SERIES 7 1
A registered representative, in addition to entering orders, is primarily responsible for
determining an investment's suitability and explaining different investments to prospective investors.
Your customer has purchased $40,000 of stock in a new margin account and deposits the required Regulation T amount into the account. At the end of the month, the broker-dealer charges the client interest on the monies borrowed in the amount of $133. At the end of the month, the value of the stock drops to $36,000. The month-end statement for this client will show a debit balance of
$20,133. A decrease in the value of the position will not affect the client's debit balance. The margin call on this account would be the Regulation T requirement of 50% of the purchase price. Any interest charges will be added to the client's debit balance. LO 16.d
A broker-dealer can rehypothecate (repledge) up to
140% of the debit balance in a customer's margin account.
Under Rule 144, when shares are sold by an affiliate (control), Form 144 need not be filed if
5,000 or fewer shares are sold or the dollar amount is $50,000 or less.
There are several conditions found in the Securities Act of 1933 permitting the offering of control stock to the public without filing a Form 144. Included in that list are
5,000 shares or fewer are sold. the dollar amount is $50,000 or less.
Effective March 17, 2022, amendments to FINRA Rule 2165 on senior exploitation changed the maximum length of the hold and extended the ability to hold any transaction not just disbursements. The previous maximum length of 25 business days (15 automatic and an additional 10 if justified) has now been extended to
55 business days if the member firm has reported the matter to a state regulator or agency or a court of competent jurisdiction.
accounts allow ownership of real estate
An UTMA account
the following investors would be exempt from filing Form 144 when selling securities they own
An employee of the company selling registered shares purchased in the open market
Before a trade can take place, a subject quote always must be reconfirmed with the
OTC trader or market maker that provided it.
Nonqualified plans are not covered by
ERISA.
Rule 144 regulates the sale of control or restricted securities. Securities bought in a registered public offering are not restricted and therefore an employee of the company selling registered shares need not file
Form 144. Unregistered shares or securities purchased in a private placement are restricted and Rule 144 would apply. Form 144. Unregistered shares or securities purchased in a private placement are restricted and Rule 144 would apply.
The initial confirmation of a when-issued municipal bond contains
Number of bonds involved in the transaction Yield to maturity
Regulation T payment is due
S+2, which is T+4 in a regular way equity trade.
A customer holding 450 shares of XYZ common stock in registered form turns in a sell order on Monday for regular way delivery. Who has the initial responsibility to ensure that the security is in good deliverable form?
The registered representative
A customer has a $75,000 bank CD that is about to mature, and she wants some recommendations from the registered representative handling her brokerage account. ALL of the following items would be important when considering a suitable recommendation?
The customer's need for liquidity The customer's current portfolio The customer's investment goals
Minor children cannot be a party to any account except an
UGMA or UTMA.
A customer must present a signed representation letter stating that he is not a restricted purchaser before buying a new issue of
common stock.
Although the final arbiter of deciding the good delivery status of certificates is that of the transfer agent, it is the registered representative's responsibility to
communicate the requirements to the customer. Those include a reasonable expectation that the certificates will be delivered on time and in the proper form.
A joint account could be opened for any of the following except
a parent and minor child.
A buy stop order is placed
above the prevailing market price and is elected (triggered), becoming a market order to buy when the stock trades at or through (above) the stop price.
ERISA guidelines state that
all qualified retirement plans must be in writing, segregate funds from corporate or union assets, make prudent investments, report to participants annually, and not be discriminatory
All of the following statements regarding municipal bond official statements are true
all retail purchasers of a new municipal bond issue must receive a final official statement. a retail customer must receive an official statement no later than the settlement date. the Municipal Securities Rulemaking Board (MSRB) does not require issuers of new municipal securities to prepare a final official statement.
A buy stop order is elected (triggered) when the underlying stock trades
at or above the stop price.
When the SEC rules that an offering has become effective, the SEC has
cleared the offering for sale.
Mixing a customer's securities in with the accounts of the broker-dealer is
commingling and is prohibited by securities industry regulations.
A broker-dealer has put customer's securities in its own proprietary accounts. This is a violation of industry rules known as
commingling.
One of the effects of Regulation BI is to place a limitation on the use of the descriptive term
financial advisor.
One of the primary differences between UTMA and UGMA is the
investment flexibility.
If the syndicate manager, based on anticipated demand, wants to sell more shares than initially registered with the SEC, the manager can
invoke the green shoe clause on short selling
All of the following are minimum requirements for listing on the NYSE
market value of publicly held shares. number of publicly held shares. number of shareholders.
The reasonable-basis obligation requires a
member or associated person to have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors.
a change in All primary information, such as ________________________, must be noted immediately in the file.
name, address, and Social Security number, and all information that could affect recommendations or a customer's financial situation
A green shoe clause,
negotiated with and agreed to by the issuer, allows the syndicate to sell up to 15% more shares than initially registered within 30 days of the IPO beginning to trade.
A final official statement must be delivered to retail buyers of a new issue
on or before the settlement date.
. Cash settlement for a trade occurs
on the same day as the trade date
The primary purpose for creating ERISA was to
protect employees from the mishandling of retirement funds by corporations and unions.
An offering becomes effective when it is released by the SEC for sale. The SEC does not approve or disapprove of new offerings; it
releases them for sale after determining that enough information is available for public investors to make sound investment decisions.
The three categories of communication with the public designated by FINRA are
retail, correspondence, and institutional.
A nonqualified deferred compensation plan is often used by corporations to
retain high salaried key employees.
Standby underwriting is a term associated only with a
rights offering
The designated market maker is responsible for
setting the opening quote for issues listed on the NYSE. The set quote is based on orders in hand.
One term you would never see in conjunction with an underwriting of a municipal security is
standby.
An over-the-counter (OTC) quote that must be reconfirmed with the OTC trading room before a broker-dealer takes action is
subject.
Deferred compensation plans are most often used to
supplement, not replace, qualified plans.
The SEC wants investors to know that it does not approve or disapprove new issues. The disclaimer statement must appear on
the cover of all prospectuses.
The opening quote for issues listed on the NYSE is set by
the designated market maker.
Under the Uniform Practice Code, regular way transactions for common stock settle on
the second business day following the trade date.
A stop limit order is a stop order that becomes a limit order once
the stop price has been triggered
A new offering has a green shoe option. This means
the syndicate can oversell by up to 15% of the offering.
Under the Uniform Practice Code, regular way trades settle
two business days after the trade date (T+2)
An initial public offering is conducted
with the issuer generally through an underwriter.
