UNIT 32 CHECKPOINT EXAM Flashcards
Harold, a representative for Seacoast Securities, is soliciting candy sales for his kid’s band camp fundraiser. What permissions does Harold need to do this?
A) No permission is needed, but he needs to provide a verbal notification to his supervisor.
B) Permission from his employer is needed.
C) No permission is needed unless his firm has rules on this activity.
D) No permission is needed, but he does need to provide written notice to Seacoast.
C) No permission is needed unless his firm has rules on this activity.
Explanation
The regulators do not care about this activity, but Seacoast may. This behavior may be annoying, but it is not illegal.
Which of these are considered violations to the FINRA Conduct Rules?
I. Engaging in a private securities transaction without compensation with an immediate family member without notification to the employing broker-dealer
II. Parking a license for a former registered principal
III. A registered representative accepting a complimentary registration and accommodations at a seminar presented by a mutual fund sponsor at an exclusive offshore island resort
IV. A member firm waiting 30 days after termination to provide the terminated employee with a copy of the Form U-5
A) II and IV
B) I and IV
C) II and III
D) I and II
C) II and III
II. Parking a license for a former registered principal
III. A registered representative accepting a complimentary registration and accommodations at a seminar presented by a mutual fund sponsor at an exclusive offshore island resort
Explanation
Parking a license, regardless of the registration level, is a prohibited practice. Receiving a complimentary registration to a seminar produced by a mutual fund sponsor could be permitted, but it would have to be in a location that is considered appropriate to the purpose of the meeting. An offshore resort would not qualify. Notification is not required when a private securities transaction takes place with a member of the immediate family of the representative, as long as there is no compensation. An employer member has up to 30 days to deliver a copy of the Form U-5.
After working for several years as a retail sales manager, Marsha decided to seek employment at a FINRA member firm. Marsha was successful on her first attempt on the qualification exam and during her first three years as a registered representative she opened a number of accounts. During a market correction, her commission income fell and she decided to devote her time on weekends to a part-time retail sales position. Under FINRA, rules regarding outside business activity (OBA), Marsha must
A) choose her occupation; she cannot do both of these simultaneously.
B) provide prior written notice to the employing member firm.
C) receive approval from the FINRA district office.
D) provide prior written notice to, and receive written permission from, the employing member.
B) provide prior written notice to the employing member firm.
Explanation
Under FINRA’s rules regarding outside business activity (OBA) prior written notice to, but not the permission of, the member firm Marsha represents is required.
Hudson is a representative for Saguaro Securities in Scottsdale, Arizona. During the months of May through September, Hudson operates his business from a summer home in Flagstaff. Which of these statements about his home office is false?
A) The home office is subject to visits from Saguaro Securities compliance department.
B) The office must be separated from the residence and have its own entrance.
C) The home office will be treated as a branch of Saguaro Securities.
D) The home office is subject to regulatory visits.
B) The office must be separated from the residence and have its own entrance.
Explanation
There is no specific physical requirements for a home office. The home office is in every way treated as a branch, including regulatory and firm examinations.
If a registered person fails to complete the regulatory element within the prescribed period,
A) the person must not be present on the firm’s premises until the requirements of the program are met.
B) FINRA will normally grant a 30-day extension of time.
C) the member firm must suspend the person until the requirements of the program are met.
D) FINRA will deactivate that person’s registration until the requirements of the program are met.
D) FINRA will deactivate that person’s registration until the requirements of the program are met.
Explanation
Failure to complete the regulatory element within the prescribed time period will lead to FINRA deactivating that person’s registration until the requirements of the program are met. The person may still have a role in the member’s business, but it would be limited to those activities permitted to those not requiring registration.
A municipal finance professional (MFP) would have duties
A)
including issuing and underwriting of municipal bonds.
B)
limited to giving financial advice regarding a new issue of municipal bonds.
C) limited to sales of municipal bonds and other securities.
D) including underwriting, sales, and trading of municipal bonds.
D) including underwriting, sales, and trading of municipal bonds.
Explanation
An MFP is an associated person of a FINRA member firm engaged in municipal securities underwriting, trading, sales, financial advisory, research, investment advice, or any other activities that involve communication with public investors about municipal bonds. Municipal bonds are not issued by underwriters or securities industry personnel; they are issued by municipal governments.
Eddy is a representative for Saguaro Securities in Scottsdale, Arizona and wants to join the Maricopa County Sheriff’s Department as a part-time reserve deputy. For his community service, he will receive a small payment to help defer the cost of his equipment. Before he does this, he needs to
A) receive permission from Saguaro to enter into service for the department.
B) provide written notice to both his employer and the state regulator of his intention.
C) provide Saguaro with written notice.
D) do nothing other than a good job for his employer and his community.
C) provide Saguaro with written notice.
Explanation
He must provide written notification, but does not need permission to proceed. Note that his employer may have stricter rules. Though this work is mostly volunteer, the small payment makes it a paid position. There is no requirement for Eddy to send a notice to a regulator.
Under rules found in the Investment Advisers Act of 1940, if a political contribution to certain elected officials or candidates is made then an adviser may
A) have to suspend the providing of advisory services to any government they represent until it is determined if the election campaign was successful or not.
B) not provide advisory services to any government they represent for a fee until the next election.
C) not provide advisory services to any government they represent for a fee for two years.
D) not provide advisory services to any government they represent for a fee for three years.
C) not provide advisory services to any government they represent for a fee for two years.
Explanation
The rule makes it unlawful for an adviser to receive compensation (i.e., fees) when providing advisory services to a government entity for a two-year period after the adviser makes a political contribution to a public official of a government entity. This includes candidates for office. The outcome of an election has no relevance within the rule.
The portfolio manager of a pension plan is a well-known fan of the local football team. The branch manager of a FINRA member firm who has been trying to secure a portion of the plan’s investment account owns a luxury box at the stadium. FINRA’s Conduct Rules would permit
A) transferring the ownership of the rights to the luxury box to the portfolio manager if at least 30% of the portfolio is transferred to the branch manager’s firm.
B) the branch manager to invite the portfolio manager to accompany him to a game of his choice.
C) the branch manager to offer tickets to the portfolio manager only if the value did not exceed $100.
D) the branch manager to offer the portfolio manager two of the seats in the box for the entire season.
B) the branch manager to invite the portfolio manager to accompany him to a game of his choice.
Explanation
A gift of tickets to a single game, even in a luxury box, would be permitted under the Conduct Rules; a gift of tickets for the season would not be. Any gift conditioned upon an explicit promise of future business is not permitted. An outing where a representative of the firm accompanies the guest would fall under the heading of normal business dealings. In that light the rule requiring that gifts be of no more than $100 in value is waived for any occasion considered to be normal business dealings.
From a regulator’s standpoint, a complaint refers to which of these?
I. Verbal or written
II. Any aspect of customer service
III. Written
IV. Any issue arising from a securities transaction
A) II and III
B) III and IV
C) I and II
D) I and IV
B) III and IV
III. Written
IV. Any issue arising from a securities transaction
Explanation
Regulations only recognize written complaints that are related to securities transactions. Firms likely have different rules, but the regulators only see writing and do not see rudeness or things unrelated to a transaction as a complaint.
Seacoast Securities, Inc., a broker-dealer firm, has developed a series of ongoing education courses for its registered personnel. These courses cover various developments in the industry that are pertinent to Seacoast’s business. Employees must complete the assigned courses in the year they are assigned. This is an example of
A) firm-element continuing education.
B) broker-dealer education mandate.
C) regulatory element continuing education.
D) good human resource development.
A) firm-element continuing education.
Explanation
This is an example of the required firm-element CE. It is administered by the firm annually and is relevant to the firm’s business. The regulatory element is administered by FINRA. The other names are fictional examples.
Which of these statements regarding home-based offices is true?
I. Home-based offices would not require FINRA approval.
II. Home-based offices would require FINRA approval.
III. Home-based offices would be subject to site visits by FINRA auditors.
IV. Home-based offices would not be subject to site visits by FINRA auditors.
A) II and III
B) I and IV
C) I and III
D) II and IV
A) II and III
II. Home-based offices would require FINRA approval.
III. Home-based offices would be subject to site visits by FINRA auditors.
Explanation
It does not matter if the office is home-based, also acting as the representative’s personal residence; it is subject to the same approval and inspection requirements of a normal branch.
Representatives are required to take CE courses provided by their employer annually, and CE courses administered by FINRA on the
A) first anniversary of licensing and every three years thereafter.
B) second anniversary of licensing and every two years thereafter.
C) third anniversary of licensing and every two years thereafter.
D) second anniversary of licensing and every three years thereafter.
D) second anniversary of licensing and every three years thereafter.
Explanation
Regulatory element CE, administered by FINRA, begins on the second anniversary from passing a top-off exam, and then every three years. A 120-day window opens on the anniversary date of passing the top-off exam and the CE must be completed within that 120 day window. Failure to do so will result in a deactivation of the license.
Ron the representative is opening the branch’s mail and finds a letter of complaint about a trade he entered. What should Ron do next?
A) Drop the letter in a shredder accidentally.
B) Forward the complaint to a principal.
C) Contact the customer and attempt to resolve the problem.
D) Reverse the trade.
B) Forward the complaint to a principal.
Explanation
Ron must forward any complaints to principals. There are no alternate steps here. Make the boss aware just as quick as you can.
Joey, a registered representative for Seacoast Securities, Inc., has been approached by his close friend, Ross (who is a customer), to help him raise money for his anthropological research project. Ross wants Joey to introduce the program to his customers. If the customer invests in the program, they will receive a portion of any money earned with the sale of the research. The project is organized as a limited partnership, and Joey would receive payment for any investors he brings to the table. If Joey helps Ross and receives payment directly from him this is an example of
A) not selling away because of the long standing relationship.
B) not selling away because it is not a normal limited partnership program.
C) selling away, but is not a violation because it is a science project.
D) selling away and is a rules violation.
D) selling away and is a rules violation.
Explanation
This is selling away, which is always considered a violation. The fact that the money is being raised for science is not relevant; the intent is to make a profit with the sale of the research. Receiving payment directly from the sponsor indicates the employer is not aware of the sale.
