Test 1 Rerun

Question 1

According to the FINRA Corporate Financing Rule, compensation disclosures must be filed with FINRA under which of the following time frames?

Answer 1

By no later than three business days following the filing of the registration statement with the SEC or any state securities commission

Question 2

When would a corporate bond trade executed in a DVP account typically settle?

Answer 2

T+2

he broker-dealer has up to 35 calendar days to complete delivery of the security. (

Question 3

If a WKSI loses its qualifications, how long can offerings commence?

Answer 3

until the next 10k is filed

Question 4

disclosed by a research analyst in a public appearance:

Answer 4

The spouse of the research analyst has a short position in the subject company

The subject company is currently a client of the firm

A member of the research analyst’s household is an officer of the subject company

The disclosure that the firm makes a market in the subject security is required in a research report, but not in a public appearance.

Question 5

A U.S. citizen wants to purchase a U.S. issued security using funds that are borrowed from a Swiss bank. Which of the following regulations applies to her purchase?

Answer 5

Regulation X

obtaining credit from non-US

Question 6

Which of the following statements is TRUE concerning a pattern day trader who has a minimum equity in his account of $22,000?

Answer 6

Closing transactions will be permitted for the next 90 days

Day trader must have $25,000

Question 7

If the National Uniform Practice Committee has not determined a settlement date, settlement on when, as and if issued transactions is on the:

Answer 7

Business day following the day the seller gives the buyer written notice of its intention to deliver the securities

Question 8

A communication that mentions the investment objectives and desirability of owning shares of a registered investment company is called:

Answer 8

Generic advertising

Explanatory information relating to securities of investment companies

Explanation of investment company investment objectives

Offers, descriptions, and explanation of various products and services that do not constitute a security subject to registration

An invitation to inquire for further information

Question 9

When does a principal need to approve an order in a discretionary account?

Answer 9

Promptly

which means on the day of the trade

Question 10

After a broker-dealer executes the first of several orders from a customer for different stocks, it discovers that the customer has been added to the Specially Designated Nationals (SDN) list. As it relates to the customer and the orders, what must the broker-dealer do?

Answer 10

Block the executed order and cancel the open orders

Question 11

An investor has acquired new securities directly from a NON-reporting issuer in a private placement. Under Rule 144, the investor may sell the securities:

Answer 11

After one year

reporting = 6 months

Question 12

Under Regulation SP, which of the following information is not included in the category of non-public personal information?

Answer 12

Aggregated data obtained about consumers

Aggregated data is not considered non-public personal information. Instead, aggregated data is information that’s blind and doesn’t contain personal identifiers about a consumer.

Question 13

Which of the following statements is TRUE concerning certification required under the Annual Certification of Compliance and Supervisory Processes (FINRA Rule 3130)?

Answer 13

It must be submitted to the audit committee and board of directors within 45 days of the completion of the certification.

FINRA Rule 3130 requires each member firm to certify on an annual basis that it has in place written compliance policies and procedures to comply with all applicable SEC and SRO rules and regulations. The certification must be signed by the chief executive officer or equivalent. As part of this process, the final report must be submitted to the member’s board of directors and audit committee (or equivalent bodies) at the earlier of their next scheduled meetings or within 45 days of the date of execution of this certification. If a member firm does not have a board of directors or an audit committee, it would submit the report to an equivalent group such as a management committee, general partner, managing member, advisory board, or financial standards committee.

Question 14

A broker-dealer may close out positions in a customer’s margin account under which of the following circumstances?

Answer 14

The equity falls below the $2,000 requirement in a short account

Question 15

Under Regulation SHO, in which of the following circumstances would a customer NOT be considered long stock?

Answer 15

A customer owns a bond convertible into the number of shares of stock being sold

The fact that the investor owns a convertible bond is not sufficient to be considered long. The convertible bond must first be tendered for conversion to be considered long. In the other choices the investor has exercised and is, therefore, considered to be long the stock.

Question 16

A registered person of a brokerage firm has just been appointed to sit on the board of directors of a non-profit civic organization. If the person’s involvement is investment-related, which of the following statements is TRUE?

Answer 16

He’s required to update his Form U4 within 30 days.

Question 17

If a registered person at a brokerage firm has recently been charged with a misdemeanor involving investment-related fraud by a foreign court:

Answer 17

The registered person is required to update Form U4

Question 18

AAA Investments is applying to become a new member firm with FINRA. There are some deficiencies in its initial application. How long does the firm have to correct these deficiencies?

Answer 18

5 days

Question 19

Each of the following securities is quotable in the Alternative Display Facility, EXCEPT:

Answer 19

Corporate Bonds

Question 20

According to Regulation SHO, a broker-dealer executing a short sale in an equity security for a client must perform a locate:

Answer 20

Prior to accepting a short sale order

Question 21

Each of the following is considered an office of supervisory jurisdiction, EXCEPT:

Answer 21

Any office that’s supervised by a principal
.
An office of supervisory jurisdiction (OSJ) is a branch office of a member firm that’s specifically authorized to (among other things) supervise registered representatives, engage in market making, and structure public and private offerings. An OSJ requires a principal on premises, but many principals operate at branch locations as well. (11525)

Question 22

A registered person employed by a member firm has been indicted for a felony. Which of the following statements is TRUE?

Answer 22

Form U4 must be amended within 30 days.

Question 23

A firm has an office from which clients may obtain financial planning, but only executes a few securities transactions each year. This location is considered a(n):

Answer 23

Non-securities business office

Question 24

A customer maintains three accounts with a broker-dealer. He has two cash accounts and one margin account. In one cash account there are $300,000 of fully paid securities that are registered in his name and the other has $50,000 in cash. The margin account has equity totaling $100,000. How much will the Securities Investor Protection Corporation (SIPC) cover in the customer’s accounts?

Answer 24

$150,000
.The SIPC provides each separate customer of a broker-dealer with maximum coverage of $500,000, of which no more than $250,000 may be for cash holdings. If a customer maintains a cash and margin account, both accounts are combined when determining SIPC coverage. However, securities that can be specifically identified as belonging to a customer will be distributed to the customer without regard to the dollar amount limits previously described. The customer will receive the $300,000 worth of securities that are registered in his name without regard to any SIPC limits, but will receive SIPC coverage for $150,000 of cash and securities in his other accounts. Unless a question suggests otherwise, assume that the securities are held in street name by the broker-dealer. (11803)

Question 25

According to FINRA’s Corporate Financing Rule, underwriting agreements are not required to be filed in which of the following types of offerings?

Answer 25

Restricted securities sold under Regulation D

According to FINRA Rule 5110, securities issued under SEC Rule 147 or Regulation A, while exempt from SEC registration, are still subject to the filing requirements under the Corporate Financing Rule. Restricted securities issued under Regulation D are exempt from filing as well as municipal securities, tender offers, and exchange offers of securities listed on the NYSE, AMEX, and the Nasdaq Global Market (not the Nasdaq Capital Market). (11336)

Question 26

An investor who purchases a reverse convertible security is MOST LIKELY interested in:

Answer 26

High current income

An investor who purchases a reverse convertible security is seeking an above-market coupon rate. Reverse convertible securities are short-term notes that are issued by banks and broker-dealers and typically pay a coupon rate above prevailing market rates. The issuer agrees to pay this higher coupon rate since it has an option to sell a security to the investor if the price of the security falls below a specified value which is referred to as the knock-in level. If the price of the underlying asset stays above the knock-in level, the investor will receive the high coupon and the full return of her principal (the most beneficial option). The investor will not be able to participate if the price of the underlying asset increases. If the price of the underlying asset falls below the knock-in level, the investor will be obligated to purchase shares of the underlying asset at a fixed price. The price of this asset may have depreciated below the knock-in level and the investor may receive substantially less than the original principal.

Question 27

A transaction in a security that is reported to TRACE may be seen by the public:

Answer 27

Immediately

Any transaction in a TRACE-eligible security executed between 8:00 a.m. and 6:29:59 p.m. (i.e., TRACE hours of operation) must be reported within 15 minutes. Once the transaction is reported, it is available to the public immediately. (98738)

Question 28

Senior management of the broker-dealer must be apprised of the status of the firm’s supervisory control system:

Answer 28

Annually

Question 29

A family of funds has collectively acquired a 6% stake in the stock of a specific company. What’s the reporting requirement to the SEC?

Answer 29

Form 13G must be filed within 10 calendar days

Passive investors must file Form 13G within 10 calendar of acquiring a greater than 5% stake in an issuer. Activist investors must file Form 13D.

Question 30

An individual is considering opening a new account with a broker-dealer and provides some personal information in order to develop an investment profile. The dealer intends to share some of this client’s non-public information with its affiliate. According to Regulation SP, the broker-dealer will:

Answer 30

Do nothing

The individual in this question has yet to establish a relationship with the broker-dealer and would be defined as a consumer. If a broker-dealer plans to share the information with only affiliates, there is no requirement to provide the consumer with a privacy notice. If the broker-dealer intends to share the information with a non-affiliated third party, a privacy notice must be provided to the consumer before the information is disclosed. If the individual establishes a relationship as a customer of the broker-dealer, the privacy notice must be provided at that time and annually thereafter. This privacy notice would allow the customer to opt out of sharing this information with the non-affiliated third party.

Question 31

A producing branch manager who runs an OSJ also services retail brokerage accounts on behalf of his family. Under SRO rules:

Answer 31

The manager’s producing role may be considered when determining his ability to manage the OSJ region

Question 32

A Suspicious Activity Report (SAR) must be filed within what time period?

Answer 32

30 days

Question 33

Which of the following regulatory bodies conducts a review of Schedule TO?

Answer 33

The SEC’s Staff Office of M&A

Question 34

A stopped order is best described as:

Answer 34

A price guarantee for a customer’s order
.

A stopped order is best described as an order that’s received from a customer (typically an institution) which will be executed at no worse than the contra-side price at the time the order was stopped, with the understanding that the order may receive a better price. For example, if a stock is quoted 18.50 bid - 18.60 ask and an order to buy is stopped at 18.60, the buyer will pay no more than 18.60. Conversely, a seller whose order has been stopped at 18.50 will receive at least 18.50.

Question 35

One of your registered representatives was charged with misdemeanor DUI two weeks ago. The best course of action to take upon learning of this event is to:

Answer 35

Reprimand the employee, but no regulatory action is required

Any kind of felony charge is reportable under the rules. However, since the charge is a misdemeanor, SRO, state, and/or SEC notifications are not required. (98483)

Question 36

Which of the following is found in a fund’s summary prospectus?

Answer 36

Summary prospectuses can only be used by mutual funds and are used to summarize the full or statutory prospectus. The summary prospectus will contain information concerning the investment objectives/goals, fees and expense tables (including any applicable sales charges), the principal investment strategy and risks, the fund’s performance and management information, purchase and sale information, as well as tax information. Since the summary prospectus is primarily a static document, up-to-date information (e.g., the number of shares issued, the net asset value, or the public offering price) is NOT included and neither is the structure of the mutual fund organization (board of directors). (20969)

Question 37

A broker-dealer operating with $5,000 of net capital would like to be able to receive and hold customer assets. The firm will amend its BD application accordingly. How much additional net capital will be required to facilitate this change in status?

Answer 37

$245,000

According to SEC Rule 15c3-1, a broker-dealer that carries customer accounts and receives or holds funds and securities (a general securities firm) must have net capital of $250,000 (i.e., $245,000 additional capital is required). A broker-dealer that carries accounts but does not hold customer funds or securities must keep net capital of $100,000.

Question 38

Which of the following statements is TRUE concerning a Regulation A offering?

Answer 38

Under Regulation A, an issuer may conduct a public offering which is open to both U.S. and foreign investors. There’s no requirement for the purchasers to be accredited. In a Regulation A offering, the disclosure document is referred to as an offering circular and one must be provided to all purchasers.

Question 39

Under what conditions may a member firm use an advertisement suggesting the benefits of rapid-fire trading that encourage a client to trade like a professional investor?

Answer 39

The firm delivers a risk disclosure document to clients prior to trading

If a member firm promotes a day-trading strategy to noninstitutional customers (retail), it is required to furnish a risk disclosure document prior to opening the account. In addition, the firm is required to approve the customer’s account for a day-trading strategy, and have reasonable grounds for believing this strategy is appropriate for the customer. The firm is considered to be promoting a day-trading strategy if, on its website, in seminars or advertisements, it discusses the benefits of rapid-fire or momentum trading and encourages customers to trade like professional investors. As with all advertisements by a broker-dealer, principal approval is required.

Question 40

An S Corporation is allowed a maximum of ____ shareholders

Answer 40

100 max

Question 41

Under portfolio margin rules, margin requests must be satisfied within ______ business days of request.

Answer 41

3

Question 42

FINRA must be notified ____ days prior to the effective date of a satisfactory subordinated loan.

Answer 42

30 days

Question 43

The Special Reserve Bank account must be evaluated by a carrying firm on a _______ basis.

Answer 43

weekly

Question 44

Within what period must any required adjustment be made to a firm’s fidelity bond?

Answer 44

60 days

Question 45

When is a BD required to report operational difficulties?

Answer 45

24 hours

Question 46

If a BD has $100,000 worth of Regulation D stock, at what value may it be carried for net capital purposes?

Answer 46

$0. Regulation D stock (restricted stock) is deducted in full for calculating net capital.

Question 47

For how long must a prospectus be provided in the after-market for a non-exchange follow-on offering?

Answer 47

40

Question 48

What items must be included in a preliminary prospectus?

Answer 48

The number of shares or amount of bonds to be issued, as well as the use of the proceeds

Question 49

Explain the importance of Regulation S-K.

Answer 49

It sets rules for: 1) the format used to present projections and 2) the non financial components of a firm’s filings.

Question 50

Annual Report of Financial Condition is filed with SEC no later than _______ from the date of the financial statement.

Answer 50

60 days

Question 51

A BD is in violation of net capital standards when its net capital is below _____% of its required minimum.

Answer 51

100%

Question 52

Once notified by a Code of Procedure hearing panel, the hearing must be held within ____ days.

Answer 52

Once notified by a Code of Procedure hearing panel, the hearing must be held within 28 days.

Question 53

Once notified by a Code of Procedure hearing panel, the hearing must be held within 28 days.

Answer 53

False. Form 211 is required for firms that intend to initiate quotes for non-exchange securities.

Question 54

Under the Limit Order Display Rule, how quickly must orders that improves the market maker’s quote be displayed?

Answer 54

30 seconds