SIE27
FINRA rule 2210 on communications with the public would apply for all of the following except
A) A website B) A text message C) A flyer sent to 20 prospects D) A Voicemail left for a customer Answer is D E: Rule 2210 applies to written communication. Written communication does not require paper, just words made up from letters. If they can read it, it is considered written communication.
There are two types of do not call list. What are they and how long do names stay on the list?
A) Broker-dealer list and names remain until removed by the customer, and national list and names remain for five years B) National list and names remain on list for five years, and broker-dealer list and names remain on list for 10 years C) Broker-dealer list and names remain on list for five years, and national list and names remain on list until removed by customer D) Broker-dealer list and name remain on list for five years, and national list and names remain on the list for 10 years Answer is C E: For the broker-dealer list, names are not to be called for five years; on the national list, names are not to be called unless the customers request that their name be removed from the list.
Which broker-dealers or investment advisers are obligated to maintain a business continuity plan?
A) Federally registered investment advisers only B) All broker-dealers and investment advisers C) Broker-dealers only D) State registered investment advisers only Answer is B All securities firms, both B-Ds and IAs, must have a business continuity plan (BCP).
Regulation S-P defines consumers and customers correctly in which of these statements? A customer has an ongoing relationship with the company. A consumer performs a onetime transaction with the company. A consumer has an ongoing relationship with the company. A customer performs a onetime transaction with the company.
A) II and IV B) I and II C) III and IV D) I and III Answer is B E: Customers have an ongoing relationship and should receive an annual Regulation S-P notice. Consumers are entitled to receive the notice once.
A client phones his registered representative in September and informs the representative that he will be studying abroad in Europe for the remainder of the year. The client wants the firm to hold his mail. What action should the representative take?
A) The representative must instruct the client that the request must be made in writing. B) The representative should send duplicates to Paris since the SEC customer protection rules state mail cannot be held. C) The representative should temporarily change the client's address to a secure PO box to prevent the theft of his mail. D) The representative should have all mail forwarded directly to the branch to protect against identity theft. Answer is A E: FINRA rules require that all requests to hold mail must be made through written instruction from the customer. The instruction must include the period during which the mail hold is requested. If the requested period included in the instructions is longer than three consecutive months, then the customer's instructions must include an acceptable reason for the request (e.g., safety or security concerns).
Jackson Raleigh a registered representative in Memphis, TN, has a client that is a pension fund manager for the Tiger Pension Fund. Mr. Raleigh creates several flyers of informational literature about the funds available in the Tiger Pension Fund and emails them to the fund manager so that the fund manager can print copies of the flyers and make them available to the participants in the pension fund. Financial Industry Regulatory Authority (FINRA) would classify these flyers as
A) correspondence. B) retail communications. C) institutional communications. D) sales literature. Answer is B E: FINRA has three classifications of communication with the public: correspondence is communication to 25 or fewer retail investors in a 30 day period; retail communications is to more than 25 retail investors in a 30-day period; and institutional communication is going to banks, insurance companies, and mutual funds et cetera. Even though the material was sent to the pension fund which could be considered institutional communications because the material was being forwarded to retail investors, it is considered retail communication.
There are rules regarding customer statements. All of the following statements reflect those rules except
A) customers must be alerted to report any inaccuracies or discrepancies promptly. B) customer statements containing penny stocks must be sent monthly, even if no activity occurred in the account. C) customer statements must be sent no less frequently than quarterly. D) activity limited to only stock splits or stock dividends do not require monthly statements be sent. Answer is D E: Any activity in an account such as purchases and sales, dividends and interest, and stock splits and stock dividends will trigger the requirement to send a monthly statement. If there is no activity, statements are only required quarterly, unless the account contains penny stocks in which case a statement is required for any month penny stocks are in the account. All statements sent require notice that inaccurate information is reported promptly.
The TCPA only restricts solicitations that are delivered via
A) email. B) the telephone lines. C) voice telephone calls. D) facsimile. Answer is B
All of these are true regarding correspondence except correspondence
A) must be filed with FINRA within 10 business days. B) may be reviewed after use (postreview). C) must be in good faith. D) must be to 25 or fewer retail customers or prospects within 30 days. Answer is A E: Correspondence may be either pre-use approval or postuse review; it is the firm's decision. All communication with the public must be in good faith. Correspondence may go to 25 or fewer persons within 30 days. Unlike retail communication, correspondence does not need to be filed with FINRA.
An institutional customer has requested that you provide an article that they can use in their quarterly retail client newsletter. Rule 2210 states that you must
A) obtain preapproval from a principal, but no filing is required. B) have a principal review the communication and a copy must be filed with FINRA. C) obtain preapproval from a principal and file a copy with FINRA. D) have a principal review the communication but no filing is required. Answer is C E: Even though this is going to an institutional customer, you have good reason to believe it will be sent to retail customers; as such, this must be treated as retail communication.
For institutional communication the rule allows for either preapproval or review. However, if the firm allows the communication to go out before approval by a principal then
A) the principal must preapprove the topic of the communication. B) the review must occur within 10 minutes of transmission. C) the associate must have training on these communications. D) the associate must have at least 10 years industry experience. Answer is C E: The rule allows the firm to require pre-use approval or allow for postuse review. If the firm allows postuse review then the associates must receive education and training on communications with institutions.
Communications with the Public
FINRA holds BDs to general standards regarding all member firm communications. All member communications must be based on principles of fair dealing and good faith. Statements must be clear and not misleading within the context that they are made, and they must be fair and balanced regarding potential risks and benefits. Omission of material facts is not permitted, nor is making false, exaggerated ,or misleading statements or claims. No communication should ever imply that past performance will be repeated. FINRA mandates that members must consider the nature of the audience to which the communication will be directed and should provide details and explanations appropriate to the audience.
Business Continuity Plan (BCP)
FINRA requires member firms to create and maintain a BCP to deal with the possibility of a significant business disruption. The plan must address certain points having to do with the consequences of the event, including but not limited to the following: -Data backup and recovery (hard copy and electronic) -Alternate communications between the firm and its customers -Alternate communications between the firm and its employees -Alternate physical locations of employees -Communications with regulators -Prompt customer access to funds and securities in the event the firm is unable to continue its business Firms must designate a member of senior management who is also a principal to approve, update, and conduct an annual review of the plan. Additionally, FINRA requires firms to provide them with the names of two emergency contact persons who may be contacted by FINRA in the event of a significant business disruption. Each contact person must be a principal and a member of senior management, and firms must update this contact information promptly, in no case later than 30 days following any change. Regarding communicating this information to customers, a firm must disclose to its customers how it will respond to significant events of varying scope. This disclosure must be made, in writing, to customers at the time of account opening, posted on the firm's website, and mailed to customers on request.
Confidentiality of information
If your firm reserves the right to disclose to unaffiliated 3rd parties nonpublic personal information, the notice must provide customers a reasonable means to opt out of this disclosure. Reasonable opt out means providing customers with a form with check-off boxes, along with a prepaid return envelope, providing an electronic means to opt out for customers who have agreed to the electronic delivery of information, and providing a toll-free telephone number. Asking customers to write a letter to express their disclosure preferences or to opt out would not be considered reasonable under Regulation S-P.
Safeguard requirements
In addition, the regulation embodies the obligation of financial institutions to safeguard customer information as it related to all forms of existing and developing technology. For example, this would include, but not limited to, securing desktop and laptop computers and encrypting email.
According to FINRA: 3 categories of communications
Institutional Communications -- Retail Communications -- Correspondence --
Institutional Communications
Means any written (including electronic) communication that is distributed or made available only to institutional investors, but it does not include a member's internal communications (eg. internal memos). Examples of institutional investors are -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 FINRA mandates that no member may treat a communication as having been distributed to an institutional investor if the member firm has reason to believe that the communication or any part of it will be forwarded or made available to any retail investor. Each firm must establish if they will require principal approval of institutional communication before use or allow for post-use approval. If a BD does not require prior principal approval, it must provide for (and document) education and training of associated persons regarding institutional communication.
Correspondece
Means any written (including electronic) communication that is distributed or made available to 25 or fewer retail investors within any 30 calendar day period. As with institutional communication, each firm must establish if it will require principal approval of correspondence before use or allow for post-use approval. If a BD does not require prior principal approval, it must provide for (and document) education and training of associated persons regarding correspondence.
Retail Communication
Means any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar day period. A retail investor is any person other than an institutional investor, regardless of whether the person has an account with the member. A copy of all retail communication must be filed with FINRA. For a new member firm (firms in the first year of FIRNA membership) the filing must occur at least 10 days before use. For established member firms, the filing must happen within 10 days of first use. The requirement is that a firm send a copy to FINRA for filing. This is not an approval process, just a file copy of the communication. The rules require that all retail communication receive principal approval before use or filing with FINRA.
Regulation SP privacy notifications
Regarding PRIVACY OF CONSUMER FINANCIAL INFORMATION, Regulation SP is designed to protect a customer's nonpublic, personal information. Under Regulation SP; firms must provide their customers with a description of their privacy policies ( a privacy notice). The notice must state the types of personal information that the firm collects and who the firm shares this information with. Firms must initially provide every customer with a privacy notice at the TIME THE RELATIONSHIP IS FIRST ESTABLISHED. Once the relationship is established, the firm must provide with an UPDATED VERSION OF THIS NOTICE ANNUALLY.
Social Media Use
Regarding the use of SM and online activities, firms are required to monitor the business-related social media presence of all representatives. Most static content, such as a website or a blog, typically must be approved by a registered principal before use -- and sometimes may be required to be filed with FINRA. There is no requirement to preapprove individual posts in interactive online forums, but firms must have policies and procedures in their written supervisory procedures concerning these activities. Representatives may use social media platforms to engage with both existing customers and prospective clients.
Nonpublic Personal Information
The SEC, in Regulation S-P, notes examples of nonpublic personal information. This type of information would include a customer's SSN, account balances, transaction history, and any information collected through an internet cookie.
2 Types of do-not-call lists and when to consult them
The TCPA requires an organization that does telemarketing (cold-calling in particular) to -maintain a do-not-call list of prospects who do not want to be called and keep a prospects name on the list until the prospect requests its removal -institute a written policy on maintenance procedures for the do-not-call list -train representatives on using the list -ensure that pres acknowledge and immediately record the names and telephone numbers of prospects who ask not to be called again -ensure that telemarketers do not call a prospect from the time of the prospect's do-not-call request -ensure that the company's dncall list is no more than 30 days old The FTC maintains the National Do Not Call Registry. Telemarketers are also required to check numbers against this list. Like a company list, the national list being used may not be more than 30 days old. ***Before making a telephone solicitation, a representative must check the number against both the company's and the National Do Not Call Registry. If the number appears on one or both of these lists, DO NOT CALL IT
The Telephone Consumer Protection Act of 1991 (TCPA)
The TCPA, administered by the FCC, was enacted to protect consumers from unwanted telephone solicitations (telemarketing). A TELEPHONE SOLICITATION is defined as a telephone call initiated for the purpose of encouraging the purchase of or investment in property, goods, or services. The act governs commercial calls, recorded solicitations from auto-dialers, and solicitations and advertisements to fax machines and modems. The basic rules under the TCPA are as follows: -Ensure that anyone making cold calls informs prospects of their name, the company's name, and the company's telephone number or address -Ensure that solicitation occurs only between 8am and 9pm based on the prospect's time zone. -No calls to numbers on the company or federal do not call list The act exempts calls -Made to parties with whom the caller has an established business relationship or from whom the caller has prior express permission or invitation -Made on behalf of a tax exempt nonprofit organization -Not made for a commercial purpose -Made for legitimate debt collection purposes
Regulation S-P (Privacy Notices)
This regulation was enacted by the SEC to protect the privacy of customer information. In particular, the regulation deals with nonpublic personal information.
Rules for holding customer mail and statement frequency
Your firm is permitted to hold mail for a customer (statements and confirmations) provided that -the member firm receives written instructions that include the time period the request is being made for up to 3 months (longer for an acceptable reason such as safety or security concerns) -the member firm informs the customer of any alternate methods the customer may use to receive or monitor account activity, such as email or through the member firm's website (the member must obtain customer confirmation that this information regarding alternate methods was received) -the member firm verifies at reasonable intervals that the customer's instructions still apply. Additionally, during the time that a member firm is holding mail for a customer, the firm must be able to communicate with the customer in a timely manner to provide important account information. The firm must take actions reasonably designed to ensure that a customer's mail is not tampered with or used in a manner that would violate FINRA rules or federal securities law. While holding mail is a courtesy that firms are permitted to extend to customers, the rule does NOT REQUIRE them to .If extending the courtesy is consistent with the BDs in house rules, the written request by the customer to do so implies that the customer is also giving the BD permission to do so.
