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SIE > Chapter 9 SRO Regulatory Requirements > Flashcards

Chapter 9 SRO Regulatory Requirements Flashcards

1
Q

What are the Membership Qualifications for SROs?

A

-Abide by FINRA rules
- Abide by Federal & State laws
- Current updates within 30 days
- Pay dues

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2
Q

What does a principal do?

A

Person involved in the management of the firms business activities and must carry out written supervisory procedures (WSP)

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3
Q

When does a WSP be reviewed?

A

Annually

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4
Q

What are some potential red flags for an RR?

A
  • Churning
  • Blanket recommendations
  • Similar customer complaints
  • Improper suitability
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5
Q

What is the FINRA requirement for an RR to open an account at another firm?

A

All associated persons receive written consent from their broker dealer before opening an account
- Must get prior written consent if there is any beneficial interest

  • Must notify the carrying firm once opened & send duplicate account opening statements
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6
Q

What security transactions are exempt from the account opening requirements?

A
  • UIT
  • Mutual Funds
  • Section 529 plans
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7
Q

What must a principal do when reviewing a U4?

A

Investigate good character
Reputation
experience verify prior 3 years

Then they must review, sign, and date

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8
Q

What is a U5 form for?

A

Form to terminate a registered representative, voluntarily or involuntarily and discloses the reason

  • Provide a copy to the employee within 30 days
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9
Q

What causes a disciplinary action?

A

Causes can be if any member includes incomplete, inaccurate, or misleading information

  • Failure to disclose any information in a timely manner
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10
Q

What are some causes of Statutory Disqualification?

A

Theft related to securities
Misdemeanor convictions
Felony convictions from the last 10 years
Injunctions
Expulsions

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11
Q

How long does a member stay subjected to regulation after resignation?

A

Subject to regulation following the filing of a complaint within 2 years after the effective date of resignation

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12
Q

What are the minimum qualification requirements for registration with FINRA?

A
  • Firm must register their representatives
  • Registration must be appropriate to roles
  • Must pass exams
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13
Q

What’s the waiting period if you fail a FINRA exam?

A

30 days 1st & 2nd attempt
180 days after 3rd attempt

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14
Q

What is the regulatory element?

A

Is a computer based training session administered by FINRA

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15
Q

When are RR supposed to complete their regulatory training?

A

2nd anniversary of their initial securities registration

Every 3 years after

120 day grace period; if not completed by then they will receive an inactive status

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16
Q

What is the purpose of the annual compliance meetings?

A

To address compliance issues that directly impact registered personnel. Must keep a record of attendee name

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17
Q

What is Form U4 for?

A

Application used to register an associated person

18
Q

What is Maintaining Qualification Program (MQP)?

A

Allows individuals up to 5 years to re-register with a firm without having to retake associated qualification exams

  • Must enroll in MQP within 2 years of termination or resignation
19
Q

What is FINRA BrokerCheck for?

A

For anyone who wants to look into FINRA member within the past 10 years

20
Q

What is not included in FINRA Brokercheck?

A

Any personal information
- Residence
- Social
-

21
Q

How long can FINRA retain jurisdiction over one of its members or registered associated persons after they are no longer in the industry?

A

2 Years

22
Q

Why does FINRA prohibit outside activity?

A

Its necessary to prevent misconduct or conflicts of interest that could harm the firm or their customers

23
Q

If there is any outside activity what must an RR do?

A

The RR must get written approval from the firm. It is up to the firm to decided if there’s any conflicts of interests

24
Q

What is the purpose for FINRA Rule 3241?

A

The rule is stop RR from being a beneficiary or hold a trust position

25
Q

How can an RR be a beneficiary for one of their customers?

A
  • The customer has to be an immediate family member
  • Written permission from the firm
26
Q

When do you have to notify your supervisor?

A

Anything that is outside the normal scope of an RR duties

27
Q

What must happen if an RR gets compensation from a Private securities transaction?

A

They must record it to the firms books and the member firm is responsible for supervising the RRs participation

28
Q

Is it okay for a Broker Dealer to sell a security they have control over?

A

Its only okay if the customer has received proper disclosures and must have written disclosure

29
Q

What is selling away?

A

Selling away is when an RR sells investment that a broker dealer does not offer

30
Q

What is Rule G-37?

A

it stops Broker dealers from engaging in any municipal securities business with an issuer within 2 years of any contribution

31
Q

What should an RR do if they receive a customer complaint?

A

They must give it to their manager immediately and then its up to the manager to resolve the issue

  • Sent to FINRA within 30 days
32
Q

How long is a customer complaint retained for?

A

4 years

33
Q

What must an RR do if they care to engage in any for compensation outside business activity?

A

Provide Prior written notification to their BD

34
Q

When can an RR share commissions or referrals?

A

Only if they share the same Broker Dealer

35
Q

When can an RR receive continuing commissions?

A

They can only continue to receive commissions if the transaction was conducted during employment and in a written contract between rep and broker dealer

36
Q

Are you allowed to take additional compensation outside the prospectus?

A

No

37
Q

What is the general rule for Sales Contest ?

A

It is okay as long it doesn’t steer the business towards one product

38
Q

What is a restricted person?

A

Basically just someone who you cannot sell shares to

39
Q

What is the purpose of creating Regulation Best Interest & Customer Relationship Summary Form ?

A

To provide transparency for retail customers.

40
Q

What are the 4 Components to Regulation BI?

A

Disclosure Obligation
Care Obligation
Conflict of Interest
Compliance Obligation

41
Q

What is the CRS form for?

A

It describes the relationship between firm and client

SIE (12 decks)

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