Communications

Question 1

What are the three categories of communications according to FINRA Rule 2210?

Answer 1

Institutional, retail, and correspondence

These categories help define the type of audience for the communication.

Question 2

What is the primary purpose of the rules about communications with customers?

Answer 2

To protect investors and remind us of our duty to them

These rules ensure ethical communication practices.

Question 3

What principle must all communications adhere to?

Answer 3

Principles of fair dealing and good faith

This principle ensures honesty and integrity in communications.

Question 4

How must statements in communications be presented?

Answer 4

Clear and not misleading within the context that they are made

Clarity is essential to avoid misinterpretation.

Question 5

What is required regarding the balance of potential risks and benefits in communications?

Answer 5

Communications must be fair and balanced

This balance helps investors make informed decisions.

Question 6

Is the omission of material facts permitted in communications?

Answer 6

No, it is not permitted

Omitting material facts can lead to misrepresentation.

Question 7

What constitutes a violation in communications?

Answer 7

Making false, exaggerated, or misleading statements or claims

Such actions undermine trust and violate regulatory standards.

Question 8

What should no communication imply regarding past performance?

Answer 8

That past performance will be repeated

This helps prevent misleading investors about future outcomes.

Question 9

What must FINRA members consider when communicating?

Answer 9

The nature of the persons receiving the communication

Tailoring communication to the audience is crucial for effectiveness.

Question 10

Fill in the blank: All communications must be based on principles of _______.

Answer 10

fair dealing and good faith

This ensures ethical standards in communication.

Question 11

True or False: Omission of material facts is allowed in communications under FINRA Rule 2210.

Answer 11

False

Omitting material information is a violation of the rules.

Question 12

What is institutional communication?

Answer 12

Any written (including electronic) communication sent to or made available only to institutional investors

Does not include a member’s internal communications.

Question 13

Who qualifies as an institutional investor? List examples.

Answer 13

• Another member firm or RR
• A bank
• A savings and loan association (S&L)
• An insurance company
• A registered investment company (mutual fund)
• An employee benefit plan
• A governmental entity or subdivision
• A person acting solely on behalf of an institutional investor
• Any entity with $50 million or more of total assets, including natural persons

These are entities that typically participate in large-scale investment activities.

Question 14

What does FINRA mandate regarding institutional communication?

Answer 14

No member may treat a communication as institutional if they believe it will be made available to any retail investor

This rule helps protect the integrity of communications intended for institutional investors.

Question 15

What must each firm establish regarding institutional communications?

Answer 15

Whether to require principal approval before use or allow for post-use approval

This decision impacts how communications are vetted for compliance.

Question 16

If a BD does not require prior principal approval for communications, what must they provide?

Answer 16

Education and training of associated persons regarding institutional communication

Documentation of this training is also required.

Question 17

What is retail communication?

Answer 17

Any written (including electronic) communication distributed to more than 25 retail investors within any 30-calendar-day period

This includes various forms of communication such as emails, brochures, and advertisements.

Question 18

Who qualifies as a retail investor?

Answer 18

Anyone that is not an institutional investor

Retail investors are typically individual investors who buy and sell securities for their personal account.

Question 19

What is the filing requirement for new member firms regarding retail communications?

Answer 19

Must file at least 10 days before use

This applies to firms that are in their first year of FINRA membership.

Question 20

When must established member firms file retail communications?

Answer 20

Within 10 days of first use

Established firms have a shorter time frame to file compared to new member firms.

Question 21

What must firms send to FINRA regarding retail communications?

Answer 21

A copy of all retail communications for filing

This ensures that FINRA can review the communications for compliance.

Question 22

What is required before the use or filing of retail communications?

Answer 22

Principal approval

This means that a designated principal must review and approve the communication to ensure it meets regulatory standards.

Question 23

What does correspondence mean in a financial context?

Answer 23

Any written (including electronic) communication distributed to 25 or fewer retail investors within any 30-calendar-day period.

This includes emails, letters, and other forms of written communication.

Question 24

What must each firm decide regarding correspondence?

Answer 24

Whether to require principal approval of correspondence before use or allow for post-use approval.

This decision impacts how correspondence is managed within the firm.

Question 25

If a BD does not require prior principal approval, what must it provide for?

Answer 25

Education and training of associated persons regarding correspondence. ## Footnote This is essential to ensure that all staff understand the compliance requirements.

Question 26

True or False: Correspondence can only be sent to more than 25 retail investors at a time.

Answer 26

False. ## Footnote Correspondence is specifically defined for communications to 25 or fewer retail investors.

Question 27

* all activity in the account since the previous statement; * securities positions, long or short; and * account balances, debit or credit.

Answer 27

an account statement

Question 28

_ gives customers an overview of the holdings and activity in an account.

Answer 28

account statements

Question 29

- cash balance not earning interest in the account - statements must inform that these funds are available upon request

Answer 29

free credit balance

Question 30

FINRA mandates that account statements are sent at least _.

Answer 30

quarterly

Question 31

When must a statement be sent for an account holding penny stocks?

Answer 31

monthly

Question 32

**True or false**: Statements must tell customers to promptly report any discrepancy to their BD firm.

Answer 32

True

Question 33

* The customer has agreed in writing. * Delivery must be secure and confidential information kept safe. * The firm must be able to show proof of delivery. * Customers may get paper copies on request.

Answer 33

FINRA requirements for electronic delivery of documents.

Question 34

What does BCP stand for in the context of FINRA guidelines?

Answer 34

Business Continuity Plan

Question 35

True or False: FINRA requires firms to have a written business continuity plan.

Answer 35

True

Question 36

Fill in the blank: FINRA's BCP guidelines are designed to ensure that firms can continue to operate during __________.

Answer 36

disruptive events

Question 37

What is one key component that must be included in a firm's BCP according to FINRA guidelines?

Answer 37

A process for communicating with customers and employees during a disruption.

Question 38

Multiple Choice: Which of the following is NOT a requirement for a BCP under FINRA guidelines? A) Identification of critical business functions B) Regular testing of the plan C) A detailed marketing strategy D) Emergency contact information

Answer 38

C) A detailed marketing strategy

Question 39

What must firms do with their BCP according to FINRA regulations?

Answer 39

Review and update it periodically.

Question 40

True or False: FINRA BCP guidelines apply only to large financial firms.

Answer 40

False

Question 41

Short Answer: What is the primary goal of a business continuity plan?

Answer 41

To ensure the firm can maintain operations during and after a disruption.

Question 42

Fill in the blank: FINRA recommends that firms conduct __________ of their BCP to ensure effectiveness.

Answer 42

test drills

Question 43

Multiple Choice: Which of the following is a potential disruptive event that BCPs should address? A) Market fluctuations B) Natural disasters C) Changes in management D) All of the above

Answer 43

D) All of the above

Question 44

What key issues should a firm's BCP be able to deal with?

Answer 44

* data backup and recovery (paper and electronic) * alternate communication between customers * alternate communication between employees * alternate physical locations * communication with regulators * prompt access to funds and securities

Question 45

SSNs, account balances, transaction history, and information collected through internet cookies are all _ information.

Answer 45

nonpublic personal information (NPI)

Question 46

True of False: Asking customers to write a letter to express their disclosure preferences and/or opt out is allowed under Regulation SP.

Answer 46

**False**: Asking customers to write a letter to express their disclosure preferences or to opt out **would not** be considered reasonable under Regulation SP.

Question 47

Name one of Regulation P's reasonable opt out methods.

Answer 47

providing customers with a form with check boxes along with a prepaid return envelope

Question 48

Providing an electronic means to opt out for customers who have agreed to the electronic delivery of information would be considered _.

Answer 48

a reasonable opt out method

Question 49

Name a reasonable opt-out method.

Answer 49

providing a toll-free telephone number