Series 4

Special risks associated with portfolio margining that must be disclosed to customers include which of the following

1)Greater leverage, creates greater losses in the event of adverse market movements 2) time limit for meeting margin is shorter than a regular account, there is increased risk the account may be liquidated involuntarily 3) May be difficult for customers to predict the size of future margin calls 4) in the event of insolvency- the broker dealer is less likely to recover the full value of long positions carried in a portfolio margin account

In options advertisements, it must be stated

1)That options are not suitable for all investors 2) statement of potential gain must be balanced by a statement of potential risks

If a person has asked to be placed on the "National Do Not Call List" the person May be contacted under three exceptions, what are that?

1)The member has an EBR with the person 2) the member received the persons express written consent to be contacted 3) the register representative has a personal relationship with the person being contacted, A personal relationship is defined as a family member, friend, or acquaintance of the representative making the call.

On the PHLX, a block trade in a foreign currency option contract is a trade of at least how many contracts?

1,000

Japanese Yen is how many units of currency

1,000,000

For margin purposes, what type of positions are acceptable to cover a short put position

1) Bank guarantee letter, 2) Cash or T-Bill deposit, 3) Long Put with the same strike price or higher, with the same of later expiration, 4) Short position in the underlying stock

To open a corporate account what is needed

1) Obtain proof that the corporation exists 2) need a Copy of The Corporate Charter 3) who is legally responsible under the corporate by laws to trade the account 4) must pass a resolution signed by the secretary of the corporation that specifically allows options transactions

The insider trading rules

1) Prevent trades of publicly held companies based on material non public info 2) extend liability for insider trading violation to the source of info that resulted in the trade 3) extend the right of recovery to private citizens who traded at the same time as the insider

What are the the 3 components to suitability?

1) Reasonable basis suitability, 2) Customer-Specific Suitability, 3) Quantitative Suitability

To open an account to sell uncovered calls what must be met?

1) Specific criteria and standards must be used to perform a suitability determination 2) Must receive the ODD at or prior to account opening 3) Must receive a special written description of the risks inherent in short uncovered options positions, at or prior to account opening

The gift limit does not prohibit the member from paying someone to work as long as:

1) There is a written agreement spelling out the work to be performed and compensation to be paid. 2) The agreement is approved in writing by principal of the firm before it takes effect.

To open a partnership account what is needed

1) a copy of the partnership agreement(clause allowing the opening of the account and naming the list of authorized traders) 2) specifically allow for options transactions

To open a portfolio margin account what is needed

1) approval by DROP for uncovered options writing 2) copy of risk disclosure document at or prior to account opening 3) sign an acknowledgement that he or she has read and understand the risk disclosure document

What are the steps in the death of a customer?

1) cancel all open orders 2) Note the customer is deceased with the date on the new account form 3) await instruction from the executor if the estate

What is the required documentation for the Death of an individual upon tenants in common?

1) death certificate 2) letters testamentary(copy of will) 3) Probate court filing 4) Proof of domicile and inheritance tax waivers

The following must be disclosed when a firm recommends a security

1) if the firm owns or its officers own the security 2) the price of the security at the time of the recommendation 3) if the firm or its officers own options or warrants on that security 4) if the firm has been a manager or co-manager in the past 12

An EBR( established business relationship) means that the person being contacted:

1) made a financial transaction or had security position at the firm in the past 18 months 2) has contact the member to inquire about products or services in the preceding 3 months

Minor Rules Violation Procedure

1) member admits guilt, 2) offense is minor, 3) penalty is limited to a maximum $2,500 fine

What is the maximum amount of customer securities that can be rehypothecated by a broker

140% of the debit balance

The options agreement necessary to open an Options account for a customer must be signed and returned within how many days

15 calendar days

If a security remains in the limit state for BLANK seconds, then the security enters a BLANK minute trading pause

15 seconds, 5 minute trading pause

In a dispute between a member firm and an associated person, where the amount in controversy exceeds $100,000, the arbitration panel will consist of:

2 public arbitrators, and 1 non-public arbitrator

If there is a customer complaint, FINRA retains jurisdiction over a resigned member for:

2 years

Firs year broker-dealers must file all retail communications with FINRA, how many business days prior to first use?

10 business days

A member firm that acted as a manager or co-manager in an underwriting of that issuers securities cannot issue a research report on that company for how many days following the effective date for an initial public offering

10 days

At what percentage is an option considered to be "deep in the money"

10%

The minimum maintenance requirement to sell a broad based index option is what percentage?

10%

The informer bounty for informants on insider trading can be any where from what percentage to what percentage?

10% to 30% of amount recovered under civil penalties

What is the contract size and multiplier of PHLX World Foreign Currency option contracts?

10,000 units of currency, with the exception of the Japanese Yen(1,000,000 units), the contract multiplier is 100

Under the "cheap stock rule," if a customer wishes to short a stock under $5 a share, he must put up the greater of

100% or $2.50 per share

A customer must be sent an audited balance sheet and net capital footnote no later than

105 days from the firms fiscal year end.

The safe harbor rule that permits statutory insiders(officers,directors, and 10% shareholder) to set up a written plan for trading that company's securities is called

10b-5-1 trading Plan

Willful violations of prohibited acts make that person liable for damages sustained by investors in the security. Any suit must be brought within BLANK years of discovery, but no later than BLANK years after the violation has occurred

2 years of discovery, and 5 years after the violation occurred.

Any location that is used to engage in non-securities activities and that effects no more than 25 securities trades in a year is not defined as a branch. This term is called:

A satellite office

The SEC required on a form S-4 that's the prospectus must be sent to security holders st least

20 business days prior to the special meeting when the vote will be taken

The maximum number of PHLX EURO currency options contracts that an individual can take on 1 side of the market is:

200,000 contracts

The pre-hearing conference must be held within how many days of the respondents answer?

21 Days

In January, the longest expiration equity LEAP that will be available is a contract expiring when?

24 months later

A decision within the district hearing panel can be appealed to the FINRA National Adjudicatory Council within how many days?

25 days

The maximum life on an equity LEAP contract is

28 months

Under Regulation T, an extension for payment may be requested on the:

2nd business day after settlement date

There are 6-6 year records to be retained by member firms and they are?

3 blotters of original entry( cash receipt and disbursements, securities record and delivered, purchase and sales), general ledger, customer account records, and securities record

For a portfolio margin call, a customer has how many days to meet a margin call?

3 business days

A member firm that acted as a manager or co-manager in an underwriting of that issuers securities cannot issue a research report on that company for how many days following the effective date for a secondary offering

3 days

Under the "Optional All Public Panel Rule", customer Arbitration claims may be heard by

3 public arbitrators if the customer desires

All work papers and documentary materials relating to the assignment procedure and allocation methods used by the firm must be retained for how many years?

3 years

Records relating to terminated personnel must be kept for

3 years

A copy of a complaint kept in the central file must be retained for

3 years, but FINRA requires that customer complaints be retained for 4 years

Regarding vacation homes, FINRA defines these as "non branch" locations as long as they are used for less than

30 business days a year

FINRA requires that within BLANK days of signing the Arbitration agreement, the customer must be provided with and copy and must sign and acknowledge receipt of the agreement

30 days

If a registered individual is terminated, FINRA must be notified with a U5 Form within:

30 days

If an associated person is subject to a reportable event, such as being suspended or expelled by another regulator, the report must be filed with FINRA:

30 days

New issues cannot be margined for how many days following the issuance

30 days

Short sale of rule 144 securities that are included in the threshold list where there is a fail to deliver on settlement must be closed out in

35 consecutive settlement days

The maximum legal life of an equity LEAP option is how many months?

39 months

What is the maximum life for an OEX option?

4 months, but 3 months may be tested

A pattern day trader is defined as an individual that effects 4 or more day trades within a BLANK business day period

4 or more day trades within a 5 business day period.

Complaints must be kept at the office of Supervisory Jurisdiction for how many years?

4 years

What are the reg T margin requirements for a foreign currency?

4% of the market value of the underlying security+ 100% of the premium- any "out the money" amount

The latest time to place a trade for an equity option on the C.B.O.E floor is:

4:00PM ET; 3:00 PM CT

Index Options trading on the C.B.O.E floor take place until what time?

4:15 PM EST; 3:15 PM CT

Buying power in a pattern day trading account is

4X Maintenance Excess

Exercise Limits on stock option contracts cover a time period of

5 Business Days

The SEC has cracked down on the shorting of stock from an offering through Rule 105. This prohibits broker dealers from covering previously shorted stock from the underwriters at the offering price or in the market with how many days of the effective date?

5 Business Days

Tier three securities have what type of restriction period?

5 day in actively traded securities

CTRs must be retained for how many years

5 years

Anyone who accumulated a BLANK% position in a company is required to report the holding to the SEC

5%

Exercise cut off for equity options is at what time?

5:30 PM EST

The last date and time to exercise an expiring equity option contract is

5:30 PM ET on the last day of trading

Associated persons securities record is required to be retained for

6 years

Customer account records must be maintained for how many years after a customer closed an account?

6 years

Customer account records must be retained for how many years?

6 years

The statute of limitation for filing a claim for a settlement by arbitration is how many years from the event?

6 years

All options with the exception of stock options, are subject to a special year-end tax treatment. Any gain on an appreciated position is taxable at year end for BLANK long term, and BLANK short term

60% long term, 40% short term

Options positions that are due to expire within BLANK days are exempt from the requirement to freeze the account in an ACAT?

7 business days

The margin to buy a LEAP option with over 9 months to expiration is set at what percentage?

75%

A C.E.A noticed is accepted up until what time for a contrary exercise?

7:30 PM EST

What is the maximum life for an equity Stock option

8 months, but 9 months may be tested

The TRF is open from:

8:00 AM - 8:00 PM ET

TRACS is open from:

8:00 AM to 6:30 PM

Corporate issuers are responsible for reporting 8Ks, 10Ks, 10Qs explain these reports

8k- significant events 10Q-unaudited quarterly report 10K- audited quarterly report

A member firm is permitted to execute an Options trade for a customer outside of the exchange floor if:

A better execution can be obtained for the customer, resulting in a lower purchase price or higher sale price

Branch Office

A location where the member conducts securities or investment banking business that is advertised as such.

If a customer requests, a broker dealer must make available its latest

Balance Sheet, Net Capital Computation, the latest FINRA manual(which is held in each branch location)

A firm is prohibited from acting as a dealer in 144 transactions unless the firm is a

Bonafide market maker in that security( publishing bid and ask quotes in that security on at least 12 of the proceeding 30 calendar days with no more than 4 successive days elapsing without a quote

Portfolio margining cannot be used for what type of position?

Bonds

The following information can be found on a BLANK report: Safeguarding of customer funds and securities, maintenance of books and records, supervision of customer account serviced by branch managers, transmittal of funds between registered representatives and customers,and customers and third parties, validation of customer account changes, and changes in account information

Branch Inspection Report

If a member firm wishes to change its method of allocating exercise notices prior approval must be obtained from the

C.B.O.E

If a new ROP is designated as the responsible person for approving naked options accounts that do not comply with firm standards who must be given prior notice?

C.B.O.E

If a new ROP is designated as the responsible person for discretionary customer account supervision who must be given prior notice?

C.B.O.E

A customer that wishes to sell call options against common stock held in a traditional IRA account:

Can do so without restriction, however can not sell uncovered position in a Keogh or IRA

If a member firm wishes to change its procedure for the allocation of exercise notices assigned in respect of a short position in customers accounts. The member firm:

Can only change its allocation method with prior approval of the SRO, and if it informs its customers of the method used to allocate exercise notices, explaining its manner of operation and the consequences of that system

Contracts are not adjusted for what type of dividends

Cash dividends

Options are not adjusted on ex date for

Cash dividends, stock dividends, or fractional splits. Only upon exercise....the deliverable is adjusted.

If assigned, the writer of a put option must deliver

Cash on t+2

Acceptable margin deposits for short put and long call positions

Cash, bank guarantee letter, for short puts OCC allows T-Bills with a current market value equal to or greater to the exercise settlement amount.

To satisfy a margin deficiency, the following are acceptable deposits from clearing members

Cash, governments securities, letters of credit from approved institutions, marginable common stocks

The only paperwork that is needed to transfer the assets of the account into the name of the beneficiary is a

Certified copy of the death certificate

An amended U4 filing is required if a registered individual: is convicted of a felony, discovers a deficiency in the existing filing, changes employers or residence address, not if

Change in marital status

Mediation is generally BLANK, and BLANK than arbitration

Cheaper and faster

Under Reg T, securities held in a margin account are marked to market daily by using the what price

Close

Disputes between FINRA members about deliveries of securities will be handled through the:

Code of Arbitration

When is consent given for the arbitration process?

Consent is given when the customer signs a predispute arbitration agreement upon opening the account

In a situation where an individual does not have an account and simply wants the firm to sell some securities that he/she holds and remit a check, this person is call a

Consumer, and should only Receive a privacy notice at the time of the transaction

BLANK relationships must be disclosed prior to entering into a contract to buy or sell a security, and if such disclosure is not made in writing, written disclosure must be made prior to the completion of the transaction(no later than settlement)

Control Relationships

Stock held by an officer, director, 10% shareholder, or affiliated person is what you if stock?

Control Stock- subject to the dribble rule but no 6 month holding period.

Records to be kept for 3 years include:

Copies of order memoranda(order tickets), trial balances, customer confirmations, correspondence, bank account records, fail to receive, fail to deliver, interest and dividend blotter, U4 and finger prints

If FINRA suspends or expels a member, it will notify the:

FINRA Membership, News Services

public appearance

FINRA defines interactive real-time content on blogs, social networking sites and chat rooms as

The code of arbitration would not be used to deal with disputes between whom?

FINRA vs Member (The code of arbitration is used to deal with the following disputes Member v member, member v clearing Corp, member v associated person, associated person v associated person, member v customer(where the customer has previously signed an arbitration agreement))

If a broker-dealer terminates a registered employee, a copy of the U5 Form must be given, or made available, by that broker-dealer to

FINRA, ex-employee

The following take place where? Order execution and/or market making Structuring of new issue offerings Final approval of new accounts Review and approval of customer orders Review and approval of advertising/sales literature Responsibility for supervising activities at one of more branch offices.

FINRAs definition of an Office of Supervisory Jurisdicition

True or False, the date of the confirmation of the first option transaction is required to be maintained in a customers option account file

False

True or false, the minimum net equity in a customer account required to sell naked options based on the trading activity can be based on a flat dollar amount

False, a flat dollar minimum cannot be based on account activity, because this must be a uniform amount for all such accounts.

True or false, the Designated Registered Options Principal approves research reports

False, the DROP only approve communications about options

VIX options contract availability is based on which cycle

February quarterly expiration cycle

An account where a third party is acting for, and in the best interest, of the owner of the account is called?

Fiduciary Account( Trust, guardian, conservatory of the incompetent,administrator or executor of Estate, Receiver in Bankruptcy)

The valuation date for customer securities held in an account at a failed broker-dealer is the date of the:

Filing of the protective court decree

SAR(Suspicious activity reports) reports are required to be filed with whom?

FinCen(Financial Crime Enforcement Network) SAR exceeds $5,000, 30 days

Other statements besides the annual audit include:

An audited FOCUS report, and unaudited FOCUS report to be submitted periodically to FINRA

Proxies must be sent by the broker dealer to customers that

Hold the stock in margin accounts

A member may, on the same business day, act as a market maker in the option contracts on one security; and may act as a

Floor broker in the option contracts of another security

If a customer has a brokerage account with a free credit balance, this must be reported on an account statement generated:

For that quarter

Restricted stock can be sold if:

Form 144 is filed with the SEC, the securities are held for 6 months fully paid, and the seller sells no more than 4 times a year.

To register with the SEC, an adviser must file what type of form?

Form ADV

Who is not restricted from buying an IPO from the member firm that employs an associated person

Grandparents of the associated person

A customer purchases an equity option contract at 1pm ET Tuesday, October 10th in a regular way trade. If the customer wishes to exercise, the customer my place an exercise notice with the options clearing Corp when?

Immediately if they wish.

The purpose of OFAC ( Office of Foreign Assets Control) is to:

Impose economic sanctions against hostile foreign countries and groups

A customer that has agreed to submit a dispute to mediation

Is allowed to withdraw from the mediation process without consent of the other party or the mediator

FINRA does not consider a representative residence office to be branch location as long as the residence is

Not advertised as a branch

A registered representative is deployed in the army reserves... what happens to their registration status

It remains active and he or she has to complete the regulatory element CE obligation on-line when given notice from CRD...because they are in the army reserves and they still hold a regular job in the US like everyone else

When is the last time to trade a European style index option contract?

Just prior to market close on the Third Thursday of the month

When is the last time to trade a European style index option contract?

Just prior to market close on the third Thursday of the month

Floor brokers on the CBOE are allowed to accept what type of orders

Limit, Stop, Spread, Straddle...they can execute them all...ONLY from other member organizations, NOT directly from the public

Capital gain/loss exceeding 1 year are considered

Long term

The deposit of cash will not cover the sale(write) of a call since the potential what is unlimited

Loss

Spread position can only be taken in what type of accounts

Margin accounts

Market wide circuit breakers are first imposed if the S&P500 index falls what percentage from the prior close, and single stock circuit breakers are first imposed if the stocks price falls by what percentage from the prior 5 minute average price

Market wide 7%, single stock 5%

Order Book Officials on the C.B.O.E may accept what type of orders?

Market, Limit

Margin deposits on spreads is the same as

Maximum Loss

If no settlement is reach during the mediation process the BLANK cannot serve on the arbitration panel that will then hear the case.

Mediator

If a recommendation is made, either in a research report or a public appearance, it must be disclosed if the:

Member organization or its affiliates own 1% or more of the common stock, associated person or household member has a financial interest, member organization has any material conflict of interest

The C.B.O.E requires that if there are more than how many registered persons in a location doing options business, a branch manager must be registered as an option Principal for that location

More than 4

If a customer uses margined stock to cover the sale of a call option, the stock can be value at no

More than the strike price of the call

If any disciplinary action is taken by any "self regulatory organization" against a person associated with a firm, or by a member firm itself, the firm must:

Notify all "self regulatory organizations" with which that person is registered.

Transactions that are exempt from Reg M include

Odd lots, unsolicited orders that are not through the broker dealer, exercise of options, warrants, rights, or conversion privileges

This office is responsible for creating and enforcing written supervisory procedures(WSPs) over the branches

Office of Supervisory Jurisdiction

A location where a registered representative meets a customer by appointment on a non-regular basis is an

Office of convenience

A copy of the written supervisory procedures must be kept in each

Office of supervisory jurisdiction

Reg SHO applies to trades originated in the US that's are executed

Offshore

The act that requires registration with the SEC only for advisers with assets of $100,000,000 or more under management, or adviser to investment companies is called:

National Securities Markets Improvement Act of 1996

Ratio writing strategies are what type of strategies?

Neutral

Does the client have to sign the Options Disclosure Document?

No

If FINRA or the SEC request specific customer account information, does the privacy rule apply?

No FINRA and the SEC are regulators

In a partnership account, if one owner dies, what happens to the new orders?

No orders can be accepted until the remaining partners amend the partnership agreement

If a customer shorts a stock on the threshold list, but on the following day, the stock is removed from the list... is the buy-in mandatory?

No, no buy in is required, the list does Not start recounting unless the security is added to the threshold list

Can option worksheets be used for every potential customer who inquired about a strategy?

No, option worksheets are based on a specific security and strategy which is not suitable for all customers

Does the customer sign the new account form?

No, the signature that appears on the new account form are the registered representative, and the manager or principal

Reg T of the Federal Reserve Board only applies to

Non exempt securities. Government and municipal are exempt

Examples of information that is not subject to the privacy rules include:

Non personally identifiable information, blind data that cannot be linked to a specific customer, public information, information collected from federal, state, or local government, widely distributed media, disclosures to general public

Options order tickets must be written:

Prior to order entry

A customer must be provided with a portfolio margin risk disclosure document at or prior to the initial transaction in the account and must sign an acknowledgement that they have read and understand the disclosure document when?

Prior to the initial transaction in the account( more strict than regular opening of options account)

The following are what type of acts: Making blanket recommendations of low price speculative stocks, excessively trading a customers account(churning), trading in mutual fund shares, recommending purchases beyond a customers financial capacity, and misappropriating customer funds of trading without authorization

Prohibited Acts

A broker dealer that is participating in the primary or secondary distribution of a new issue is

Prohibited by conduct rules from compensating another firm for recommending or purchasing that security on a national securities exchange

When mediation fails to resolve a dispute, that dispute goes to an arbitration panel for a hearing and resolution. The mediator in the unresolved dispute is:

Prohibited from acting as an arbitrator on the panel

Maintenance calls must be met when

Promptly

Under CBOE rules, options trade confirmations must sent to customers

Promptly, but no later than T+1

Under Regulation T, full payment in a cash account must be made when

Promptly, but no later than T+4

To buy stock and sell a call against that stock on the same day requires that the stock be

Properly margined at 50%

A registered representative who participated in an internet chat room is defined as

Public appearance

The following are the guidelines for what rule: 1) Must be effected through 1 broker deal on any given day 2) cannot be an opening or closing transaction defined with a 1/2 hour of the opening and within 1/2 of the close unless actively traded 3) must be effected at prices no higher than the current highest independent bid for that security or last sale(whichever is higher) 4) cannot exceed 25% of the trading volume in the security that day(except for block flow outside of the norm)

Rule 10b-18(buy backs)

Once a specifics stink drops 10% or more than the previous days close, a circuit breaker is triggered... for the remainder of the day and the entire next day, short sales are only permitted at a price above the NBB for that security. This rule is called what?

Rule 201 of Reg SHO

The DROP in a supervisory capacity must review what type of option accounts and orders?

Selected customer options accounts, selected customer option orders

Time extensions for the collection of monies resulting from reg T initial margin calls are requested from the

Self Regulatory Authority

If a register representative handled a securities transaction for a customer through another firm, this is a prohibited practice known as

Selling away

The following options transactions would be permitted in a fiduciary account under ERISA guidelines?

Selling calls covered by a long stock position, selling puts covered by cash

As far as unaudited balance sheets and unaudited computed amount of net capital... a firm must send this to their customers how often?

Semi annual and no later than 65 days after its mid year point

Rule 105 of Reg M, describes:

Stop ya the shirt sellers from pushing down the price of the security prior to the effective date

What is a delta neutral options strategy,and when does it profit?

Strategy that is insensitive to small price movement ms either upwards or downwards Profits during periods of volatility

If a customer is going to give discretionary authority to a firm to engage in an Options trading program, the customer must receive a written explanation of how

The program works, the costs and risks, cumulative performance history

Under the terms of margin agreements written by member firms, the firm has the right to change minimum margin requirement

Whenever they want

Research personnel cannot trade in any of the recommended subject company's securities or equivalents unless

The transaction is in compliance with the firms internal policies and procedures

If a customer is an immediate family member of the representative; or is a "significant other" of the representative ; the lending or borrowing is permitted with

The written permission of the member firm

If a managing underwriter wishes to stabilize the price of a new issue in the secondary market:

a notice of stabilization must appear in the prospectus given to all purchasers of the issue

Foreign Currency Options expire on the

Third Friday of the Month

Foreign currency options expire on the:

Third Friday of the Month

When the ROP signs the order ticket of a discretionary order promptly, what is meant by this?

This means that the trades are reviewed and approved by the Registered Options Principal at the end of each trading day

A block trade is define as:

Trade of 10,000 shares or more; or a trade of $200,000 or more

Foreign Currency Options are quotes in terms of

US Dollars

Acceptable margin deposits for short call and long put

Underlying security, escrow receipt

The member firm may hold part of the issue in its investment account if the underwriting is

Undersubscribed, regarding the distribution of "new" common stock issued

A copy of the current prospectus of the OCC must be furnished to customers:

Upon request

Any change of a customer mailing address must be

Verified with the customer by the principal or manager, either verbally, telephonically, or in writing

A broker-dealer that maintains records on an electronic storage media must do all of the following

Verify automatically the quality and accuracy of the storage media recording process; Serialize, index and catalog the original and duplicate units of storage media with time date for the required period of retention; and Be able to download indexes and records to any storage medium as required by the SEC or FINRA.

The value of the VIX is based on the 30 day

Volatility of the S&P 500 Index

As an alternative to arbitration of disputes, FINRA offers the BLANK process of mediation which is

Voluntary

Brokerage firms require that each new account sign an Arbitration Agreement under this agreement the customer...

Waived their right to sue the brokerage firm and agreed that any disputes will be handled by binding arbitration

VIX expiration occurs when

Wednesday that is 30 days prior to the 3rd Friday of the following calendar month

Portfolio margin results in a much lower margin requirement for what type of scenario

When stock positions are hedged by Options(picked the answer that is hedged, when asked about the greatest benefit of reduced margins)

What act is define omunder the below requirements: 1) unsolicited calls cannot be made before 8:00AM, nor after 9:00 PM in the recipients time zone The caller must identify themselves by Name, Firm, Address or telephone number from which the caller is dialing, if the person called states that they do not wish to receive calls, the the person must be placed on the "Do Not Call" list. Act applies to any transmission over the phone lines and unsolicited fax transmissions

The Federal Telephone Consumer Protection Act of 1991

The designated Registered Options Principal is NOT responsible for

The approval of option accounts

The designated ROP is not responsible for

The approval of option transactions in customer accounts

Items included in the predispose arbitration agreement are highlighted and must include language that explains that:

The customer is giving up their right to sue, arbitration is final and binding, arbitrators do not have to explain the reasons for their reward, and arbitration panels include minority individuals who were or are affiliated with the securities industry

Customer Name, Date Complaint was received, identification of registered representative servicing the account, general description of matter complained of, and record of action that was taken by the member .org, are required to be kept in

The customers complaint file

The restrictions on not making solicitation calls before 8AM nor after 9:00PM do NOT apply if:

The member has an established business relationship with the person being called The member received that persons prior express written consent to be contacted

An exercise notice may be placed by a customer immediately upon the purchase of a call or put contract, However, the OCCC does not handle the exercise until when

The morning of the next business day 10AM

Designated Registered Options Principal

must approve options advertisements, options sales literature, and independently prepared reprints.

Sales literature

non-interactive (static) content on blogs, social networking sites and chat rooms is defined as

An "in the money" European style index option that has not been closed by trading will be exercised how and when?

will be automatically exercised on the third Friday of the month, (AM settlement)will have the index value calculated based on the opening prices of the stocks in the index on the third Friday of the month

The signature of the CEO on the annual compliance certification filed with FINRA means that the CEO:

reviewed the firm's compliance procedures

Approval of option accounts for trading can be performed by the:

series9/10, series 4 and the designated Registered Options Principal

ROPs are permitted to delegate their responsibilities to

any employee who is capable, and who remains under ROP supervision

The premium collected from the "sale" of the index option in a BuyWrite Index option is calculated

based on the VWAP - Volume Weighted Average Price - of that option, computed over a 1/2 hour time window on the third Friday of the month.

A broker-dealer can charge for clerical services such as

collection of dividends; safekeeping of securities; and appraisals of securities

If the exercise occurred prior to an "ex date", then the receiving firm is

entitled to any dividend payments made on the underlying stock.

The branch office inspection cannot be carried out by the resident branch manager. It must be carried out by whom?

A principal that is independent, such as a principal in the office of Supervisory Jurisdiction

Annual testing of a member firms AML program may be conducted by

A qualified outside party or member personnel

It is not a branch as long as no more than 25 securities trades are effected from that location in a year.

A registered representative's residence office is excluded as long as the representative does not meet customers at that location

Is a LEAP contract exercised American or European?

American

Jumbo options are what style exercise?

American Style

Jumbo options are exercised how?

American style

An OEX Index Option, is exercised how and when?

American/ PM

Under the code of procedure, if a respondent or the department of enforcement wishes to appeal a decision made by the District Hearing Panel:

An appeal must be filed within 25 days after service of the decision

It is required that broker dealers submit to an annual BLANK by a CPA

Annual Audit

If a branch office is given responsibility for supervising other branches, then it must be inspected at least

Annually

A registered representative who has been called up to active duty can share his commission during the period of Military service with

Another rep at the SAME broker dealer

The following rules are required from FINRA for what type of issue? 1) Establish and implement policies and procedures to detect and report suspicious transactions 2) Provide for annual independent testing for compliance to be conducted by a member personnel or a qualified outside party 3) designate a principal responsible for implementing and monitoring day to day operations and internal controls 4) provide for ongoing training of appropriate personnel

Anti-Money Laundering(AML)

Graphic communication is defined as

Any form of electronic media, videotapes, audiotapes, facsimiles, CD-ROM, electronic mail, internet websites and computer networks.

Insiders can be sued by

Any person who traded that security during the time period that the insider trades occurred. The statute of limitation is 6 years

The options disclosure document must be furnished to a new customer at or prior to

Approval of the account for options trading

A dispute between two associated persons must be settled by

Arbitration

Records kept for life are

Articles of incorporation or Partnership agreements, minutes of board meetings or partnership meetings, customer compliant file

When must a customer be provided with the privacy notice?

At account opening, and annually thereafter

A copy of the completed new account form and account statements for at least the most recent 6 month period must be maintained where:

At both the branch office and the principal supervisory office

The customer must receive the latest Options Disclosure Document when:

At or prior to the opening of the account

Stabilization is NOT allowed for

At the market offerings

An opening rotation on the floor of the CBOE starts:

At the opening of trading of the underlying security

To open and maintain a day trading account

$25,000

A jumbo index option contract has a multiplier of

1,000

The maximum life on an LEAP is how long?

28 months

A CAP gain is a maximum gain of how much

30 points

What is the maximum life for LEAP index options,

36 months

In a restricted margin account, what percentage of the sales proceeds may be withdrawn

50%

Trading of VIX options takes place from

9:30 AM EST(8:30AM CT) to 4:15 PM EST(3:15 PM CT)

Discretionary options orders must be approved and initialed by the

BOM/ROP not the designated ROP

Notifications of broker dealer financial condition: brokerage firms must send semi-annual financial statement of the firm itself to customer the statement must include:

Balance sheet(audited for the year end; unaudited for mid year statement), net capital computation

With this letter the bank assumes responsibility for a loss upon exercise of a short put:

Bank guarantee letter

Reg U controls credit from whom to whom

Bank to broker

The Nasdaq IPO cross takes place

Before the IPO is released for trading

The anti-fraud provisions of the Exchange Act of 1934 apply to the trading of what

Both Exempt and Non-Exempt Securities, Both individuals and firms are subject to the rules

Reg T controls credit form whom to Whom?

Broker to customer

The symbol "BX" stands for what?

Buy-write

Money laundering regulations are established

By the Federal Reserve and the Department of Treasury

Insider trading violations are punishable by

Civil penalties, treble damages, and imprisonment

Fiduciary information is BLANK information and cannot be disclosed without the express consent of the customer

Confidential

The options NEW ACCOUNT form contains the following information

Customer Income, Net Worth, Liquid Net worth, Marital Status, number of dependents, and Tax Status..... NOT the names of the customers dependents.

Daily position reports issued by the OCC include changes in positions for which of the following accounts?

Customer accounts, firm accounts, and third party accounts

The person responsible for the supervision of options accounts is the:

Designated Registered Options Principal

Foreign currency options have what type of exercise

European

Options strike prices are adjusted on ex date for:

Even stock splits: deliverable

A customer must be sent the "account profile" how often?

Every 3 years

Broad based index ETFs are exercised how and when

Exercised American Style, T+2

SEC rule 17f-2 requires that all officers,directors, sales employees,as well as all person who handle cash, securities, and the books and records of original entry be

FINGERPRINTED

Any brokerage firm that wishes to offer portfolio margins must get the approval of who to do so?

FINRA

Records to be kept for 6 years include:

General ledger, purchase and sales blotters, cash and receipt and disbursement blotters, stock received and deliver blotters, customer account records, stock record

A customer is not considered to be long the stock unless convertible bonds of that issuer

Have been tendered for conversion

Narrow based contracts have lower or higher bets compared to Broad Based?

Higher

Only the BLANK side of a short straddle is margined

In the Money

Stocks can only be sold short in what type of account?

MARGIN

Does reg SHO apply to qualified market makers?

No reg Sho applies to FINRA member firms, and customer of FINRA member firms

Tier 1 securities have what restriction period

No restriction period- actively traded and exempt

For stocks that are sold short does a holding period exist?

No, a holding period is never established because the shares are borrowed

On an Options worksheet does an annualized rate of return have to be shown?

No, if an annualized rate of return is to be shown, it must be based on at least 60-day experience.

A class of Options consists of all options with:

One type on an underlying security For Example, all ABC calls are a class, all ABC puts are a class

Customers must be sent trade confirmations of option transactions when

Promptly, but no later than the business day following trade date.

Regulation S-P is designed to protect

Retail clients only, investment advisers, and investment companies

The ROP May delegate responsibility and authority for supervision and control to any qualified person, provided that the ROP

Retains overall responsibility

Portfolio Margining is what type of strategy, and how is it calculated?

Risk based strategy, calculated using probability-based loss percentages

Flex Options are issued by whom

The O.C.C

A market makers activity report must be made when?

The next business day

If an E.B.R(Established Business Relationship) exists with an individual contacting your firm about a specific product. When can the representative recontact that individual?

The rep can contact the individual during the upcoming 3 months(90 days)

If a registered representative has an existing customer that is on the member firms "do-not-call" list...the representative can and cannot do what?

The representative cannot contact the customer by telephone to recommend investments, the representative can contact the customer by telephone to discuss the customers account profile.

When a will a limit state exist under the limit up limit down rule?

When the National Best Offer equals the Lower Price Band, and the National Best Bid equals the Upper Price Band

If the exercise occurred on, or after and "ex date, then the delivering firm is

entitled to any dividend payments made on the underlying stock

A covered security under rule 101 of regulation M can be subject to a restriction period of

1 day or 5 days

Customer disputes may be handled through the arbitration process only if

The customer consents

A capital gain/loss is considered to be short term if the holding period is

1 year or less(counted from trade date to trade date)

The premium movement of 1 for a jumbo option equals what dollar value

$1,000

A CTR is required for cash deposits or withdrawals of more than how much

$10,000 within 15 days

What is the VIX options contract multiplier

$100

The reportable customer complaint settle threshold is valued you at what dollar amount?

$15,000

The reportable internal fine imposed by a firm threshold is what dollar amounts?

$2,500

In a NEW account what is the minimum margin requirement

$2000

SAR(Suspicious Activity Report) is required for suspicious activities where the amount involved exceeds

$5,000 with 30

Customers who are not broker dealers that wish to carry unlisted derivatives in a portfolio margin account must maintain

$5,000,000 of equity (To Open: Individual customers- $100,000, Prime Brokerage Accounts- $500,000)

Simplified arbitration procedure is available for disputes not exceeding what dollar amount?

$50,000

Excluding the trading volume test, how much of the issuer's outstanding shares can be sold every 90 days under Rule 144?

1%

Minimum maintenance margin requirements set by FINRA

.75% of the underlying market value plus premium

Tier two securities have what restriction period?

1 Day restriction period at least $100,000- $1,000,000

Stabilization must end when the manager disband the syndicate, and FINRA has a rule requiring that syndicated disband no later than BLANK days front he effective dat

90 days

What time do Index Options trade from?

9:30AM EST to 4:15PM

Violation for a "controlling person" under insider trading is

A $25,000,000 fine, but will not impose unless it can be proven that the person knew or recklessly disregarded the fact that a violation occurred.

Material intended for a mass market such as newspapers, magazines, non-password protected internet websites, internet bulletin boards, TV, billboards, signs, tape recordings, motion pictures

Advertising

A non password protected website is define as

Advertising

A registered representative posting on a blog is defined as

Advertising

A person who "receives compensation for advising others about securities, or about the advisability of investing in securities" is considered:

An Investment Adviser

FINRA prohibits the registered representative of firm from charging the customer for

Investment advice

FINRA requires that any disputes between registered representatives and their firms be handled by

Binding Arbitration

Trace reports trades of

Corporate Bonds, Ginnie Mae pass-through certificates, Agency Bonds NOT MUNI's

Broker dealers are obligated to check the threshold list when

DAILY

Escrow positions held for the member would be shown on what report from the OCC?

Daily depository report

Net margin to be deposited by a member would be shown on what report from the OCC?

Daily margin report

Under reg M tier 1 securities are those with a minimum:

Daily trading volume of $1,000,000, and a market float of 150,000,000

Under reg M tier 2 securities are those with a minimum of:

Daily trading volume of $100,000 and a public float of $25,000,000(any other security not meeting these minimums is considered tier 3 and is subject to a restricted period of 5 business days prior to the effective date.

Under this rule, margin calls for $1,000 or less do NOT have to be sent

De Minimus Rule

When a customer asks, to what value can this security decline before a maintenance call will be sent? What Formula can be used to compute this value?

Debit balance/ .75

Exercise settlement of Index Options results in

Delivery of cash, next business day

A reprint or excerpt of any article issued by a publisher, where the publisher is not affiliated with the FINRA member and the report was not commissioned by FINRA member.

Independently prepared reprint

CAP option contracts are available on:

Index Options

All unrealized gains are taxable at year end in which of the following types of options?

Index Options, and foreign currency options

Any person who has received material non public information that can be expected to influence the price of a company's stock. If that person trades on the information prior to it becoming public, that person is considered an

INSIDER

In regards to position limits, the accounts that are aggregated are the ones where the investment decisions are being made:

Independently by the broker Discretionary account managed by broker, and brokers personal account

LEAPS are available on what type of instruments?

Individual stock and indexes

Options pricing models used by the C.B.O.E include volatility, dividends, interest rates not

Inflation

If a branch manager is informed by a registered representative in his/her office that they have received inside information about a listed company, but that they have not acted in that information, the branch manager should:

Inform the home office of this situation

Under this act, broker dealers must have procedures to prevent misuse of material non-public information

Insider Trading and Fraud Enforcement Act of 1988

Equivalent orders to buy are simultaneously placed by the OBO, Market Maker, and Floor Broker. What is the priority of executing the orders?

OBO, Market Maker, Floor Broker

When do equity options contracts expire

On the third Friday of each month at the stroke of midnight 11:59PM EST

If in the course of settlements, securities are suspected to be stolen, a report must be filed with the SIC within:

One business day of discovery

Claims of less than $100,000 how many arbitrators are used?

One non public for member v member(in the biz), one public for customer or associated persons(out the biz)

Member firm vs an Associated Person, and member firm vs Customer consists of how many and what type of arbitrators?

One non-public(in the biz), two public(out the biz)

Customer Name, Customer Address, Customer Tax I.D. Number, Customer Date of Birth Are all critical information in order to:

Open an account

The office of supervisory jurisdiction must inspect customer account records:

PERIODICALLY

Rule 102 of Reg M is described as:

Restrictions on issuers and selling shareholders

Rule 101 of Reg M, refers to what

Restrictions on syndicate members

Options sales literature that is accompanied or proceeded by the options disclosure document can show what type of information?

Past performance, future projections, and recommendations

A cabinet transaction in an Options series effected on the AMEX of CBOE is permitted when, and must be reported when,

Permitted on any trading day, and must be reported following the close of each business day

The following are excluded from the definition of what: Banks or bank holding company, lawyers, accountants, engineers whose performance of such services is solely incidental to the practice of their profession, broker dealers and their reps whose advisory services are solely incidental to the securities business and who receive no special compensation for making recommendations, publisher of bonafide newspapers, magazines, or financial publications of general and regular circulation, any person who advises solely about U.S Government guaranteed obligations

Person excluded from investment adviser definition

Regulation blank, prohibits issuers from making selective disclosure of non-public information to research analysts, mutual fund managers, and other industry professionals, unless at the same time, the information is broadly disseminated to the public

Regulation FD

If a position exceeds the position limits.When must a report be filed?

Reports must be filed on the business day following the day the position amount was exceeded.

Selling exempted securities with a written agreement to buy them back at a later date is called a

Repurchase agreement

The following terms are used when identifying what? The members broker deal services must be conducted in a physical location distinct from the area where retail deposits are taken The member must ensure that supervisory personnel of the member, FINRA and the SEC will be permitted access to the financial institutions premises in order to inspect books and records There must be a written agreement between the member and the financial institution setting forth the responsibilities of the parties and the compensation arrangements

Requirements for a broker dealer operating within a bank setting

Insider trading rules attempt to segregate these two departments within a firm

Research from investment banking

Rule 103 is described as:

Restrictions on Market Makers- must seem an excuse to withdraw as a market maker, or act as a passive market maker Limited to the amount of Net purchases of that security(the limit is 30% of their ADV over the preceding month

Short term LEAPs are always taxed as:

SHORT term

A password protected website is defined as

Sales literature

Any communication targeted to a specific audience, such as the firm's customers, is considered to be

Sales literature

Foreign Currency Option trades settle through who and when?

Settle through the O.C.C, next business day

SEC Re 153a states that aim a merger or reorg, existing shareholder must be delivered a prospectus prior to the:

Shareholder vote

All gains and losses are always BLANK term for sellers of options

Short Term

Short sale rules do not apply to(Exempt) under what circumstances:

Short sales above NBB, seller owns the securities but delivery is delayed, odd lots, arbitrage transactions, risk less principal transactions, VWAPs

A index CAP Options is most similar to a

Spread

Buy write index options are used during a time window that the investor is expecting what type of market outcome?

Stability

Rule 104 of Reg M, is described as

Stabilization rules: notice of stabilization inside the cover of the prospectus, only one stabilizing bid, one sided quote(bid side), at or below the POP, of a current independent market exist the stabilizing bid can be no higher than the last reported trade as long as the current ask price is equal to or higher than the last report sale, if not bid cannot be entered any higher than the current independent bid, also the bid can only be entered on the effective date- NOT BEFORE

The multiplier and strike price are not adjusted for

Stock dividends and fractional splits. If there is an exercise, then the "deliverable" is adjusted

Options contracts are adjusted for 2:1 and 4:1 stock splits, what are they not adjusted for?

Stock dividends or uneven splits unless exercised, then the deliverables are adjusted. Yeah

The term ratio write applies to the sale of options against what type of position

Stock position, not to a spread

A limited power of assignment or substitution given to the broker dealer is a

Stock power

A joint account where each person owns a stated percentage of the account is what type of account

Tenants in common

If a tender offer is being made for 10% of the outstanding shares of a company. The officers of that company can

Tender as much stock as they wish(as long as they own it)

Another name for the branch office manager(BOM) is

The "limited principal-general securities sales supervisor"

If FINRA wishes to initiate an action against a member firm it uses

The Code of Procedure

I The development and implementation of a written program for the supervision of all customer option accounts II The development and implementation of a written program for the supervision of all customer option orders III Reviewing the supervisory performance of BOMs and other ROPs in the branch offices IV Reviewing training of registered representatives with regard to options Are all duties of whom

The Designated Supervisory Registered Options Principal

The Position Report, Margin Report, and the Depository Record is prepared daily by whom

The OCC(Options Clearing Corporation)

Who is the VIX regulated by?

The S.E.C

Investment advises with less than $100,000,000 under management are not required to register with whom?

The SEC m- they are only registered at the state level

The last trading day of a VIX Options is when?

The Tuesday before the monthly Wednesday morning exercise-settlement value calculation

A registered representative is terminated and the U5 form is filed with FINRA within the prescribed time period. After the filing is made, information becomes known about the registered representative that should have been disclosed in the filing. What happens to the U5

The U5 filing must be amended within 30 Days

A customer wishes to open a new account, but refuses to give his or her social security number and date of birth

The account cannot be opened. There are 4 critical pieces of information that must be collected to open a new account for an individual customer - Name, Address, Date of Birth, and Social Security number.

To a open a portfolio margin account

The account must be approved for naked options writing, and a minimum equity of 100k must be maintained

If the ODD is amended, customer must receive

The amended ODD no later than with the next trade confirmation for a transaction to which the amendment pertains

In reference to index options, the index value is computed as of what time of day when exercised

The close

Regarding a DROPs overall review of customer accounts

The compatibility of options transactions with investment objectives Size and frequency Commission activity Profit and Loss Undue concentration Reg T

The annual compliance certification is signed by who and filed with FINRA

The firms CEO

The minimum maintenance margin requirements set by FINRA for corporate Debt=

The greater of 20% of market value or 7% of face value set by FINRA not reg T

If a deep in the money call is sold against a stock position, what happens to the holding period?

The holding period stops counting

Transmittal cost of proxy materials to customers are paid by whom?

The issuer

3:00PM Central Time; 4:00 EST, on the expiration date is the last time to trade what type of option?

The last time to trade an equity option that is about to expire

Complaints must be kept in the clients files for how long?

The lifetime of the account

A member firm can not assume a customer loss in an Options account unless

The loss was due to a mistake made by the member firm, or if the C.B.O.E gives approval for the the member firm to assume the loss

If a new options customer is sent a copy of his account profile for verification and does not sign and return it within a Specific time period:

The member firm can considered the information verified.

Under SEC rules, customer account information must be verified by the member firm

Within 30 days of account opening, every 3 years

From a basic economics standpoint, the premium is set in the market based on supply and demand. What actually establishes the market value of the premium is a combination of

The relationship between the strike price and the market price; The time value of the contract; The volatility of the underlying stock; and Market interest rate levels.

The OCC has just published a revised ODD. How may this revised document be delivered to a client?

The revised ODD can be delivered electronically by emailing a link to those customers who have given a valid email address to the firm(access equals delivery rule)

If the seller of a call is exercised he/she must deliver

The stock at the strike price

What is the purpose of the opening rotation?

To ensure that opening trades in every option contract are conducted at the same price (Longest expiration with Highest strike first)

When is the first day that an exercise could be assigned for an equity option purchased in a cash settlement?

Trade date

Regarding ACATS, the acronym T.I.F stands for what?

Transfer Initiation Form

The violation for insider trading rules can include what?

Treble damage- 3 times the profit realized or losses avoided, and Criminal penalties including fines up to $5,000,000 and 20 years in jail for each violation

True or false,Rights and warrants are not considered in position limits

True

True or false does FINRA have the authority to declare a transaction null and void on its own motion, or as the result of an investigation that it makes after receiving a complaint from either the buying dealer or selling dealer?

True, FINRA can declare a erroneous trade null and void on its own motion and complaints from the buyer or seller

True or false, compared to regular margin accounts, pattern day traders are subject to higher minimum margin to open an account m, and the same minimum maintenance margin percentage

True, equity required to open a margin account is $2,000...the requirement for a day trading account is $25,000. The maintenance is the same but calculated differently (Regular margin- based on each days closing price, day trading minimum- based on the value of transactions made each day

Opening an Options account for a trust you need:

Trust agreement, trust doc must authorize options trading, recommendations must meet the financial situation and needs of the trust

A dispute between a registered representative and a member firm must be settled by arbitration for what type of claim

Working conditions claim

The customer must sign and return the Options Agreement when:

With 15 days of the opening of the account

If the district hearing panel receives a complaint and send a copy to the firm that is the object of the complaint. That firm is obligated to reposed in writing when?

With 25 calendar days from the date of receipt, if the complaint is amended, a 14 calendar day extension is granted

If an associated person is subject to a reportable event, the report must be filed with FINRA

Within 30 days

Safeguarding of customer funds and securities, maintaining books and records, supervision of customer accounts serviced by branch managers, transmittal of funds between customers and representatives, validation of customer address and account information changes, are part of what procedures of a member firm

Written Supervisory Procedures

Is a non-profit exempt from the provisions of the federal telephone consumer protection act of 1991?

Yes, the act does not apply to charitable solicitations

Are Jumbo options listed on the same cycle as standard options?

Yes, they are issued on the same cycle as the 100 share contracts

Does the ex-employer of an employees termination have an ongoing obligation to update the U5 for subsequently discovered information after the employee is terminated?

Yes, this does not go away if the individual associated with another member firm

TRACE reports OTC trades of

corporate, government and agency bonds