1
Q
Who would be designated as a principal?
A
- Sole proprietors
- officers
- directors ACTIVE in business
- general partners ACTIVE in business
2
Q
Individuals designated as representatives:
A
- solicitors
- traders
- assistant officers
- training directors and assistants
3
Q
Financial and Operations Principal Registration (FINOP)
A
- Required for individual responsible for preparation of a firm’s financial statements and net capital computations
4
Q
Exemptions from Investment Adviser Registration include:
A
- Lawyers, accountants, teachers, and engineers who give advice as incidental part of ordinary business and do not charge separate fee for advice LATE.
5
Q
Investment banking principal prerequisites:
A
- investment banking rep exam (Series 79)
- securities industry essentials exam (SIE)
- S24
6
Q
When a member firm terminates a registered person or associated person, the firm must notify FINRA within how long using form U5?
A
30 days of termination
7
Q
Form U6
A
Used to report disciplinary actions against BDs and associated persons. Also used by FINRA to report final arbitration awards against same parties.
8
Q
Form U4 background check requires an applicants:
A
- employment history for the last 10 years, certify last 3 years
- 5 year residence history
9
Q
When an applicant for registration has been previously registered with FINRA, form U5 must be obtained by the member:
A
- no later than 60 days following the filing of application for registration or demonstrate to FINRA that it has made reasonable efforts to comply with the requirements.
10
Q
Disclosure to Associated Persons when signing Form U-4
A
- agreeing to arbitrate any dispute, claim, controversy between you, your firm, or customer (giving up right to sue)
- arbitration awards are final and binding
- ability of parties to obtain documents, witness statements, and other discovery is limited
- arbitrators do not have to explain reasons for award
- arbitrators may include persons affiliated with securities industry or public arbitrators
- may be time limits for bringing claims to arbitration
- claims alleging employment discrimination are NOT required to be arbitrated under FINRA rules
11
Q
Fidelity Bonding:
A
a form of insurance that protects broker-dealers from dishonest, fraudulent actions of employees.
- minimum coverage must be at least 100,000, but may be higher depending on BDs net capital requirement
- deductible provision may be included of up to 25% of fidelity bond coverage
- each member shall make required adjustments annually as of yearly anniversary date of issuance of fidelity bond
- each member must within 10 days report any change, cancellation, termination, or substantial modification of bond to FINRA.
- does not cover firm against decline in value of its inventory
- brokerage firm with minimum net capital requirement that is less than $250k must maintain minimum coverage of greater of 120% of its required net capital or 100,000.
12
Q
Under continuing education requirement of registered persons rule, registered persons must complete the regulatory element of their requirement within how long?
A
120 days after the anniversary of either:
- the second anniversary date of initial registration
- every 3 years thereafter as long as the person remains registered
13
Q
Firm Element Continuing Education:
A
- Each member must maintain a firm-wide written continuing education program for its covered registered persons (individuals who have direct contact with customers doing business)
- at least annually, member firms must evaluate training needs and develop training plan that includes the scope of the firms business activities.
Corporate organizational charts are NOT part of continuing ed materials
14
Q
Every person who is a partner, director, officer, or employee of a broker dealer must be fingerprinted EXCEPT if the person meets all of the following conditions:
A
- they are not engaged in the sale of securities
- they do not have access to handling of securities or monies or original books and records and
- they do not have direct supervisory responsibility over persons engaged in the activities mentioned in 1 and 2.
15
Q
If a firm submits fingerprint cards which are returned ‘ineligible’ by the FBI, the firm may submit:
A
-up to 3 sets of fingerprint cards
16
Q
Inters would have to be fingerprinted if they:
A
- sell securities
- have access to the keeping, handling, pr processing of securities, monies, or original books and records or
- have direct supervisory responsibility over those who sell securities
17
Q
Educational communication prepared by FINRA in the event one producer goes to another BD has to be delivered when?
A
- the firm, directly or through the rep, contacts former customer of the rep to transfer assets or
- former customer transfers assets to account assigned or to be assigned to the rep of the firm without individual contact
18
Q
The educational communication under recruitment practices highlights:
A
- whether financial incentives that the rep receives may create a conflict of interest
- that some assets may not be directly transferrable to recruiting firm and customer may incur costs to liquidate and move assets or incur maintenance fees to leave them with his or her current firm
- potential costs related to transferring assets including differences in pricing and fees
- differences in products and services between current firm and recruiting firm
19
Q
What would trigger the delivery of the educational communication?
A
- oral or written communications by the transferring representative to the client
20
Q
The educational communication requirement in the rule applies for how long?
A
- 3 months following the date the rep begins employment or associates with recruiting firm
21
Q
If an associated person engages in private securities transactions without firm approval:
A
- considered ‘Selling Away’. selling products not approved by the brokerage firm. It is prohibited
22
Q
A person registered with a member firm is prohibited from borrowing from or lending money to any customers unless:
A
- members has written procedures allowing transactions
- lending or borrowing meets one of the following:
- customer is a member of persons immediate family
- customer is financial institution that is in business of providing credit, financing, or loans
- customer and registered person both registered w same firm
- lending arrangement is based on personal relationship outside of the broker dealer relationship
- lending based on business relationship outside of the broker dealer relationship
23
Q
Family members included in borrowing/lending under rules around borrowing or lending:
A
Everyone in your family, including cousins
24
Q
Members must pre approve in writing the lending or borrowing arrangements between:
A
- two registered persons with the same firm
- personal with a personal relationship with the customer outside of the broker dealer relationship
- persons with a business relationship outside the broker customer relationship
pre approval is not required if customer is immediate family member or if customer is financial institution in the business of lending
25
If an account was opened prior to a persons association with the new employer member firm, the associated person must:
- obtain written consent of employer member to maintain account and shall notify in writing the executing member (where they have their account) of their association with the new employer.
- must do this within 30 days of association of new employer
26
Related and other persons under the accounts at other broker-dealers/financial institutions rule:
- associated person shall be presumed to have beneficial interest in any account that is held by:
- spouse of associated person
- child of associated person or of their spouse, provided the child resides in same household or is financially dependent
- individual over whose account the associated person has control
- any individual whose account the person has control and if the associated person contributes financial support to them.
27
Transactions and accounts not subject to the rule of accounts at other broker-dealers/financial institutions:
- UITs
- muni fund securities
- 529s
- variable contracts
- redeemable securities of registered investment companies
- monthly investment plan type accounts
28
Accounts at a financial institution other than a member firm:
- employer member has to consider extend which it will be able to obtain statements from credit unions, foreign BDs, insurance companies, trust companies, etc. If they dont provide it, the member cant maintain their account
- if copies of statements are sent, must be reviewed periodically.
- if RR had acct at other firm 10 years ago and it's closed, no need to disclose
- employee of insurance company licensed to sell fixed annuities would not be subject to this rule.
29
Outside Business Activities:
- may not accept compensation from any other activity outside of the employment other than passive investment income (income from a trust) unless registered person provided written notice to member firm.
NO APPROVAL is required, from anyone. just notification to the MEMBER FIRM. Not FINRA, it's not required
30
Influencing or Rewarding Employees of Others under Gifts and Gratuities rule:
- no member shall give anything including gratuities in excess of $100/per person per year in relation to the business of employer. gifts of any kind.
- rule does not apply to written contracts of employment
- $100 limit is total for a year
- Rule does NOT apply to gifts given to individual customers not related to business of the broker dealer. personal gifts, or events as long as the person associated with the firm ATTENDS the gift- have to go with them.
31
Taping Firm:
- at least 5 but fewer than 10 registered persons where 40% or more of registered persons have been associated with one or more disciplined firms in registered capacity within the last 3 years.
- at least 10, fewer than 20 regiestered, 4 or more have been associated with one or more disciplined firm in last 3 years
- at least 20 registered where 20% or more have been associated with one or more disciplined firms in last 3 years
32
Taping firms must maintain and enforce special written supervisory procedures relating to telemarketing activities of their registered persons:
- must tape record all phone calls between registered persons and both existing and potential customers
- disciplined firm= firm that has been expelled from membership or had registration revoked for sales practice violations
- can avoid becoming a taping firm if they deduce their staff levels within 30 days after receiving notice that they're subject to rules. persons registered with disciplined firm for 90 days or less within last 3 years and have no history are excluded
- firm has 60 days to install taping system. must be maintained for 3 years
- all recordings must be kept for 3 years, first 2 years readily accessible.
- by 30th day of month following end of each quarter, must file report with FINRA regarding supervision.
- FINRA will make available to the public listing of all firms subject to the rules.
33
FINRA Members use of social media web sites rule require members to have Written Supervisory Procedures that address:
- recordkeeping responsibilities- communications made kept for not less than 3 years
- suitability responsibilities
- supervision of social media sites
34
Sharing or linking content under FINRA social media rules:
- shares or links to specific content, or by liking or sharing favorable comments, FINRA considers them to have adopted them and subject to FINRA standards
35
Code of Procedure was established to handle trade practice complaints addressing proceedings for:
- disciplining a member or person associated with a member
- regulating activities of member experiencing financial or operational difficulties
- summary or non-summary suspensions, cancellations, bars, prohibitions, or limitations
- obtaining relief from membership eligibility requirements of FINRA by-laws and FINRA rules
36
FINRA can impose the following sanctions on someone for any neglect or refusal to comply with an order, direction or decision issued under FINRA rules:
- censure member or person associated with member
- impose fine upon member or person associated with member
- suspend membership of member or suspend registration of person associated with member for a definite period or period contingent on performance of act
- expel member, cancel membership, or revoke or cancel registration
- suspend or bar member or person associated with a member from association
- impose temporary or permanent cease and desist order
- impose any other fitting sanction
37
The Department of Enforcement or Department of Market Regulation will establish a Hearing Panel that:
- a submission agreement is signed by all parties to statement of claim
- each party must serve each other with a signed and dated submission agreement and an answer within 45 days of statement claim
- hearing panel must issue written opinion within 60 days of end of hearing
- respondent has 25 days to appeal to the national adjudicatory council
- SEC is final level of appeal. SEC's decision may then be taken to federal court.
- maximum penalty a hearing panel can impose for minor rule violations is 2500
38
National Adjudicatory Council
- national committee that reviews initial decisions rendered in FINRA disciplinary and membership proceedings. Council can affirm, modify, reverse, increase, or reduce any sanction or impose any other sanction it believes is appropriate
decisions MAY be appealed to the SEC.
39
FINRA will release to the public information concerning the following disciplinary decisions:
- suspension or revocation of a person associated with a member firm
- suspension barring of a member or a person associated with a member firm from association with other member firms
- imposition of monetary penalty of 10k or more on a member firm or person associated with member firm.
FINRA has NO jurisdiction over Insurance, commodities, or residential real estate transactions
40
A respondent is permitted to request and review documents that pertain to a complaint brought by FINRA. A respondent can review:
- written requests directed to persons not employed by FINRA to provide documents or to be interviewed
- documents provided in response to requests described in #1
- all transcripts and transcript exhibits
- all other documents obtained from persons not employed by FINRA.
Respondent is NOT entitled to request info or documentation that has not been presented as evidence in the complaint
41
How long will information submitted on broker check be available?
- forever as long as you're registered
| - full records of brokers leaving the industry- remain available for 10 years
42
What are the guidelines around historic complaints under the FINRA Brokercheck system?
- historic complaints are complaints that are more than 2 years old and have not been settled or adjudicated and customer complaints arbitrations or litigations that have been settled for amount less than 10k prior to 2009 or amount less than 15k after may 2009 as long as complaint became a matter on or after august 1999
43
Expungement under the brokercheck rules:
- can only occur when there is independent judicial or arbitral decision that expungement is appropriate. no member firm or associated person shall condition or seek to condition settlement of a dispute with a customer.
44
FINRA requires member firms websites to include readily apparent reference and hyperlink to broker check on:
- initial web page
- any other web page that includes professional profile of one or more registered persons who conduct business
- firms may elect to satisfy requirement of rule by using a 'deep link' to the firm or associated persons individual brokercheck pages.
Exception:
- member firm does not provide products or services to retail investors
- directory or list of registered persons limited to names and contact info
- third party websites
- social media sites
NOT required on email or text messages
45
Factors considered by firm with brokercheck being referenced on websites:
- placement: if scrolling is required to find it, must be clear that info is available below the screen. such reference cannot be buried
- font size: must be similar in size to font size of other info on the page
- font color: font color of description and hyperlink contracts or blends in websites background
46
What type of claim would not be required to go to arbitration?
claim alleging employment discrimination including sexual harassment not required. may be arbitrated if parties involved agree to arbitrate.
47
A simplified arbitration procedure:
- may be used for issues between public customer and a member involving dollar amount of $50k or less
- one single arbitrator will be appointed to resolve
- can be resolved by using one of the following methods:
1) documents and pleadings are submitted to single arbitrator and arbitrator makes decision
2) special proceedings for full hearing with a single arbitrator. special procedure hearings are held by phone, claimants and respondents have 2 hrs to present cases.
48
If a claim is more than 50k, but not more than 100k, how many arbitrators are appointed?
- one unless parties agree in writing to three
49
if claim is more than 100k or does not request monetary damages, how many arbitrators are appointed?
- 3 arbitrators unless the parties agree in writing to one
50
Majority Public panel:
- where panel is comprised of chair-qualified public arbitrator, a public arbitrator, and a NON public (industry) arbitrator
51
Optional all public panel:
- allows any party to select all public arbitration panel
52
Non public arbitrators who could be considered public of the applicable criteria is met:
- must wait 5 years after ending affiliation based on own activities
- for persons who do not conduct activities themselves but are employed at such firm must wait 2 years after ending affiliation
- if person has immediate family member emplyed at firm, person must wait 2 years after employed person ends employment
53
In arbitration, parties involved are required to exchange any documents that they intend to present in arbitration hearing at least:
- 20 calendar days prior to hearing date.
54
Arbitration and mediation rules provide that:
- parties may represent themselves
- parties may be represented by an attorney in good standing admitted to practice in any jurisdiction in the US
- Parties may be represented by a person who is not an attorney, unless person is suspended or barred from securities/law industry
55
Pre dispute arbitration agreement
- arbitration is not required for customer claims unless the customer has signed a pre-dispute arbitration agreement or initiates an arbitration claim.
- if customer signs agreement, must provide firm with signed ack. of receipt. All parties agree to arbitrate and waive court claims. decisions are final and binding, cannot be appealed. upon request of a customer, firms required to provide copy of pre-dispute arbitration agreement within 10 business days.
56
Uniform code of arbitration states that controversy is not eligible for submission if:
- 6 or more years have elapsed from date of event giving rise to dispute.
Series 24
flashcards
Decks in class (13)
# Cards
-
Chapter 184
-
Chapter 257
-
Chapter 336
-
Chapter 459
-
Chapter 556
-
Chapter 11 Improvement Areas32
-
Chapter 10 Improvement Areas27
-
Chapter 9 Improvement Areas0
-
Chapter 9 Improvement Areas12
-
Chapter 8 Improvement Areas8
-
Chapter 7 Improvement Areas0
-
Chapter 6 improvement Areas33
-
Chapter 3 Section 4 study deck0
