Chapter 3 Flashcards
Finra rule 2090 and Rule 2111 (account suitability) with regards to account opening and KYC rule, it would be appropriate for a supervisor to return with out his signature who failed to properly get information:
Generally rule 4512 requires the following info to obtained
Name, address and occupation, name address of employr
Associate person, employed by another bd, officer, 10%
SS#, tax ID
Legal Age
Cash/margin
Citizenship
Income, net worth, inv objectives, Time Horizon
Inv experience, Risk tolerance, Inv obj
RR responsible
It is not unusual to have rules relaxed for certain classes of investors:
Banks, S&L, Insurance, Registered Inv companies
IA registered with either the state or SEC
Any natural person, corp, partnership or trust with total assets of $50mm
Before opening a account for a non-institutional customer, the member must:
Provide risk disclosure outlining risks for day trading
Approve the account for a day trading strategy or recve from the customer a written statement that customer will not engage in day trading
To approve account, the member must have reasonable grounds for believing that the day trading strategy is appropriate for customer and must gather what info?
Investment objective, trading experience and knowledge
Financial status and tax status
Employment status, marital status dependents and age
True/False- At a customers written request, an account may be identified by only a number or symbol.
True
True/false- in a addition to the disclosure at the opening of a margin account, the member must at least annually deliver the disclosure again
true
USA PATRIOT Act BD’s are required to :
Verify the identity of a new customer
Maintain the records of the information used to ID
Determine whether the person appears on any known terrorist watch lists.
Records must be retained for 5 years
True/False- Accounts that are acquired the the acquisition of another member firm are not subject to customer ID procedures
TRUE
There are 2 services a member may not charge customers
1- Research- providing research would force a member to register as a IA
2- forwarding proxy material. Members charge the issuer
True/False- Convenience is not an acceptable reason for holding mail longer than 3 months?
TRUE
A trade is discretionary if-
Action ( buy or sell) or Asset ( the security ) or Amount ( shares or dollars)
Retail orders granting time or price discretion are limited to the day the order is given unless the firm has written authorization from the customer
True
Institutional not held orders are not affected if given a a GTC basis
Confirms:
Principal or Agent Symbol, Price, Shares, Date and time Member acted as dual agent, Commission in agency trade Markup/markdown Payment for order flow MM and/or control relationship Debt security traded on yld or dollar price YTM or YTC or CY CalL legend
Solicited or Unsolicited is not required
Rule 10b-10 requires that confirms for DVP/RVP trades be delivered when?
No later than t+1
Tru/False- There is a requirement to disclose yield on a trade confirmation for CMO’s
False- If the BD chooses to do so, addtl information wud be required.
The nominal face amount and IR, Maturity date and Settlement date including WAC should be on confirm
ACATS transfer
3 bd’s tofollowing validation of the transfer instruction, member must complete. 1 day to validate, 3 days to ship
True/false- a carrying member may not take exception to a transfer and deny validation because of a dispute over securities positions or the money balance in the account
TRUE
True?False Block transfer can always be used whether or not the RR prior firm agrees to participate.
False- if the prior member is unwilling to particpate in this block transfer program, it will be necessary for the RR to transfer using an Individual change of dealer authorization form.
True False- Discretionary authority ends at the death of an account owner
TRUE
JTWROS account if one party dies
Cannot be transferred into the name of new owner until the member receives a certified copy of the death certificate. the remaining tenant can still enter orders
If One Party in a TIC dies, the decedent interest in the account goes to his estate.
Member smust freeze the account and acceptance of orders until required docs are presented
If the sweep provided by a member firm is a money market fund for the investment of free credit balances the fund must be….
No load open ended management company registered under the IC act of 1940.
if customers are provided with a bank sweep program, the method for determining interest rate must be disclosed
Free credit balance notification is required ….
monthly in active accounts and quarterly in inactive accounts… if no distinction between active/inactive, then answer is quarterly
Offer of rescission-
solicited unsuitable trade- member can offer in writing to rescind the trade buy back securities fir the original consideration and pay interest to the customer based on cost from purchase date to repurchase date. Must be accepted by customer within 30days of receipt or give up future legal action
QIB
is any entity acting for its own account or the accounts of other QIBS that in the aggregate owns/invests $100mm If its a bank must have$25mm and a BD must have $10mm
Rule 2121- 5% policy ( qibs exempt)
It applies to markups, markdowns and commissions but not to securities sold by prospectus.
What are the 3 types of market environments?
Active, competitive markets
Inactive, competitive markets
Dominated and controlled markets
Active and competitive markets, what is the prevailing market price?
The inside market
Inactive, competitive market what must market maker use?
Contemporaneous purchases/sales from other dealers
Markups= sales to other dealers Markdowns = purchases from other dealers
