Practice Test 3

variable products are a hybrid securities/insurance product that are only sold by insurance companies

sell a variable product, in addition to either a federal: Series 6 or Series 7 license, a state insurance license is required.

A municipal new account form MUST contain which of the following signatures?

* Associated person introducing the account * Municipal principal accepting the account

TRUE regarding the delivery of municipal securities

*bearer bonds can only be delivered in either $1,000 or $5,000 denominations *Delivery is normally made to the buyer's office, however the buyer can designate an agent to accept delivery (such as a bank) *Legal opinions must accompany delivery of municipal bonds unless the bonds are identified as "ex legal" at the time of the trade *Finally, securities can be delivered physically, or in book-entry form. Book-entry bonds are "certificateless"

NASDAQ MarketWatch makes a written determination as to whether the decision is to nullify the trade or adjust the terms of the trade

*the buy side of the trade can appeal to the Market Operations Review Committee *the sell side of the trade can appeal to the Market Operations Review Committee *if an appeal is made to the Market Operations Review Committee, their decision is FINAL & BINDING *Any appeal must be made within 30 minutes of the trade

The maximum sales charge for single purchases of non-12b-1 fund shares is 8 ½% of the Public Offering Price under FINRA rules.

8 ½% X / (100-8.5)

Mutual Fund Shares

Class A - sales charge at time of purchase Class B - sales charge at time of redemption

An employee of a FINRA member firm wishes to sell mutual funds, part time, for another member firm. Which statement is TRUE

FINRA must be given prior notification of the dual registration via Form U4

Aside from the member firm, who else maintains a "Do Not Call" list that must be used by member firms

FTC (Federal Trade Commission)

Rule 201 of Regulation SHO is the current version of the "short sale rule."

If a stock's price has dropped by 10% or more, a short sale is prohibited for the remainder of that day, and the entire next day, unless the trade is effected on an UP-BID

The broker-dealer is handling a firm commitment underwriting of ABC Corporation non-convertible subordinated debentures. Prior to the effective date

Indications can only be confirmed once the offering is declared effective and priced. The key to this situation is that the broker-dealer is underwriting the non-convertible bonds of the company. Since these cannot be converted into the common stock, there are no prohibitions on the broker-dealer from recommending the purchase of the common stock; from soliciting orders to buy the common stock; from accepting unsolicited orders to buy the common stock; or from distributing research reports on the common stock prior to the effective date. Please note that if the underwriting was for a convertible issue, all of these activities would be prohibited.

Prior to the filing of a registration

Prior to the filing of a registration statement, underwriters are prohibited from any action promoting or selling the proposed new issue. Once the registration statement is filed, underwriters are limited to accepting indications of interest and can publish a tombstone announcement. There is no prohibition on forming a syndicate prior to the filing of a registration statement, since this does not involve the offer or sale of the issue to the public.

securities offering that uses an "investment letter" to sell restricted securities is a:

Regulation D offering

SEC Regulation that permits U.S. based issuers to sell unregistered securities outside the United States to non-U.S. residents is:

Regulation: S the securities will be exempt from SEC registration. Essentially, Regulation S requires that to get the exemption, the issue must be sold to non-U.S. residents

The SEC regulation that allows Qualified Institutional Buyers (QIBs) to buy large blocks of unregistered securities from issuers and trade with other QIBS is

Rule 144A (minimum block size of $500,000) from issuers; and they can trade them with other QIBs without having to register the securities with the SEC. The PORTAL system was created for trading these issues.

The FINRA System which reports trades of corporate bonds is

TRACE

The PATRIOT Act established:

anti-money laundering rules centered on transactions by foreigners

Under FINRA rules, the presumptive basis for computing the mark-up on a debt security is

contemporaneous purchases or sales of that security by that dealer

Rule 605 of Regulation NMS requires

each market center to prepare monthly electronic reports about its quality of executions and effective spreads

securities are suspected to be lost as the result of a securities count

has 1 business day to find the securities and then must notify the Securities Information Center on the NEXT business day

Under Regulation SHO, a "threshold security" is one that

if sold short and not delivered within 13 consecutive settlement days of the trade, buy-in is required

Qualified Annuity Contract

qualified annuities have contribution limits contributions to qualified annuities are made with PRE-tax dollars and earnings build tax deferred

The sale of which of the following investment companies does NOT require the delivery of a prospectus to a customer?

open-end fund (ETF)