Notes 4

Question 1

SEC 147 requirements for issuers

Answer 1

need 80% of assets, or 80% of revenue derived from that state

Question 2

requirements to buy SEC 147 securities

Answer 2

Need either 100% of the partnership located in the state, have a principal office in the state. can’t have an organization that exists specifically to buy the security

Question 3

are 529 plans paid with after tax or pre-tax?

Answer 3

after tax

Question 4

What happens when fed does a repo?

Answer 4

buy securities, then sells them at later date

Question 5

of people to be sent requirement for retail communication

Answer 5

at least 25

Question 6

How to open a corporate account?

Answer 6

Individual needs to supply a corporate resolution authorizing one or more persons to open and operate account

Question 7

What is the hypothecation agreement

Answer 7

allows BD to pledge customer’s securities to a bank as collateral for the customer’s margin loan. Requires the customer sign this agreement when the margin account is opened

Question 8

Money market funds cannot contain __

Answer 8

stocks

Question 9

What is Backing away

Answer 9

when BD fails to honor a quote it put into the market

Question 10

Omnibus account

Answer 10

when a firm clearing trades for another firm is not given specific information regarding the introducing firm’s clients. The Introducing firms are required to establish and maintain records for omnibus accounts.

Question 11

Trade surplus does what to currency?

Answer 11

Appreciates it, since exports > imports, people will want that currency to trade

Question 12

Max criminal penalty for insider trading? How about max civil penalty?

Answer 12

Max criminal - $5MM fine or 20 years in prison

Civil - 3x amount gained or loss avoided

Question 13

What is taxable for Muni bonds?

Answer 13

only capital gains, interest is tax free

Question 14

Which economic theory believes govt. intervention is required for controlling economic growth?

Answer 14

Keynesian economic theory

Question 15

What happens when corp sells its stock for above par value?

Answer 15

added to paid in capital / capital surplus

Question 16

Who takes action for criminal activity against securities laws?

Answer 16

DOJ. SEC investigates it first though, DOJ only is involved if its a criminal matter

Question 17

When sending a confirmation to a customer, a FINRA member must disclose

Answer 17

whether broker acted as principal or agent, amount of commission, time when trade was executed. doesn’t have to disclose whether the BD is an banker for the issuer of the security

Question 18

Can a RR buy it’s employing BDs stock for a discretionary account?

Answer 18

Yes, but needs clients written approval

Question 19

what is a discretionary account?

Answer 19

Client allows RR to trade on their behalf

Question 20

Can a RR share in a client’s account?

Answer 20

Yes, but , must only take profits in proportion to his contribution. However, doesn’t need to contribute an equal amount into the account

Question 21

What is a closing purchase? closing sale?

Answer 21

closing purchase is closing out an options position when you’re short (the seller). You cover the position by buying another option
Closing sale - you close out an options position when you sell it, if you’re in possession of it

Question 22

Can father-in-law buy an IPO that a RR’s firm is an underwriter of?

Answer 22

Yes as long as its from another BD

Question 23

What time frame felony’s need to be disclosed on a U4?

Answer 23

Any felony that has been committed, regardless of when it was

Question 24

Options characteristics

Answer 24

Cannot get an extension of a margin call, cannot choose which securities be sold to meet margin call, and firm is not required to contact the customer when it sells securities in the acc

Question 25

when does a limited partner need to deposit in more funds?

Answer 25

if they are subject to an assessment

Question 26

how long do rights usually last for?

Answer 26

60 days