Supervision Of Customer Activities Flashcards
How long must registrations on the do not call list be maintained
Indefinitely
In assessing the fairness of a members commission and markup practices, what factors are considered?
Type of security Availability of the securities Price Dollar Amount Patterns of markups and markdowns
Under FINRA rules, how often must statements be sent?
Quarterly
What is required to grant discretionary privileges to a third party in a cash account
A new account form and a limited power of attorney. A limited power of attorney gives the third party trading authority, but prohibits the party from withdrawing assets from the account
In its first year, how many days must a new member profile communications with FINRA
10 days
A carrying member may take exception to transfer instructions if
The account number is invalid
The social security number on the account does not match that on the carrying firm’s records
The account title does not match
The customers signature is improper
How many days after the date that a member first placed a temporary holds on disbursement of funds in a senior account will the hold expire
15 days unless other terminated or extended by a regulator or court of competent jurisdiction
FINRA rules require anti-money laundering training to take place on what frequency
Ongoing
Email to what number of individuals or less is considered correspondence?
25
When should the receiving member firm forward the TIF to the firm currently carrying the account?
Immediately
What is a breakpoint sale?
A customer knowingly buys investment company shares in an amount just under a dollar bracket that would qualify for reduced sales charges
How long must a B/Ds approved retail communications be kept on file?
3 years
How many days do member firms have to provide a copy of the new account form to new customers
30 days
How many days do Firm have to file SAR forms?
30 days
What are the means by which a customer can opt out of privacy disclosure rules
A reply form with an opt out notice
Electronic means to opt out if the customer has consented to electronic delivery of information
A toll free number
The SEC has stated that members have not provided a reasonable means of opt out if the only means is by writing a letter to the member
How is markup/markdown calculated in a dominated and controlled market
Cost
How is markup/markdown computed in an inactive competitive market
Contemporaneous sales to other dealers
How is markup / markdown computed in active competitive markets
Inside market at the time of the transaction
When should order tickets, discretionary or otherwise, be reviewed by a principal
After execution - usually by the end of the trading day.
What is the reporting threshold for a SAR
$5,000
What is the threshold level for disclosing a testimonial?
$100
What are the required disclosures for a research report?
Whether the member was a manager or co-manager of any offering or the issuer’s securities within the past year
If the member is a market maker in the recommended security
Are member firm’s required to disclose participation in a selling group as part of a research report?
No - members must only disclose if they were a manager or co-manager
The Patriot Act requires firms to make and retain records related to wire transfers of what amount?
$3,000
Account transfer rules require firms to validate within ___ amount of days and transfer within ___ amount of days following validation.
Validate within 1 business day
Transfer within 3 business days
Does a cash account require a customer’s signature
Nope
What ads require pre-filing with FINRA
Ads associated with rankings and those that contain bond fund volatility ratings
What is a not-held order? When must it be executed
A not held order is one in which the customer give a rep discretion over the price or timing of the order. It is not discretionary.
In addition, retail not hod order must be executed on the day received unless the customer has provided written and signed instructions to the contrary.
Exercise time or price discretion must be noted on the order ticket
What are a members duties related to a signed and returned proxy statement that fails to indicate how the shares should be voted?
The member should vote the shares as recommended by the management of the issuer
If, however, the customer does not return the proxy by the 10th day before the annual meeting, the member may vote the shares as it sees fit as long as the matters to be voted on are of minor importance
If the matter are of major importance, the member may never vote the shares.
What are the rules for holding mail for clients?
Members may hold mail for a customer if they receive written instructions including the period during which the request is being made
If the request is long than three months, the request must include an acceptable reason. Convenience is not an acceptable reason for holding mail longer than three months.
What are a member’s actions following the death of a client?
Cancel orders
Freeze accounts
To release funds, a certified copy of the death certificate is always required to release the dependents assets.
An affidavit of domicile and and inheritance tax waiver may also be required
What are the SEC rules related to changes in account records?
Broker dealers must send customers changes in account records on or before 30 days after notice of the change
Broker dealers are required to furnish copies of customer account records at intervals no greater than 36 months
What are the requirements to open an account?
What are the requirements to verify identity?
Name, address, social security number, date of birth.
The rules require that you verify a customer’s identity within a reasonable period of time after the account is opened.
The SEC does not prescribe procedures but member firms must include in WSPs
What type of communication is text messaging considered?
It is not telephonic communication.
Depending on its use, it can be considered correspondence or retail communication
What are the requirements for emergency contacts?
2 emergency contacts
Update 30 days following a change.
Firms are obligated to review contact information 17 days after the end of each calendar year
Emergency contacts must be a principal of the firm. Backup does not have to be a principal, but needs to be knowledgeable.
What are the threshold and retention requirement for reports submitted to FinCen?
10,000
These reports are to be maintained for 5 years
What is the timeline for a customer to accept of reject a recession offered by a B/D?
The offer must be accepted or rejected within 30 days. Offer is void after this date and can no longer sue
The member offers to buy back the security from the customer at cost plus interest of 6%
What is the prevailing market price for a corporate bond
Absent information to the contrary, a firm’s contemporaneous price is the prevailing market price for a corporate bond
What are the rules that govern the continued receipt of commissions at retirement?
Retired employee or former employees widowed spouse can continue to receive commissions if a prior written contract exists. Commission may only be paid on business generated while employed
What are the three exceptions to telephone solicitations to persons on the national do not call list
The firm has established business relationships with the recipient of the call
the firm has the person’s written consent
The person making the call has a personal relationship with the recipient of the call
Where is payment for order flow disclosed
Payment for order flow is required to be disclosed on confirmations?
What are the requirements for a member firm who wants to flaunt its recent performance?
It must provide balance by disclosing all selections of similar investment class and suitability performance for the last 12 months
For example, if 10 short term trading ideas for aggressive investors are being touted because they were successful, the firm must disclose short term ideas that were unsuccessful for aggressive investors over the same 12-month period
What two regulatory bodies have established the most regulations related to money laundering?
The federal reserve and the U.S. treasury
When should financial institutions file Form 112?
When any currency received in the amount of more than $10,000 on a single day. They must file the form within 15 days of receipt of the currency.
