Q&A8

Question 1

TRACE Reporting

BDs req’d to report trades to TRACE within ___.

FINRA will confirm receipt of trade report ___.

Answer 1

15 mins

immediately

Question 2

U4

Must be updated w/in ___ days of person convicted or charged (or pled guilty or no contest to) any felony or misdemeanor involving investments – or any fraud, false stmts, bribery, perjury, forgery, etc or conspiracy to commit.

Answer 2

30 days

Question 3

Research analysts

Can they attend roadshows related to IB transactions or offerings of equity/debt?

Answer 3

No

Question 4

Passive MM

1. Daily purchase limit (DPL) = greater of __% of its ADTV or ___ shares.
2. Once net purchases exceed DPL, it must withdraw for [how long?].

Answer 4

1. 30% or 200 shares

2. rest of the day

Question 5

Trade-through

Violation that occurs when an order is filled at a price that is ___ to a protected quote (one immediately accessible through an automated execution system).

Ex: BD accepts order to sell stock and sends to Market Center A, which executes through automated execution system at 30.25 while inside market is 30.26 - 30.35.

Answer 5

inferior

Question 6

FINOP

Financial and Operations Principal has final approval / responsibility for financial reports (from which books and records are derived) and their preparation, plus supervision of employees who assist in their preparation and of those in Ops.

Does NOT supervise employees who prepare ___ reports (would fall in general securities principal).

Answer 6

NOT trade reports

Question 7

Reg M

Reg M notice must be filed with ___ by the managing underwriter no later than ___ pricing of the distribution.

Required for most offerings meeting definition of a ‘distribution’ but NOT for ___.

For any Nasdaq security, managing underwriter must indicate whether participants will be ___ or will be ___ during the restricted period.

Answer 7

FINRA….close of biz the next biz day following pricing

NOT for IG nonconvertible debt

will be excused from trading or will be passive MMs

Question 8

Proceeds tx

BD must consider total $ amount when determining markup. But markup computed as though customer made only one tx (the sale).

Ex: Customer sells $10k of stock and uses proceeds to purchase $10k of another stock. If BD charges total markup of $875, this would = __%.

Answer 8

8.75%

Question 9

Directed vs. Non-directed order flow

1. Directed: ___ specifies market center (e.g., Nasdaq).
2. Non-directed: BD chooses market center and must disclose / report non-directed order flow [how often?].

Answer 9

1. Customer

2. quarterly

Question 10

Stock loan b/w BDs

Lending firm retains all rights to the stock except ___.

Answer 10

voting rights

Question 11

Form U6

Regulators, states, jurisdictions use to report ___ against an RR or firm.

FINRA also uses to report final ___ against RRs and firms.

Answer 11

disciplinary actions

arbitration awards

Question 12

Subordination vs. Temp subordination

1. Subordination agmt: MIN duration of ___.
2. Temporary subordination agmt: MAX duration of ___.

Answer 12

1. 1 year

2. 45 days

Question 13

Short interest report

Must be filed [how often] by the __ biz day after the reporting SD.

Answer 13

semi-monthly by the 2nd biz day after reporting SD

Question 14

Nasdaq system operates from __am to __pm

Answer 14

4:00am to 8:00pm

Question 15

Process of returning securities that were previously accepted on SD is known as ____.

Answer 15

reclamation

Question 16

Piggyback exemption

Applies to securities that have been subject of regular and continuous quotes for past ___ days.

Quotes must have appeared on at least __ of those days, with no more than __ biz days in succession w/o a quote.

Answer 16

30 days

12 of those days, with no more than 4 biz days in succession w/o a quote

Question 17

Unexcused withdrawal

1. from CQS: suspension for ___ in the security
2. from Nasdaq: suspension for ___ in the security

Answer 17

1. 1 biz day

2. 20 biz days

Question 18

SIPC

Unless question mentions otherwise, assume securities are in ___ name.

If question states that securities are in ___ name, then SIPC not applicable.

Answer 18

street

customer’s

Question 19

Excess equity

Customer has excess equity in a margin account when the equity exceeds the ___ requirement.

Ex: Current MV = $20k. Account has excess equity if equity exceeds $__.

Answer 19

Reg T requirement (50% of MV)

Ex: $20k x 50% = $10k (Reg T req). So account has excess equity if equity exceeds $10k.

Question 20

Reg A+ offering

1. Securities may be offered publicly and [are / aren’t] restricted from resale.
2. General solicitation and advertising permitted PRIOR to filing offering stmt w/ SEC?
3. Do financial stmts filed w/ SEC need to be audited?
4. No reporting obligations unless issuer has > $___ in assets AND > ___ shareholders.

Answer 20

1. aren’t
2. Yes
3. No
4. $10mm AND 500 shareholders

Question 21

Analysts - personal trades

No analyst or member of an analyst’s household may purchase shares in a company w/in that analyst’s ____ prior to the company’s IPO.

Answer 21

sector

Question 22

ABC test

Used to determine if an entity meets definition of ____.

Three prongs?

Answer 22

investment adviser

Advice (concerning securities)
Business (of providing advice)
Compensation (for doing so)

Question 23

Margin disclosure stmt

Only req’d to deliver to ____ customers.

Answer 23

non-institutional (retail)