Flashcards in Chapter 3 Registration and Regulation of Broker Dealer Employees Deck (43)
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1
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)
2
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
3
Registration specific to
roles and/or products
-Each state may also require registration
4
FINRA Representative Registrations
Salespersons
(Series 6 or Series 7)
RRs may sell securities on a solicited or unsolicited basis
5
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
6
Unregistered People
may not give advice, process orders, or be paid commissions
7
Series 99 registration does not allow a person to give what
..to give advice or trade securities
8
If arrested NOT ........., file a U4
NOT convicted
9
Statutory Disqualification
Ground include
1. Conviction within the last 10 years of any felony or securities related misdemeanor
2. 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
10
If an RR is subject to any disciplinary action, indictment, arrest, guilty plea, or conviction a report is filed with.....
FINRA
11
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
12
Termination of Registration
After 2 years of inactivity an individual must ...
requalify
13
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
14
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
15
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.
16
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:
1. Notify the employer in writing
2. Upon request, send duplicate confirms and statements
3. Inform the employee of these required provisions
17
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
1. mutual funds
2. UITs
3. variable contracts
18
Equity IPOs
Restricts a member firm's ability to sell EQUITY IPOs to accounts in which
a restricted person has beneficial interest
19
Equity IPO's
Restricted persons are:
1. Member firms and ANY member firm employees
2. Household family members of member firm employees
3. Persons materially supported by the employee
Exceptions:
-Other family members may purchase from a B/D not employing the restricted person.
20
Gift Limit
Gift to employees of member firms limited to $___
FIRNA approval required?
$100 per person per year.
No Finra approval required
21
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.
22
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
23
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
24
Prohibited Practices by Operations Professionals:
Churning -
excessive trade to gain commissions
25
Prohibited Practices by Operations Professionals:
-Churning
-Trading without permission
-Blanket recommendations
-Lending to or borrowing from customers (unless relative)
-Guaranteeing against a loss
-Sharing in client profits and losses
-Unless joint account and sharing proport to the contribution made.
26
Red Flag Issue
You notice that a number of client accounts have been purchasing the same security. The accounts are all discretionary and overseen by the same person. What is your concern?
Blanket Recommendations (Laziness)
27
Red Flag Issue
You are copied on an e-mail which a RR persuades a customer to purchase a security by the assuring her that, should it fall in value, rep will make up the difference in the account. The practice is considered:
Guaranteeing a customer against a loss
28
Red Flag Issue
Older, wealthy client gives RR $50K and tells the RR to keep the profits he earns on the cash and to return the $50K when he can. What prohibited practice is this an example of?
Borrowing form a customer
29
Compensation Rules
Payment to non-members
RRs prohibited from paying comp to any individual who is not FINRA registered
-includes paying referral fees
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