UNIT 32 QBANK Flashcards
Each of the following activities would require prior written notification by an associated person to the employing broker-dealer except
A) part-time work parking cars on the weekend at a local racetrack.
B) offering to sell a limited partnership interest in an oil and gas drilling program.
C) becoming a limited partner in an oil and gas drilling program.
D) acting as a real estate sales agent, limited to the sales of individual homes only.
C) becoming a limited partner in an oil and gas drilling program.
Explanation
Passive investments, such as the purchase of a limited partnership interest, are not considered outside business activity. An associated person may make a passive investment for his own account without providing written notice to the employing broker-dealer.
A municipal finance professional wants to make a political contribution to a candidate for mayor in the town that she resides in. Under the MSRB pay-to-play rule, a contribution to this candidate
A) is prohibited.
B) can be in any amount.
C) cannot exceed $250.
D) cannot exceed $100.
C) cannot exceed $250.
Explanation
Contributions of up to $250 per election are permitted to be made by municipal finance professionals (registered persons) eligible to vote for that official.
When is the electronic filing of all information on customer complaints by broker-dealers with Financial Industry Regulatory Authority (FINRA) due?
A) Within 15 days of the end of each calendar year
B) Within 15 days of the end of each calendar quarter
C) Semiannually, in June and December
D) Within 30 calendar days of receipt of the complaint
B) Within 15 days of the end of each calendar quarter
Explanation
Broker-dealer firms must electronically report information on all customer complaints to FINRA within 15 days of the end of each calendar quarter. Both these filings and the complaints must be retained by the firm for 4 years.
Any sale of securities outside an associated person’s or the employing member firm’s regular business is recognized as
A) an outside business activity.
B) a private securities transaction.
C) a nonissuer transaction.
D) an unsolicited transaction.
B) a private securities transaction.
Explanation
The Conduct Rules define a private securities transaction, also known as selling away, as any sale of securities outside an associated person’s regular business and her employing member.
A mutual fund company may offer noncash compensation to associates of broker-dealer firms in the form of attendance at a meeting or convention, provided that
A) a record of compensation and meeting details is kept by the attendee member’s firm.
B) the meeting is held for the purpose of entertainment only and not for business purpose.
C) attendance is conditional upon agreement to a predetermined sales target.
D) expenses of spouses or other guests of attendees are also met.
A) a record of compensation and meeting details is kept by the attendee member’s firm.
Explanation
The firms whose associates attend the meeting must keep records of all noncash compensation and details of what went on at the meeting. Noncash compensation of this type will inevitably be at least indirectly business-related, but must not be conditional upon agreeing to meet some sales goal. Side trips and expenses of guests must be met by those in attendance, not the host of the meeting.
A registered representative has a customer who is interested in using options strategies such as spreads and straddles. The registered representative’s firm does not offer options transactions as part of their existing business model. As such, the registered representative directs the customer to another broker-dealer that allows for option trading. This is
A) an example of placing away.
B) an acceptable practice.
C) a private securities transaction.
D) an example of selling away.
B) an acceptable practice.
Explanation
A private securities transaction is any sale of securities outside an associated person’s regular business and his employing member. Private securities transactions are also known as selling away. However, in this example, the representative simply directed the customer to a firm that could handle the customer’s request. As long as the representative recieved no compensation for this activity, the recommendation to go to another firm does not violate any industry regulation.
Regarding registered representatives working from their residence, commonly known as their home office, all of the following would be true except
A) the office is subject to a premise visit by Financial Industry Regulatory Authority (FINRA) examiners as often as they see fit.
B) home office address and telephone numbers may be used for normal advertising purposes.
C) the office would be subject to a premise visit and review by a principal of the firm.
D) prospects would not be allowed to visit and be on the premises at this location.
D) prospects would not be allowed to visit and be on the premises at this location.
Explanation
Registered representatives are allowed to operate out of a home or residence, advertising the address and contact numbers. All normal business activities, including taking customer orders for the purchase and sale of securities, would be permitted. Additionally, it would be subject to a premise visit and review by principals of the firm and FINRA examiners as often as needed.
While an associated person may work for an entity other than the member firm, the employing member firm’s permission is
A) required.
B) not requested.
C) not required.
D) requested.
C) not required.
Explanation
If a registered person wants to be employed by or accept compensation from an entity other than the member firm, that person must provide prior written notice to the member. Note that notice must be made, but the employing member’s permission is not being requested nor is it required.
The de minims exemption for MSRB rule G-37 would allow municipal financial professionals to make a contribution to a municipal candidate under certain conditions up to what dollar limit per election?
A) $1,500
B) $250
C) $500
D) $1,000
B) $250
Explanation
The limit is $250 per election of candidates that the Municipal Finance Professional could vote for.
If a registered representative is involved in a securities transaction outside the scope of employment with the firm, a practice known as selling away and will receive compensation for it, which of the following must see that the representative is properly supervised for the transaction?
A) The firm where the trade will take place
B) A Financial Industry Regulatory Authority (FINRA) examiner
C) The employing firm
D) None because there is no supervisory requirement
C) The employing firm
Explanation
If a registered representative is to be compensated for a trade done through another firm, the employing firm must run the trade on its own books and see to it that the representative is properly supervised. The firm where the outside trade will take place is, of course, responsible only for the actions of its own registered representatives.
A broker-dealer wants to give an employee of another firm a gift. This is permitted provided all of the following conditions are met except
A) the gift or compensation doesn’t exceed the annual $100 limit.
B) the gift or compensation is not conditional on sales.
C) the gift or compensation has the employing member firm’s prior approval.
D) the gift or compensation is preapproved by the firm’s self-regulatory organization (SRO).
D) the gift or compensation is preapproved by the firm’s self-regulatory organization (SRO).
Explanation
Firms may not distribute gifts, gratuities, or compensation to the employees of other member firms unless the compensation is not conditional on sales or promises of sales, it has the employing member’s prior approval, and the compensation’s total value does not exceed the annual limit of $100 per person. Approval of the self-regulatory body the firm reports to is not a requirement or condition.
Financial Industry Regulatory Authority (FINRA) is concerned about potential conflicts of interest in providing incentives or rewards for selling a sponsor’s product. Which of the following situations regarding a product sponsors product training or education for outside RRs would FINRA disallow?
A) Spouses are included in the invitation with travel expenses paid for.
B) Separate outings are planned in conjunction with the training at the expense of the attendees if they wish to participate.
C) A training location is chosen based on its being convenient for attendees to get to and its proximity to the main office.
D) A member firm’s permission for its registered representatives to attend is required.
A) Spouses are included in the invitation with travel expenses paid for.
Explanation
FINRA deems payment or reimbursement by sponsors in connection with meetings held to train or educate representatives acceptable as long as certain requirements are met. These would include, but are not limited to, the following: the representative obtains the member firm’s prior permission to attend, the location of the meeting is appropriate to the purpose of the meeting, there is no payment or reimbursement for a guest (e.g., a spouse) of the representative attending the meeting, and there is no payment or reimbursement for certain expenses incurred in connection with meetings, such as golf outings.
To keep up with recent developments in the industry regarding regulatory changes and other requirements imposed by Financial Industry Regulatory Authority (FINRA), as well as needs identified by the broker-dealer firm, registered persons must fulfill the firm’s
A) yearly sales development (SD) requirement.
B) regulatory development (RD) requirement.
C) requirement to hold yearly meetings of all office personnel.
D) continuing education (CE) requirement.
D) continuing education (CE) requirement.
Explanation
Registered persons must undergo regular training in the securities industry. What is known as the regulatory element of this training is determined by FINRA and takes place every three years. What is known as the firm element is determined by the broker-dealer firm and takes place annually. Together, the two elements are said to meet the firm’s continuing education (CE) requirement.
One of the Financial Industry Regulatory Authority (FINRA) Conduct Rules is concerned with private securities transactions. Under that rule, it would be correct to state that
I. if the member approves the registered representative participating in a transaction for compensation, it must treat the transaction as if it is being done on its own behalf by entering the transaction on its own books and supervising the associated person during the transaction.
II. as long as no compensation to the registered representative is involved, notification to the member is not required.
III. sale of a securities product to the registered representative’s mother where there is only nominal compensation is not covered under the rule.
IV. if the member disapproves of the registered representative’s participation in a transaction for compensation, the associated person may not participate in it.
A) I and IV
B) III and IV
C) II and III
D) I and II
A) I and IV
I. if the member approves the registered representative participating in a transaction for compensation, it must treat the transaction as if it is being done on its own behalf by entering the transaction on its own books and supervising the associated person during the transaction.
IV. if the member disapproves of the registered representative’s participation in a transaction for compensation, the associated person may not participate in it.
Explanation
FINRA divides private securities transactions into two categories. If the associated person will receive compensation, the rules are more comprehensive requiring approval or disapproval. If approved, the firm must record the transaction on its books and records and supervise as if it were executed on behalf of the member firm. Trades with immediate family members are not included if there is no compensation. In other transactions where there is no compensation, written notice to the employer member is still required.
Financial Industry Regulatory Authority (FINRA) rules regarding outside business activity (OBA) require that
A) all activities be coordinated between both employers.
B) approval is gotten from FINRA or another self-regulatory organization (SRO).
C) all passive investments be reported under the rule.
D) prior written notice to the employing firm be provided.
D) prior written notice to the employing firm be provided.
Explanation
Under FINRA’s rules regarding outside business activity (OBA), prior written notice to the employing member is required.
Regarding political contributions, limitations are place with the view to
A) allow contributions to be made to any party without any possible loss of business.
B) prohibit advisory services for a fee provided to any government the recipients represent for a period of 10 years after the contribution.
C) permit all contributions be made equally to all participating parties in an election.
D) deter gaining political favor by employing what is commonly known as pay to play.
D) deter gaining political favor by employing what is commonly known as pay to play.
Explanation
The rule is designed to deter what is commonly called pay to play. It makes it unlawful for an adviser to receive compensation (fee) for 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.
