Chapter 3 Registration and Regulation of Broker Dealer Employees Flashcards
(43 cards)
U4 must signed and submitted with fingerprint card to
FINRA Central Registration Depository (CRD)
- Signing binds the person to using arbitration to settle disputes
- Experience, knowledge, and training are vital (NOT education)
CRD provides:
- Info about an individual’s employment and disciplinary history
- A very limited amount of this info is available to the public through BrokerCheck
Registration specific to
roles and/or products
-Each state may also require registration
FINRA Representative Registrations
Salespersons
Series 6 or Series 7
RRs may sell securities on a solicited or unsolicited basis
FINRA Representative Registrations
Series 11
Assistant Rep. for Order Processing
RRs may accept unsolicited orders from clients and be paid a salary or hourly wage (not commission)
-No soliciting orders or accounts and no investment advice or recommendations may be provided
Unregistered People
may not give advice, process orders, or be paid commissions
Series 99 registration does not allow a person to give what
..to give advice or trade securities
If arrested NOT ………, file a U4
NOT convicted
Statutory Disqualification
Ground include
- Conviction within the last 10 years of any felony or securities related misdemeanor
- Denial or revocation of registration by the SEC or CFTC
3 Expulsion or suspension from membership with any SRO (US or foreign)
4 Omitting a material fact in any application or report to an SRP
5 Maintaining a business relationship with a person who has been banned from the securities industry
If an RR is subject to any disciplinary action, indictment, arrest, guilty plea, or conviction a report is filed with…..
FINRA
Termination of Registration
If an associated person’s registration is terminated:
- File U5 with FINRA within 30 days
- provide copy to person
- incl volunt or involunt
-An disc issues must file updates
Termination of Registration
After 2 years of inactivity an individual must …
requalify
Continuing Education
Regulatory Element
- All registred personnel
- Due on second anniversary and every 3 years thereafter
- Must be completed within 120 days of notice
- If not completed, registration becomes inactive
Firm - regular training directed by firm
Annual Compliance meeting - attendance is required for Series 99 rep every year
For an RR to be involved in outside activities and earn compensation, he must provide written notice to his employer:
example - serving on a co’s board of directors, writing articles for a financial publication on part-time basis, or bartending on the weekends
- Hobbies not included
- Written approval and filing notice NOT required
Private Security Transactions (Selling Away)
Transactions executed by an associate person outside of her association with a member firm:
-if no compensation, an RR must provide written notice to her employer detailing the trade and obtain written acknowledgment from the firm
-To receive comp, RR must obtain her employer’s written approval and firm must record the transaction on its books.
Outside Accounts for B/D Employees
To open an account for ANY employee of another member firm, his spouse, or dependent children, an executing firm must:
- Notify the employer in writing
- Upon request, send duplicate confirms and statements
- Inform the employee of these required provisions
Outside Accounts for B/D Employees
No FINRA required pre-approval by employer but restrictions on _______ by an employer apply to all accounts held by associated person.
Rules do not apply for which contracts-
personal trading
Rules do not apply for
- mutual funds
- UITs
- variable contracts
Equity IPOs
Restricts a member firm’s ability to sell EQUITY IPOs to accounts in which
a restricted person has beneficial interest
Equity IPO’s
Restricted persons are:
- Member firms and ANY member firm employees
- Household family members of member firm employees
- Persons materially supported by the employee
Exceptions:
-Other family members may purchase from a B/D not employing the restricted person.
Gift Limit
Gift to employees of member firms limited to $___
FIRNA approval required?
$100 per person per year.
No Finra approval required
Gift Limit
If you go with the client it is an expense (occasional meal, sporting event, etc.)
Firms required to keep track of …
gifts given and received.
Red Flag Issue
An IT consultant send an Ops Professional a gift basket of $120 for thank you for assistance with a project. Is this a conflict?
Yes, gifts received from vendors may also be subject to limitations
Political Contribution
Violation if Municipal Finance Professional contributes more then $___ to a candidate for whom he may vote.
-Any he may NOT vote fore
If violation
$250
if violation a 2 year ban is imposed on certain types of underwriting business with issuer:
- If the MFP leaves the firm to join a new firm in a similar capacity, the remaining ban will apply to both firms
Most Ops Professionals are not MFPs
Prohibited Practices by Operations Professionals:
Churning -
excessive trade to gain commissions