Supervision Of Customer Activities

Question 1

How long must registrations on the do not call list be maintained

Answer 1

Indefinitely

Question 2

In assessing the fairness of a members commission and markup practices, what factors are considered?

Answer 2

Type of security 
Availability of the securities
Price
Dollar Amount
Patterns of markups and markdowns

Question 3

Under FINRA rules, how often must statements be sent?

Answer 3

Quarterly

Question 4

What is required to grant discretionary privileges to a third party in a cash account

Answer 4

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

Question 5

In its first year, how many days must a new member profile communications with FINRA

Answer 5

10 days

Question 6

A carrying member may take exception to transfer instructions if

Answer 6

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

Question 7

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

Answer 7

15 days unless other terminated or extended by a regulator or court of competent jurisdiction

Question 8

FINRA rules require anti-money laundering training to take place on what frequency

Answer 8

Ongoing

Question 9

Email to what number of individuals or less is considered correspondence?

Answer 9

25

Question 10

When should the receiving member firm forward the TIF to the firm currently carrying the account?

Answer 10

Immediately

Question 11

What is a breakpoint sale?

Answer 11

A customer knowingly buys investment company shares in an amount just under a dollar bracket that would qualify for reduced sales charges

Question 12

How long must a B/Ds approved retail communications be kept on file?

Answer 12

3 years

Question 13

How many days do member firms have to provide a copy of the new account form to new customers

Answer 13

30 days

Question 14

How many days do Firm have to file SAR forms?

Answer 14

30 days

Question 15

What are the means by which a customer can opt out of privacy disclosure rules

Answer 15

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

Question 16

How is markup/markdown calculated in a dominated and controlled market

Answer 16

Cost

Question 17

How is markup/markdown computed in an inactive competitive market

Answer 17

Contemporaneous sales to other dealers

Question 18

How is markup / markdown computed in active competitive markets

Answer 18

Inside market at the time of the transaction

Question 19

When should order tickets, discretionary or otherwise, be reviewed by a principal

Answer 19

After execution - usually by the end of the trading day.

Question 20

What is the reporting threshold for a SAR

Answer 20

$5,000

Question 21

What is the threshold level for disclosing a testimonial?

Answer 21

$100

Question 22

What are the required disclosures for a research report?

Answer 22

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

Question 23

Are member firm’s required to disclose participation in a selling group as part of a research report?

Answer 23

No - members must only disclose if they were a manager or co-manager

Question 24

The Patriot Act requires firms to make and retain records related to wire transfers of what amount?

Answer 24

$3,000

Question 25

Account transfer rules require firms to validate within ___ amount of days and transfer within ___ amount of days following validation.

Answer 25

Validate within 1 business day | Transfer within 3 business days

Question 26

Does a cash account require a customer’s signature

Answer 26

Nope

Question 27

What ads require pre-filing with FINRA

Answer 27

Ads associated with rankings and those that contain bond fund volatility ratings

Question 28

What is a not-held order? When must it be executed

Answer 28

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

Question 29

What are a members duties related to a signed and returned proxy statement that fails to indicate how the shares should be voted?

Answer 29

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.

Question 30

What are the rules for holding mail for clients?

Answer 30

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.

Question 31

What are a member’s actions following the death of a client?

Answer 31

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

Question 32

What are the SEC rules related to changes in account records?

Answer 32

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

Question 33

What are the requirements to open an account? What are the requirements to verify identity?

Answer 33

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

Question 34

What type of communication is text messaging considered?

Answer 34

It is not telephonic communication. Depending on its use, it can be considered correspondence or retail communication

Question 35

What are the requirements for emergency contacts?

Answer 35

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.

Question 36

What are the threshold and retention requirement for reports submitted to FinCen?

Answer 36

10,000 These reports are to be maintained for 5 years

Question 37

What is the timeline for a customer to accept of reject a recession offered by a B/D?

Answer 37

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%

Question 38

What is the prevailing market price for a corporate bond

Answer 38

Absent information to the contrary, a firm’s contemporaneous price is the prevailing market price for a corporate bond

Question 39

What are the rules that govern the continued receipt of commissions at retirement?

Answer 39

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

Question 40

What are the three exceptions to telephone solicitations to persons on the national do not call list

Answer 40

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

Question 41

Where is payment for order flow disclosed

Answer 41

Payment for order flow is required to be disclosed on confirmations?

Question 42

What are the requirements for a member firm who wants to flaunt its recent performance?

Answer 42

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

Question 43

What two regulatory bodies have established the most regulations related to money laundering?

Answer 43

The federal reserve and the U.S. treasury

Question 44

When should financial institutions file Form 112?

Answer 44

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.