1
Q
form U4
A
- registration as an associated person of a FINRA member firm requires Form U4
- name, address, aliases
- 5 year residency history
- 10 year employment history
- disclosure of any charge/conviction (if yes, detailed disclosure reporting page - DRP)
- any changes require filing an amended form with the central registration depository no later than 30 days after the member is aware of the change
- don’t need to update for educational achievements or martial status
2
Q
qualifications investigated
A
- member firm must certify that it has investigated the person’s business reputation, character, education, qualifications, experience
- If FINRA discovers any misleading info or omissions, disciplinary action may be taken to bar the individual. Principal signing application might be liable as well
3
Q
DRPs
A
- criminal disclosure (felony and certain financial misdemeanors)
- regulatory action disclosure (SEC, state regulators, SRO)
- civil judicial disclosure (civil cases not involving securities)
- customer complaints/arbitration/ civil litigation disclosure
- termination for cause disclosure
- financial disclosure (bankruptcy, payment on surety bond, unsatisfied judgements and client
4
Q
customer compliant procedures
A
- member firms must establish its own procedures
- complaints only count if they are WRITING
- complaint records must be retained for a min of 4 years
5
Q
when complaints are received
A
- if received by reg rep, must immediately bring to the attention of the person designated in procedures (manager, legal, etc)
- if broker dealer gets compliant about reg rep, they discuss it with the reg rep first then contact customer
- efforts are made to resolve compliant without taking it through FINRA’s formal procedures
- Meditation, arbitration is next if not resolved
6
Q
code of arbitration procedure
A
- arbitration is an alt to going to court to resolve disputes
- established to arbitrate unresolved industry disputes
- mandatory when:
- a member against another member or reg clearing agency
- a member against an associated person- an associated person against another associated person
- a member against another member or reg clearing agency
- most new account forms include a predispose arbitration clause that must be signed by customers before opening an account
- if a customer requests this form, must provide in 10 days - without a signed arbitration agreement, a customer can pursue arbitration, but a member can’t force a customer to arbitration
- class action claims are NOT subject to arbitration
- claims brought by employees of member firm against the firm are note required to be arbitrated unless the parties agree
- advantages of arbitration: save time, money and decisions are final and binding, no appeals are allowed
7
Q
initiation of proceedings
A
- any party may initiate of proceedings by filing a claim with the director of arbitration of FINRA
- claim must describe in detail the issue and include documentation and remedy they are looking for
- claimant must include check for the required claim filing fee
- director sends copy of claim to other party
- respondent has 45 calendar days to respond to the director and claimant .
- all available defenses and related counterclaim
- if respondent doesn’t respond in 45 days may at the discretion of the director, be barred from presenting at the hearing - if the dispute involves irreparable injury, that party might seek interim or permanent injunction - must show clear case and suffer permanent harm unless immediate relief is granted
8
Q
mediation
A
- alt dispute resolution process
- cheaper than arbitration
- both parties need to agree to it, but can withdraw at any time without consent of the other party
- attempt to work out a settlement
- mediator is selected
- if unsuccessful, a hearing is conducted
- issue is settled when memo of understanding is signed
9
Q
selection of arbitrators
A
- FINRA maintains a list
- nonpublic arbitrator
- financial industry exp
- industry prof who rep parties in disputes (5 yr cooling off period based on their affiliations, 2 yr based on someone else’s activities
- financial industry exp
- public arbitrator
- any person who doesn’t meet the definition of nonpublic
10
Q
simplified arbitration
A
- any dispute involving 50,000 or less
- one arbitrator
- 30 days
11
Q
arbitration threshold
A
- 50,000 or less = one arbitrator
- 50,000 to 100,000 = one arbitrator, unless parties agree to 3
- greater than 100,000 = 3 arbitrators, unless parties agree to 1
12
Q
awards
A
- all monetary awards must be paid within 30 days of the decision date
- all awards and details of claim are made public by FINRA
13
Q
statute of limitations
A
- 6 years
14
Q
code of procedure (COP)
A
- FINRA’s formal procedure for handling trade practice complaints involving violations of the member conduct rules
- FINRA’s dept of enforcement is the body to hear and judge complaints
- appeals and review of Dept of Enforcement are handled by national adjudicatory council.
15
Q
FINRA manual
A
- must be made available to customer upon request
16
Q
reporting requirements
A
- member firm must promptly report to FINRA (not later than 30 days) if members or an AP:
- have been found to have violated fed securities law- are subject to a customer complaint of theft, misappropriation, forgery
- suspended or expelled by another SRO
- indicated, convicted or plead guilty, no contest to any criminal offense (except traffic violations)- defendant or respondent in any securities/commodity related litigation or arbitration settled in excess of 15,000
- becomes subject to statutory disqualification
- subject of an in-house disciplinary action
17
Q
sanctions
A
- censure
- fine
- suspension of membership for up to 2 years
- expulsion, cancelation, revocation
- barring from associating with other members
- any other fitting sanction
- if AP is suspended, they cannot remain associated with the member in any capacity (can’t be on premise during suspension)
- member is prohibited from paying salary, commission, other remuneration
- AP can only be paid monies earned before the suspension
18
Q
appeals
A
- appeal may be made to the national adjudicatory council (NAC)
- must be made within 25 days of decision date, otherwise decision is final
- if not satisfied, appealing party can take the case to the SEC
- from there the appealing party can take the case to the fed court system
- appealing stays the effective date of sanctions other than a bar or expulsion
19
Q
clearly erroneous transactions
A
- Nasdaq has the authority to declare any inter dealer trade null and void or adjust the terms if the current terms are clearly in error
- Nasdaq can take this action itself or in response to customer complaint
- if a member wants a trade null and void or adjusted it must notify Nasdaq market operations within 30 minutes of execution and provide all details
- Nasdaq will make decision to:
- void the trade
- adjust the terms
- take no action
Series 7
flashcards
Decks in class (19)
# Cards
