Unit 14-15 Flashcards
Designing currency deposits or withdrawals to fall under the $10,000 cash transaction report filing threshold
Structuring
Failure to report paying for purchased securities with currency can result in what?
- $500,000 fines
- Up to 10 years in prison
Broker dealers are required to report wire transfers of how much (currency wires)?
$3,000 or more
Broker dealers must report on FinCEN Form 112 any currency deposited or received in excess of how much?
$10,000 in a single day
Requires member firms to develop, implement and monitor anti money laundering programs designed to achieve compliance with the Bank Secrecy Act and related regulations
FINRA Rule 3310
How long can a member firm hold mail for a customer?
Up to 3 months. Can be granted for longer periods if for safety or security concerns
What are 3 things a member must do when a client died?
- Cancel all open orders
- Freeze accounts
- Await instructions from executor
What records must be retained for 3 years?
- Focus reports
- Trial balances
- Forms U4 and U5
- Fingerprint cards
- Confirmation of trades
- Order tickets
- Loan records
- Failed to receive and deliver
- Long and short securities differences
What records must be kept for 6 years?
- Blotters
- General ledger
- Stock ledger
- Customer ledger
- Customer account records
- Designated principals
What are lifetime records?
- Stock certificate book
- Partnership agreement or Articles of Incorporation
- Minutes of Board or Partnership meetings
How long must written customer complaints be held for?
4 years
How long does a delivery of communication for transfer last?
3 months
How long does a member firm have to complete a transfer?
Within 3 business days
How long does a firm have to validate a transfer?
1 business day
Automates and standardizes the procedure for transfers
Automated customer account transfer service (ACATS)
How long must a broker dealer retain records of all identification information obtained from a customer?
5 years after an account in closed
When must a customer receive an updated account record due to change of address, name or employment status?
Within 30 days
When must a customer receive a copy of an account record?
Within 30 days of the opening of the account and every 36 years thereafter
How often must members send statements for penny stocks?
Monthly
How often are members required to send statements?
Quarterly
How long must customer confirmations be retained?
3 years
When new municipal bond issues are sold to investors before the bonds are issued and available for delivery, the investor will receive this type of confirmation. It does not include a total dollar amount or settlement date. Once bonds are issued, the investor will receive a new confirmation with purchase price and settlement date.
When-issued confirmation
When must the customer be sent or given written confirmation of a trade?
At or before the completion of the transaction (settlement date)
What are some items included in a trade confirmation?
- Acting as agent or principal
- Dual agent
- Commission information
- Sales load
- Markup or mark down
- Identity of shares, price and number of shares
- Total par value
- Accrued interest
- Market maker
- Date and time of execution
- Yield
- Handling fees
A printed document that contains details of a transaction, including the settlement date and amount of money due from or owed to a customer
Trade confirmation
What is not likely to fall under safe harbor provisions?
- Telephone lines
- Office furniture, including computer hardware
- Travel expenses
- Rent
- Payment for training expenses
- Internet services
What would likely fall under safe harbor provisions?
- Research reports analyzing the performance of a particular company or stock
- Financial newsletter and trade journals
- Quantitative analytical software
- Seminars or conferences
- Effecting and clearing securities trades
A method of behavior which avoids running afoul of the law.
Describes compensation to an investment advisor from a broker dealer that will generally not be considered unethical
Safe harbor
Wrongful or unauthorized taking, withholding, appropriation or use of specified adults funds or securities
Any act or omission taken by a person, including through the use of a POA, guardianship or any other authority to obtain control through deception, intimidation or undue influence
Senior exploitation
This rule deals with an issuer buying back it’s own stock in the open market
SEC Rule 10b-18
For tender offers, the target company must provide its shareholders with a statement with accepting or rejecting that offer, expressing no opinion on the offer or that it is unable to take a position, within how many days?
10 business days
If the terms of a tender offer are changed, the revised offer must remain open for how many days from the commencement and how many days from the date the terms are changed?
- 20 business days
- 10 business days
A tender offer, unless withdrawn, under regulation 14E, must remain open for how many days from the date the offer was first announced?
20 business days
A limited period SEC registered offer to acquire a substantial portion of a company’s securities (equity or debt). When a company seeks to acquire its own securities. A filing is required to disclose the terms of the offering and information about the bidders, known as the offer to purchase, along with SEC Form TO.
Tender offer
A SEC Rule dealing with issuers disclosing information that can affect the price of the stock
Regulation Full Disclosure (FD)
Exists when a broker dealer is owned by, is under common ownership with, or owns an entity that issues securities
Control relationship
The uncertainty that the value of either the foreign currency or the domestic currency will fluctuate
Currency/exchange risk
The risk that when an investor wishes to dispose of an investment, no one will be willing to buy it, or that a very large purchase or sale would not be possible at the current price
Aka: marketability risk
Liquidity Risk
The risk of a country defaulting on its commercial debt obligations
Ex: when the credit rating of the US was reduced from AAA
Sovereign Risk
The potential instability in the political underpinnings of the country.
Political Risk
The potential for an investor to be adversely affected by changes in investment or tax laws
Ex: changes in tax code
Legislative Risk
A sudden change in the regulatory climate can have a dramatic effect on the performance or risk of a business
Ex: realigns by the Environmental Protection Agency
Regulatory Risk
A nonsystematic risk generally with the concern that an issuer will be unable to meet its debt obligations as they come due
Aka: credit risk, default risk
Financial Risk
An operating risk generally caused by poor management decisions. Earnings are lowered at best, company goes out of business at worst.
Ex: Edsel, New Coke, BlackBerry
Business Risk
What are the 8 types of nonsystematic risk?
- Business Risk
- Financial Risk
- Regulatory Risk
- Legislative Risk
- Political Risk
- Sovereign Risk
- Liquidity Risk
- Currency Risk
Risk that can be reduced through diversification
Risks that are unique to the specific industry or business enterprise
Ex: labor union strikes, lawsuits, product failure
Nonsystematic Risk
The potential that because of inflation, a certain amount of money will not purchase as much in the future as it does today
Purchasing Power Risk (Inflation Risk)
Risk that you may be unable to reinvest the income at the same rate as the security itself is paying.
Occurs at maturity
Zero coupon bonds avoid this risk
Reinvestment Risk
The systematic risk associated with investments, relating to the sensitivity of price or value, to fluctuations at the current level of rates.
Interest Rate Risk
The potential for an investor to experience losses owing to day to day fluctuations in the prices at which securities can be bought or sold
Measured by securities beta.
Cannot be diversified
Market Risk
What are the 4 types of systematic risk?
- Market Risk
- Interest Rate Risk
- Reinvestment Risk
- Inflation Risk
The potential for a security to decrease in value, owing to its inherent tendency to move together with all securities in the same type. Neither diversification nor any other investment strategy can eliminate this risk
Systematic Risk
