or false: Does the 5% policy apply to a Reg D offering?
false
What type of communication is an online interactive social media website?
retail communication
A NASDAQ market maker registers to quote ABD. Within how long must it initiate a quote in ABD.
It must initiate a quote within 5 business days.
BDs must keep books and records in an easily accessible place for a minimum of:
two years
true or false: Unlisted derivatives are eligible for portfolio margining.
true
true or false: A DB must forward annual reports to customers.
true
Rule 144A permits:
private resales of securities to qualified institutional buys.
Under what conditions must a BD record all conversations between a RR and customers and potential customers?
If it employees at least 20 RRs, where 20% of them have been employed by disciplined firms.
How office must an office of supervisory jurisdiction (OSJ) and branch office that supervises one or more nonbranch locations be reviewed?
Annually.
True or false: principal approval required for institutional communications.
False
What does limit power of attorney enable somebody to do? What does full power of attorney add?
Buy and sell securities. Full power of attorney adds the ability to add/remove funds from the account.
What records must a BD keep forever?
- stock certificate books
- the corporate charter and minute books
- partnership articles
A qualified independent underwriter is a member firm that has been actively engaged in the investment banking or securities business for the preceding:
3 years
Name three items needed to open an account for a client wishing to short 1000 shares of stock. Name one thing not required.
required:
* The signature of the principal approving the account.
* The name of the RR responsible for the account.
* The signature of the client.
not required
* A completed Form W-9.
For how long must order tickets be retained?
3 years
A WKSI loses its WKSI status. Until when may it continue to sell securities registered under a previously filed automatic shelf registration?
Until the date of its next Form 10-K is required to be filed.
What are control securities?
Securities held by insiders or affiliated persons.
Within how many days after the date of the audit must the audited statement be furnished to customers?
105 days
What is an “aged fail”? What does it do to a BD’s net capital.
A fail to deliver that has been outstanding for 5 business days or longer. It is deducted from a BD’s net capital.
How often must senior management be apprised of the status of the supervisory control system?
Every year
What is the minimum net capital to have a proprietary trading account?
$100k
An ADF trading center must be open for what hours?
9:30am to 4pm
How many retail investors may receive an electronic communication in 30 calendar days before it’s no longer correspondance?
25 retail investors
A BD is managing underwriter for a TRACE eligible security. What information must the BD provide to FINRA?
- CUSIP
- issuer’s name
- coupon rate
- the time the new issue was priced
- a brief description of the issue
- any other information FINRA deems necessary
true of false: In a pre-existing partnership purchasing a Reg D offering, the partnership will count as one purchaser.
true
For how long must correspondence with customers be retained?
3 years
How often is a securities count done?
quarterly
How often must customers receive written notification of their free credit balances?
At least quarterly
What is Regulation U? Whose regulation is it?
It governs non-broker-dealers lending money using securities as collateral. The Federal Reserve Board.
true or false: An investment company may purchase an offered security even when an affiliated investment company has sold short the issue subject to Rule 105 during the restricted period.
true
What is a series 26?
To supervise the purchase and/or sale of open-end investment company shares, variable contracts, and newly listed closed-end investment company shares.
How many days from the effective date does a company have to deliver prospectuses for an IPO?
25
BD Z receives notification from its insurance carrier that its fidelity bond policy is being cancelled. What must BD do?
Immediately notify FINRA.
If a RR uses a vacation home to transact business for N business days or more per year, the location qualifies as a branch. What is N?
30 business days
Retail communications that pertain to which products must be filed with FINRA at least 10 business days prior to their first use?
- registered investment companies (if the communications include fund-created rankings or comparisons)
- security futures
- bond mutual funds (if the communications include volatility ratings)
TRUE or FALSE: Equity research analysts may assist a company in preparing presentations for an investment banking road show.
false
What is a “covered person”?
A covered person is a RR who has direct contact with customers and any person required to register as a research analyst.
true or false: Annually a customer must receive a statement describing the availability of the FINRA rulebook.
false
What are some allowable services under a soft-dollar arrangement?
- Research
- discussions with analysts
- portfolio analysis software
- attendance at a conference where corporate executives speak about their companies’ performance
- market and economic data services
- certain trading software
Allen was appointed by the court as a fiduciary for his mentally incompetent uncle. What does Allen need in order to effect transactions in his uncle’s brokerage account?
Evidence of appointment of incumbency.
A client purchases an open-ended fund or variable product, and then returns it in N days. For what N will he receive the NAV when selling?
N <= 7 business days.
How long must the general ledger be retained?
6 years
A client receives a maintenance call. When is it due?
Within three business days.
For how long must the purchase and sales blotter be retained?
6 years
How many months after a Reg S offering may the shares be resold in the US?
6-12
true or false: A BD must file its business continuity plan with FINRA.
false
When can a NYSE listed company release forward-looking statements?
at any time
Once a respondent receives a copy of a complaint from the Department of Enforcement, what happens?
He must file a response within 25 days. If the response is not filed, a second notice will be sent, and he has 14 days to answer. A second failure may be treated as the respondent’s admissions to the allegations in the complaint.
What is a series 62?
a Corporate Securities Representative
A BD is controlled by a public company. A customer wishes to purchase the stock of the controlling company. What must the BD do?
The BD must disclose the control relationship prior to accepting the deal. If this initial disclosure was verbal, written disclosure must also be provided prior to settlement.
Your firm enters a stabilizing bid, and the independent market maker moves its bid down. TRUE or FALSE: you can maintain your bid.
true
true or false: A Qualified Block Positioner must be registered as a market maker.
false
A RR receives a check from a client to reserve shares of an IPO during the cooling-off period. What must he do?
Return the check.
What must a firm do if an associated person is statutorily disqualified?
The firm must update the Form U4 within 10 days unless the SD is to be contested.
A BD receives notice from FINRA that the composition of their staff requires taping. How many days does the BD have to reduce staff to avoid compliance responsibilities under the taping rule?
30 days
According to the Corporate Financing Rule, the managing underwrite is required to file what information with FINRA?
- An estimate of the maximum offering price.
- An estimate of the maximum underwriting discount and other compensation.
- A statement concerning affiliation with any member firm of an officer or director of the issuer, or a beneficial owner of 5% or more of the issuer’s securities.
- A detailed statement explaining items of value received from the issuer in the previous 180 days.
- A statement demonstrating compliance with any exception from what constitutes underwriting compensation.
What is an actively traded security? After a secondary offering, what is the quiet period of an actively traded security?
$1M A$V and $150M market cap. There is no quiet period.
true or false: If a member firm engages in syndicate covering transactions, it must notify FINRA.
true
true or false: Any communication made by an issuer more than 10 days before the filing date of a registration statement does not constitute an offer to sell, if it does not mention the securities offering.
false: It must be more than 30 days.
When can a RR contact a person on the national Do Not Call List:
- Prior written permission from the person.
- Has a pre-existing business relationship.
- Is known personally.
A new BD is required to file all broadly disseminated retail communications with FINRA how many days prior to first use? For how long does this rule apply?
10 days. 1 year
What employment specifications disclosed in form U4 must be verified by a BD?
Employment during the most recent three years.
What are the financial requirements of a well known seasoned issuer?
Either $700M of voting and nonvoting common equity, or $1B of bonds issued in the past three years.
If a member firm wishes to hire an employee of another member firm in a part-time capacity, it may:
Do so with the consent of the other member firm.
true or false: A carrying firm may protest an account transfer because of an unsatisfied margin balance.
false
What is the minimum net capital requirement of a securities dealer?
$100k
What is the registration status of a RR who is serving in the military?
Special inactive status
What does ATM mean?
At the Market offerings.
TRUE or FALSE: In a partnership formed to buy a Reg D offering, each partnerr is counted as separate investor.
true
true or false: Unpriced indications of interest are permitted on the OTC BB.
true
How long must the blotter be maintained?
6 years
A RR recommends a variable annuity to a customer, who agrees to buy. What steps must be taken before the application is submitted to the issuing insurance company?
- The RR must document and sign the recommendation before forwarding it to his OSJ.
- The principal at the OSJ reviews the application to determine suitability.
- The principal must approve or reject the application within 7 business days. It must be signed.
true or false: Rule 144 is used to raise money for an issuer.
false
What is the main role of FINRA’s Corporate Financing Department?
Examine the fairness of the underwriter’s compensation.
A BD is a dealer-manager for a tender offer of FOTR. Can the BD be a market maker in FOTR while the tender offer is open?
no, it cannot
For how long can the SEC suspend trading in an individual stock?
10 trading days
An RR would like to compensated to help with a private security transaction or loan. What must he do?
- He needs his employer’s written approval to receive compensation.
- His employer must record the transactions on its books.
- His employer must supervise the RR’s actions.
A member firm is participating in a distribution of its own stock to the public. When can the stock be put into the discretionary account of a customer?
Only if the customer approves the transaction in writing.
How soon must transactions in TRACE eligible securities be reported to TRACE?
Within 15 minutes between 8am and 6:15pm. Outside those hours, before 8:15am (possibly the next day).
true or false: A BD’s business continuity plan must be posted on the firms’ web site.
true
true or false: Stopping stock may not be done by a floor broker.
true
What rule of regulation M restricts the purchase of stock prior to the sale of a new issue? What are the rules about how long purchases are restricted?
rule 101.
A$V $1M and $150M market cap —-> no restriction
A$V $100k and $25M market cap —> 1 day before pricing
otherwise five days before pricing
The amount of a member firm’s fidelity bond is based on its:
net capital requirement
Under SEC rules, what is a reporting company?
Either
- An exchange listed company.
- Any other publicly traded corporation that has total assets of more then $10M and more than 500 shareholders.
True or false: AML written procedures must be filed with the SEC.
False.
How many copies of the preliminary prospectus should be included in a registration filing?
5
Who reviews a Schedule TO?
The SEC’s Staff Office of M & A
Your firm will be participating in a follow-on offering of a thinly traded OTC equity security for which your firm is a market maker. What does regulation M require you to do?
Withdraw your quote immediately.
What seven activities would qualify a branch as an OSJ?
- order execution or market making
- structuring of public offerings or private placements
- custody of customer funds or securities
- approval of new accounts
- review of customer orders
- approval of retail communication
- supervising other branch offices
A BD that clears transactions or carries customer accounts must file what report according to SEC Rule 17a-5? How frequently?
FOCUS Report Part II. Quarterly.
What’s another name for a Currency Transaction Report? What act requires it? When is it filed? How long does a BD have to file it?
FinCEN Form 104. The Bank Secrecy Act. When a BD customer withdraws or deposits at least $10k of cash in a single day. The BD has 15 days to file it.
What is the maximum front end cost of a non-traded REIT?
15%
When may a Purchaser’s Representative be affiliated with the issuer?
Only if he is related to the investor.
Any person who acquires more than 5% of any equity security must file a form BANANA with the SEC within how many days? What is BANANA?
10 days. 13D
Who decides a simplified industry arbitration filing?
One nonpublic arbitrator.
true or false: An ATS may discipline its subscribers.
false
A BD reports a riskless principal transaction to FINRA how?
As one transaction
When is principal approval not required for retail communications?
- Does not contain investment or financial recommendations.
- Does not promote the firm’s products or services.
- Were posted during an interactive electronic appearance.
- Were preciously filed with FINRA.
What is the maximum net capital requirement based on the number of markets made?
$1M
What must be kept by a BD for 3 years?
Written supervisory procedures, checkbooks, and any communications with the public, records of taped conversations, data on a departed RR, trial balances, a fail to deliver ledger, a securities in transfer ledger.
How often must a BD provide a customer with an account statement?
At least quarterly.
true or false: A money market security is TRACE eligible.
false
Any funds used to meet the day-trading minimum equity requirement or to meet any day-trading margin calls must remain in your account for N business days following the close of business on any day when the deposit is required. What is N?
2 business days
If a member of a syndicate, other than the manager, effects a stabilizing bid, what must he do?
Notify the manager of the syndicate within three business days of any stabilizing transaction.
For how long can the SEC suspend trading on an exchange?
90 calendar days
AML reports are filed where?
With the department of the treasury.
Give an example of something an issuer could discuss in the presence of both the investment banking and research personnel of a BD?
a stock buyback
true or false: A BD must file reports with FINRA concerning compliance with anti-money laundering regulations.
false
Name four things that are not considered underwriting compensation.
- registration fees (including state or Blue-Sky fees)
- accounting fees
- FINRA filing fees
- prospectus printing costs
true or false: If a BD receives a complaint from a customer about a BD, then it must report the complaint to FINRA.
false. A BD must submit reports periodically to FINRA about customer complaints.
true or false: Does the 5% policy apply to riskless principal transactions?
true
In a transaction in an account opened under the Uniform Gifts to Minors Act, who must sign the security?
the account custodian
Name 4 exceptions to the short sale restrictions of Rule 105 of Reg M.
- The bona fide purchase exception
- The separate accounts exception
- The investment company exception
- Any offering not conducted on a firm-commitment basis.
