Regulations

Under Regulation M, which statement is TRUE regarding stabilizing bids entered by market makers?

there is no limitation on the period that a stabilizing bid can be maintained

Broker-dealers are required to report their computed Net Capital to customers:

Semi annually

A client of a registered representative refers a new potential customer. This customer is interested in purchasing an oil and gas limited partnership unit. What percentage of the purchase amount can the representative share with the referring client as a finder's fee?

%0

A municipal dealer purchases 100M of 7% G.O. bonds, M '45, at par. The dealer immediately reoffers the bonds. Which of the following would be considered to be fair and reasonable quotes?

101 6.90 net less 1/8 The best answer is A. The dealer must take a mark-up that is "fair and reasonable" under MSRB rules. Since the dealer bought the bonds at par, a reoffering price of 101 (1% mark-up) is more reasonable than a reoffering price of 108 (8% mark-up). Similarly, since the bonds have a 7% coupon rate, a reoffering yield of 6.90% less 1/8 point represents a much lower premium than a reoffering yield of 6.50%. Thus, the "reasonable" quotes are 101 and 6.90 net less 1/8.

Under FINRA rules, copies of order tickets must be kept for:

3 years

Under Rule 144, no filing is required if the sale amount every 90 days does not exceed:

5,000 shares worth a maximum of $50,000

New non-exempt debt issues in excess of $50,000,000 are subject to which of the following requirements?

I Registration of the issue with the SEC under the Securities Act of 1933 II Sale of the securities with a prospectus under the Securities Act of 1933 III Appointment of an independent trustee to protect the bondholders under the Trust Indenture Act of 1939 IV Anti-fraud Rule 10b-5 under the Securities Exchange Act of 1934 for any subsequent resales of the securities

Which of the following are violations of FINRA rules?

I Trading mutual fund shares II Making blanket recommendations of low price speculative stocks III Performing trades of excessive frequency in a customer account IV Trading an account beyond a customer's financial capacity The best answer is D. Mutual fund shares cannot be traded - they are redeemable securities that are purchased from the fund; and that are redeemed with the fund. Blanket recommendations of low price speculative stocks are prohibited - since these are not suitable investments for everyone. Excessive trading in a customer account (churning) and trades that are too large for a customer account, are prohibited practices as well.

Municipal securities advertising must be approved prior to use by which of the following?

Municipal Securities Principal or General principal

A new issue offering to a maximum of 35 non-accredited investors that has not been registered with the SEC is:

Regulation D

Which of the following statements are TRUE regarding the Official Statement?

The Official Statement is requested by underwriters to satisfy SEC due diligence requirements and the disclosure requirements of new issue purchasers The Official Statement is required to be delivered to customers at, or prior to settlement, if available The best answer is C. The Official Statement for a new municipal issue is not required under the Securities Act of 1933 since municipal issues are exempt, nor is it required by the MSRB, since the MSRB has no regulatory authority over municipal issuers. It is requested by underwriters to help them perform due diligence on the offering (as required by the SEC) and also to help sell the issue. The MSRB states that if the Official Statement is available, it must be given to purchasers at, or prior to, settlement of sale.

A registered representative is talking to an institutional client and has just recommended that the institution place an order to buy a block of XYZ stock. Just before the client says "Yes," the registered representative overhears a representative in the adjoining cubicle taking a large buy order from another institutional investor for XYZ stock. Which statement is TRUE about this situation?

The representative can accept the order from the client All about timing - customer made the recommendation before overhearing the rep in the adjacent cubicle

A registered representative is considering prospecting a wealthy family member to see if she will open a brokerage account at his firm. The registered representative checks the National Do-Not-Call List and finds the family member there. The registered representative checks the firm's Do-Not-Call list and does not find the family member there. Which statement is TRUE?

This prospect can be called by the registered representative There are 3 exceptions provided for cold calls to individuals that are on the National Do-Not-Call list. These are the: Established Business Relationship (EBR) Exception; Prior Express Written Consent Exception; and Personal Relationship With The Associated Person Exception. Because this prospect is a family member, she comes under the "personal relationship" exemption, as long as she is not on the firm's Do-Not-Call list - which is the case here. Note that if the family member were on the firm''s Do-Not-Call list, then she could not be solicited.

If a foreign broker-dealer that does not have U.S. based operations wishes to solicit customers in the United States, the broker-dealer:

must establish an SEC-registered U.S. subsidiary can effect its business through another registered U.S. broker-dealer

A registered representative is provided with an all-expenses paid trip by a mutual fund sponsor to a resort in Hawaii. FINRA defines this as:

non- cash compensation

Under the Securities Act of 1933, new issues are not marginable until how many days have elapsed from the effective date?

not marginable for 30 days

Under MSRB rules, which of the following documents, if prepared, must be sent to the purchaser of a new issue municipal bond?

official statement

Pre-arranged trades by insiders are:

permitted under Rule 10b-5-1 The best answer is C. We all know that insiders are prohibited from trading based on material non-public information. In 2000, the SEC issued a "safe-harbor" rule that permits statutory insiders (officers, directors and 10% shareholders) to set up a written plan for trading that company's securities. Such a written plan specifies the future date with amount on which securities are to be bought and sold; or specifies the algorithm to be used for determining the amount and date of future purchases or sales. Once the plan is in force, the "insider" cannot have any further influence on trades effected under the plan. As long as the insider adheres to such a written trading plan, that person is given a "safe harbor" from being accused of using "inside information" as the basis for the trades that occur based on adhering to the plan.

Under SEC Rule 145, all of the following corporate distributions by an issuer are exempt from the requirement to file a registration statement EXCEPT:

stock spin off

Which of the following are defined as "accredited investors" under Regulation D?

trust w/assets in excess of 5mm whos a bank or savings & loan institution