Registered Representatives and Financial Firms

Question 1

A BD must file Form U5 with FINRA when a person’s association with that firm ______________.

Answer 1

A BD must file Form U5 with FINRA when a person’s association with that firm ends/ceases.

Question 2

Candidates who have failed a qualification exam once must wait ___ days before retaking the exam.

Answer 2

Candidates who have failed a qualification exam once must wait 30 days before retaking the exam.

Question 3

In the process of opening an account for an employee of another firm, what must be done by the carrying firm?

Answer 3

Provide written notification to the employer

Question 4

List the broker-dealer employees who need to be fingerprinted.

Answer 4

Salespersons, employees who handle money or securities, and anyone who deals with records of original entry

Question 5

True or False: An RR who served in the military must retake the Series 7 when he rejoins his broker-dealer.

Answer 5

False. An RR who served in the military is put into special inactive status and is not require to retest.

Question 6

How often must a BD’s Firm Element Continuing Education program be reevaluated?

Answer 6

Annually

Question 7

___________ is FINRA’s tool for allowing public access to certain information found in the CRD.

Answer 7

BrokerCheck is FINRA’s tool for allowing public access to certain information found in the CRD.

Question 8

Which Act created SIPC?

Answer 8

Securities Investor Protection Act of 1970 (SIPA)

Question 9

What is the purpose for obtaining a Series 9/10 or Series 24 registration?

Answer 9

The Series 9/10 or 24 the registrations required for supervising registered representatives.

Question 10

How often must firms conduct their compliance meeting?

Answer 10

Once per year (annually)

Question 11

Do all outside activities of an RR require notification to an employer?

Answer 11

No. Notification is only required for employment activities, not hobbies.

Question 12

True or False: Firm Element Continuing Education requires BDs to update employees on job and product-related subjects.

Answer 12

True

Question 13

Which department of a broker-dealer executes securities transactions?

Answer 13

Trading

Question 14

True or False: A broker-dealer may pay a commission to an unregistered individual.

Answer 14

False

Question 15

Define penny stock.

Answer 15

Non-exchange traded securities that are priced at less than $5 per share

Question 16

__________________________ expenses are not subject to the Gift Rule.

Answer 16

Entertainment/business expenses are not subject to the Gift Rule.

Question 17

Gifts exceeding $_____ are considered excessive.

Answer 17

Gifts exceeding $100 are considered excessive.

Question 18

The Maloney Act of 1938 is credited with creating which SRO?

Answer 18

The NASD. In 2007, the regulatory units of the NASD and NYSE merged to create FINRA.

Question 19

List the four categories of FINRA rules.

Answer 19

1. Conduct Rules
2. Uniform Practice Code
3. Code of Procedure
4. Code of Arbitration

Question 20

What are the justifiable reasons for denying an individual’s registration?

Answer 20

Conviction for any felony or securities-related misdemeanor within the last 10 years

Question 21

What is the purpose of the Trust Indenture Act of 1939?

Answer 21

To provide security for corporate bond investors

Question 22

To apply for a securities license, one must file Form _____ with FINRA.

Answer 22

To apply for a securities license, one must file Form U4 with FINRA.

Question 23

Which department of a broker-dealer makes recommendations to investors?

Answer 23

Sales

Question 24

When must RRs complete the Regulatory Element of Continuing Education?

Answer 24

On the 2-year anniversary of their registration and every 3 years thereafter.

Question 25

For accounts opened for employees of another member firm, what is provided to the individual’s employer upon request?

Answer 25

Duplicate confirmations and statements

Question 26

What is the role of a broker-dealer’s operations department?

Answer 26

To process paperwork, handle funds and securities transfers, and settle and confirm transactions

Question 27

What is the industry policy regarding an RR who sets up an outside business that involves paid public speaking?

Answer 27

This is considered employment and the RR must receive employer approval.

Question 28

True or False: The Investment Company Act of 1940 requires mutual fund managers to register.

Answer 28

False. The Investment Advisers Act of 1940 is the Act that requires money managers to register.

Question 29

Define churning

Answer 29

Excessive trading solely for the purpose of generating commissions or fees

Question 30

What is the CRD?

Answer 30

The Central Registration Depository (CRD). CRD is FINRA’s database for member registrations.

Question 31

True or False: It is acceptable to disclose the content of a qualifying exam to a co-worker.

Answer 31

False. The content of the exam is confidential.

Question 32

Who supervises a registered representative (RR)?

Answer 32

A supervising principal

Question 33

True or False: FINRA regulates accounts of member firm employees opened at another firm.

Answer 33

True. The rule also covers accounts for the employee’s spouse or dependent children.

Question 34

True or False: RRs are always prohibited from sharing in a customer’s account.

Answer 34

False. RRs may share in a customer’s account if they have permission and sharing is proportionate to their investment.

Question 35

True or False: RRs are typically not permitted to lend money to a client.

Answer 35

True. While exceptions existing, personal loans to clients are typically prohibited.