Chapter 7
A market maker gives a firm quote of 15 - 15.50 for a stock. If the party on the other side decides to buy 800 shares, how many shares is the market maker obligated to sell at 15.50?
100 shares
Performance based fee
Agent get's additional money when the investment does well
Panting the tape
Collusion. Two B/Ds agree to arrange a trade of buying and selling.
An investment adviser representative (IAR) who works for a federal covered investment adviser has engaged in trading that was considered excessive in regard to both the size and frequency of the trades. According to NASAA's model rule, who is responsible in this situation?
NASAA's Model Rule on Unethical Business Practices applies to all investment advisers and investment adviser representatives. Even though a firm may be a federal covered adviser, it does not receive a safe harbor from the antifraud provisions of the Uniform Securities Act.
According to the Investment Advisers Act of 1940, access persons must submit their personal security holdings reports by:
No later than 10 days after becoming an access person; then at least every 12 months thereafter
Not held order
Order to buy or sell a specific number of shares of a particular stock that leaves the time of order and price up to the B/D, e.g., "buy 300 shares of ABC this afternoon.
A broker-dealer agent enters an order ticket for a customer. The order ticket must contain all of the following information, EXCEPT the:
Price of the security at the time of receipt. An order ticket does not need to include the price of the security at the time the order was received. It does need the price at the time it was executed as well as the time of execution (or cancellation). The ticket should also identify the personnel (if any) responsible for the account and the specific individual who entered the order on the client's behalf.
Which of the following may be advertised as a no-load fund?
Regulators have created standards for advertising a fund as a "no-load." No-load funds cannot have a front-end sales charge, a back-end sales charge, or a 12b-1 fee that exceeds 0.25% of the fund's average net (not total) assets for the year.
While advising a client who is in a low income tax bracket, an investment adviser representative recommends that he purchase municipal securities. Which of the following statements best describes this action?
The advice given by the representative is unethical rather than fraudulent. Municipal securities provide federally tax exempt interest income, which is advantageous to individuals who are in higher tax brackets. Recommending municipal securities to an individual in a low tax bracket is unsuitable.
How does an Administrator determine whether excessive trading has occurred in a customer's account?
The suitability of solicited trades in the account
Reverse Churning
The unsuitable practice of placing a client who trades infrequently in a fee-based account rather than a commission based account that would be more appropriate.
Front running (market manipulation)
This is the act of taking an option position when a firm has received a block order from a client, but before the block has been entered for execution. The intent is to allow the company to profit.
