review exam 1 Flashcards
(36 cards)
Define Clearly Erroneous
FINRA provides a mechanism for correcting or voiding transactions when certain terms (e.g., price, number of shares) are an obvious error. FINRA defines this situation as clearly erroneous.
What is the time frame to file clearly erroneous
The member firm should file a clearly erroneous transaction request with FINRA within 30 minutes.
What discretion does a member firm have for stop orders.
A member firm may, but is not required to, accept stop orders and stop limit orders for NMS stocks
ADF Trading center required hours.
An ADF Trading Center is required to be open from 9:30 a.m. to 4:00 p.m., which is defined as normal business hours.
ADF System hours
The ADF system is open from 8:00 a.m. to 6:30 p.m. An ADF Trading Center may voluntarily open before 9:30 a.m. or stay open past 4:00 p.m. (82863)
Finra Disqualification Appeal time frame
In compliance with FINRA Rule 9522, if the member fails to file the application requesting relief within 10 business days, the registration of the disqualified person will be revoked.
reserve bank account formula
The Reserve Formula requires the listing of the credit items. The total value of the credit items must be on deposit at the bank unless the member firm has offsetting debit items. In this case, the amount of the debit items may be deducted from the credit items and the net amount deposited in the Reserve Bank Account.
Reserve bank account computation time frames
Computations must be made either monthly or weekly. If the broker-dealer makes monthly calculations, it must maintain 105% of the required amount on deposit
Reserve Bank Account Deposit timeframe
2 days after the day of calculation
A broker-dealer has a fail-to-deliver position as a result of bona fide market-making activities and not being able to deliver stock by the settlement date. Under SEC Regulation SHO, the firm must:
If the fail was the result of bona fide market-making activities by the broker-dealer, the close-out requirement would be three settlement days following the settlement date (T + 5).
The maximum civil penalty for insider trading violations is:
$5,000,000 or treble damages, whichever is greater
explain the Riskless-principal exception to the manning rule.
Prohibition Against Trading Ahead of Customer Orders (Manning Rule) - If the proprietary trade is to facilitate a riskless-principal basis transaction (the market order from a customer to buy stock), it is not required to fill the limit order.
Regulation S
Regulation S is used by issuers to raise additional capital from foreign investors
Rule 144 is for
Selling shareholders would file under Rule 144 to sell restricted securities or control securities.
Regulation D
Regulation D is an exemption under the 1933 Act often used by issuers to conduct private placements, not public offerings.
Market maker net capital rule
market makers are required to maintain net capital of $1,000 for each security valued at $5 or less and $2,500 for each security priced above $5, with a maximum net capital requirement of $1,000,000.
Untrue statements exception
Any information conveyed to a purchaser after the time of sale is not taken into account when determining whether a prospectus included an untrue statement, or omitted to state a material fact.
Portfolio Margin eligibility
Portfolio margin is not available for small retail clients. The following entities are permitted to engage in portfolio margining.
Any broker or dealer registered with the SEC under the Exchange Act Any member of a national futures exchange to the extent that listed index options, unlisted derivatives, ETF options, index warrants, or underlying instruments hedge the member's index futures Any person approved to engage in uncovered option contracts. If a customer wants to trade unlisted derivatives, the customer must maintain equity of at least $5,000,000 at all times.
If a broker-dealer has sold a security to a customer that meets the definition of penny stock as of the last trading day of any month, the broker-dealer must provide
a monthly statement to the customer as long as the security is held for the customer’s account with the broker-dealer. The statement must include: (i) The identity and number of shares of each penny stock held for the customer’s account, and (ii) the estimated market value of the security, to the extent it can be determined.
There are three standards that can be used when applying for Nasdaq Global Select listing.
A $4 minimum bid price
3 or 4 market makers
Subject to corporate governance
The following four requirements may not be applicable, depending on which of the three standards is used in the issuer’s application.
Pretax earnings Cash flow Market capitalization Revenue
Principal Review of an Annuity Contract
When an application for the purchase of a variable annuity is received from a registered representative, the principal must approve or reject the application within seven business days of receipt. In addition, the principal must document and sign the recommendation, whether the application is approved or rejected.
Under Section 4(5) of the Securities Act of 1933
Defined
According to Section 4(5) of the Securities Act of 1933, an offering by an issuer may be considered an exempt transaction if certain conditions are met. The amount of the offering may not exceed $5 million, no advertising or public solicitation may be used to offer the securities, and the offering may be sold only to accredited investors. There are no document delivery requirements;
FINRA has limited authority to halt trading OTC equity securities underlying an ADR
cannot halt trading pending release of material information. (98823)
After the opening of quotations in a security’s principal market, stabilization may be initiated at a price
no higher than the last independent transaction in the principal market if
(1) the security has traded in its principal market (on the day stabilizing is initiated or on the preceding day, and (2) the current asked price in the principal market is equal to or greater than the last independent transaction price.
If either condition (1) or (2) is not satisfied, stabilizing may start after the opening of quotations at a price no higher than the last independent bid for the security on Nasdaq. The maximum stabilizing bid is the public offering price, however, a lower ceiling may apply.
