Unit 4 Flashcards
What type of market is the OTC market?
Inter-dealer
Who is the fourth market for?
Trading between institutional buyers only
What can a BD do if a customer fails to pay for XYZ mutual fund shares within the required amount of time?
-can sell the securities and charge the customer for any loss
•may liquidate them to pay transaction costs
Where are securities traded that are not listed on an exchange?
On the OTC market
How is the NYSE characterized?
An auction market where the highest bids and lowest ask prices represent the current best market for a security
A securities firm that holds stock rather than sells the stock is ________.
Taking or holding a long position
Which act regulates securities markets and BDs?
Securities Act of 1934
Record date
One business day after the ex-dividend date
If a customer does not pay for securities purchases in a cash account within the stated time limit & owes the firm more than $1,000, what does Regulation T require the firm to do?
- freeze the account for 90 days
- liquidate the unpaid positions in the account
How are prices arrived at in the securities markets?
- by auction in the exchanges
- by negotiation in the OTC markets
If a RR is suspended as a result of a hearing on a complaint issued by FINRA’s department of enforcement, where would his first appeal be to?
The National Adjudicatory Council
What must happen to a member if they’re suspended?
They must be treated as a nonmember by other members
Under the Code of Arbitration Procedure, how much time does a client have to submit a claim against a RR or member firm?
Up to 6 years after the date of the dispute’s occurence
Code of Procedure
Handle trade practice complaints, including alleged violations of federal securities laws
Upon receiving a customer request for a copy of the signed predispose arbitration agreement, how long does the the member firm have to supply it?
10 business days
When a brokerage firm sells stock from its own inventory, how is it acting and what does it charge?
Acting in the capacity of a principal and charged a mark-up
When a BD facilitates a transaction between a buyer and a seller, how is it acting and what does it charge?
Acting in the capacity of an agent and charges a commission
Which act regulates the activities of BDs and associated persons?
Securities Exchange Act of 1934
Securities exchange act of 1934
- regulates the secondary market and its employees and firms
- regulates the scribes of BDs and associated persons
Code of Procedure
- Contains requirements for handling violations of the conduct rules
- handles trade practice complaints, including alleged violations of federal securities law
Code of arbitration procedure
-mandatory for disputes between member firms and their associated persons, and disputes between members
Failure to adequately supervise is a violation of the __________.
Conduct rules
If a FINRA member firm is found guilty of some but not all of the charges brought against it by the department of enforcement, how long do they have to make an appeal?
-must file the appeal with the national adjudicatory council within 25 days of the decision
What is the regular way ex-dividend date for cash dividends paid by a corporation?
First business day preceding the record date
Which act created the SEC?
Securities exchange act of 1934
When is simplified industry arbitration used?
In disputes between member firms or their associated persons when the amount in dispute does not exceed $50,000
The customer sells at the _____ price.
Bid
Which orders are reduced on the ex-dividend date?
- buy limits
- sell limits
- sell stop limits
How are buy limits, sell limits, and sell stop limits reduced on the ex-dividend date?
By the dividend amount
All complaints received by the RR must promptly be transmitted to the __________.
Supervising principal
How long does a respondent have after receiving a complaint to file an answer(
25 days
At the conclusion of a hearing, the panelists convened and render a written decision reflecting the majority view within how many days?
60 days
If either side is displeased with the decision of a hearing, within how many days must an appeal be made?
25 days of the decision date
If no satisfaction is received from the NAC from the hearing, the appealing party may take the case to the ________.
SEC
If the appeal to the SEC is turned down again, the appealing party has the right to continue the appeal process by taking its case to the _________.
Federal court system
If a customer requests to see the predispose arbitration agreement they have signed, how long does the member firm have to supply them with a copy?
10 business days
After a claim is filed, how long does the respondent have to respond to both the director of arbitration of FINRA and the claimant?
45 days
For any dispute that involves a public customer, the majority of the arbitration panel must be made up of _________.
Public arbitrators
How many arbitrators for $50,000 or less?
1 arbitrator
How many arbitrators for greater than $50,000 up to and including $100,000?
1 arbitrator unless both parties agree to 3
How many arbitrators for greater than $100,000?
3 arbitrators unless both parties agree to 1
Simplified arbitration
- eligible for any dispute involving a dollar amount of $50,000 or less
- a single arbitrator reviews all of the evidence and renders a binding decision within 30 business days
When must all monetary awards be paid?
Within 30 days of the decision date
No claim is eligible for submission to arbitration if how many years have elapsed from the time of the event giving rise to the claim?
6 years or more
If the firm or an associated person has violated any laws, when does it need to be reported to FINRA?
No later than 30 calendar days after the firm knows or should have known of their existence
What makes a discretionary order?
If the RR chooses the Asset, Action, or Amount (3 As)
Regulation T
- allows a BD to extend a line of credit to the customer for up to 2 business days following the settlement date
- the customer would have up to 2 business days to pay back the BD for the securities
- (S + 2)
What orders will be adjusted because of a cash dividend?
- buy limits
- sell stops
- (BLiSS)
Only _________ and ________ will be adjusted by a cash dividend
- buy limits
- sell stops
- (BLiSS)
What orders are affected by stock dividends and stock splits?
- sell limits
- buy stops
- buy limits
- sell stops
- (both SLoBS and BLiSS orders)
How are disputes between FINRA members regarding such issues as delivery and payment for securities transactions settled?
Through the code of arbitration
How are disputes regarding the provisions of the Uniform Practice Code (UPC) handled?
Through the Code of Arbitration Procedure
After a FINRA audit, if the Department of Enforcement issues a formal complaint against a member firm for alleged violations of federal securities law, what will the matter be dealt with under?
The Code of Procedure
What does the Code of Procedure handle?
Trade practice complaints, including alleged violations of federal securities law
When does cash settlement occur?
The DAY OF the trade
Findings under the Code of Arbitration are _________.
- binding on all parties involved in a dispute
* cannot be appealed
