Q Bank Unit 9
A registered representative realizes that the wrong account number was written on an order ticket. The RR should: A) fill out an error or trade correction report only. B) notify a principal and await further instructions. C) fill out an error or trade correction report and notify a principal. D) do nothing as no action is required as long as the trade is processed for the right account.
Answer: C Documenting errors or mistakes and notifying a principal should occur immediately. Filling out an error or trade correction report would be appropriate in this case. In-house procedures for the handling of errors can then be followed once documentation and notification have occurred.
Instead of signing on the back of a security sold, the registered owner could sign on a separate paper called a(n): A) due bill. B) hypothecation agreement. C) stock (or bond) power. D) endorsement.
Answer: C If the owner cannot or does not wish to sign the certificate itself, he may execute a stock or bond power instead.
All of the following information must be on an order ticket EXCEPT: A) stock symbol. B) time stamp. C) price of a market order. D) number of shares.
Answer: C Price would not be included on a ticket for a market order, but it would be on the ticket for a limit, stop, or stop limit order.
If a security is sold by the estate of a deceased person, it will be a good delivery if it is signed by a(n): A) spouse. B) branch manager. C) executor. D) beneficiary.
Answer: C The executor of the deceased's estate is the only acceptable signature on a certificate in the name of a deceased person
A customer has sold 300 shares of ABC and has sent you 3 100-share certificates, one of which has not been endorsed. Which of the following actions should be taken? A) Send all 3 certificates to transfer. B) Send the unendorsed certificate to the customer for signature. C) Send the customer a stock power for the missing endorsement. D) Send back all 3 certificates.
Answer: C This would not be considered good delivery because the customer has sent the correct number of certificates, but has signed only 2 of them. Rather than risk sending an unendorsed stock certificate back through the mail, the stock power is sent to the customer for the signature that will allow ownership transfer.
Which of the following interdealer trades does NOT settle in clearinghouse funds? A) GO bonds. B) Corporate bonds. C) U.S. government bonds. D) OTC stocks.
Answer: C Trades in securities backed by the federal government are settled in federal funds, not clearinghouse funds.
Dealer-to-dealer transactions in U.S. government securities settle: on trade date. on the business day following trade date. in fed funds. in clearing house funds. A) I and III. B) I and IV. C) II and IV. D) II and III.
Answer: D Settlement of U.S. government securities occurs on the business day following trade date. In dealer-to-dealer trades, settlement is made in Federal funds through the Federal Reserves' Wire System.
Which of the following is NOT good delivery for 470 shares of stock? A) 4 100-share certificates and 1 70-share certificate . B) 8 50-share certificates, 1 40-share certificate, and 1 30-share certificate. C) 47 10-share certificates. D) 2 100-share certificates and 3 90-share certificates.
Answer: D Shares must add up to 100 or be in multiples of 100, with the exception of odd lots.
A customer's sell-at-market order was reported as executed at 29.75. Later it was discovered that the report was an error; the trade actually was executed at 29.50. Which of the following is TRUE? A) The customer may choose to receive either 29.50 or 29.75. B) The customer may choose to cancel the order. C) The customer must accept the 29.50. D) The customer must receive the 29.75.
Answer: C A market order means the customer states that he is willing to accept the best price at the time of execution. A mistake made in reporting does not alter that fact.
Bonds traded on a cash settlement basis settle on the: A) T+1 business days. B) T+2 business days. C) trade date. D) regular way settlement date.
Answer: C Cash-settled trades settle on the same day.
A confirmation sent to a customer must include: A) all of these. B) markup or markdown if the member acted as a principal in a Nasdaq security. C) whether the member acted as agent or principal. D) amount of any commission.
Answer: A A customer confirmation must disclose the amount of markup for a principal transaction in a Nasdaq security, whether the member acted in an agency or a principal capacity, and the amount of commission if the member acted as an agent.
Sell order tickets must be: A) marked as either long or short. B) marked only if they are long sales. C) marked only if they are short sales. D) executed in accordance with the appropriate rules, but not necessarily marked.
Answer: A Every sell order must be marked as either a long sale or a short sale.
Every transaction made by a registered representative for a customer's account A) must be reviewed by a principal of a FINRA member firm. B) is subject to FINRA approval. C) must be based on a written order from the customer. D) is subject to cancellation by either party.
Answer: A FINRA does not approve transactions, and requiring customers to provide written instructions for each trade would be impractical. Transactions represent verbal contracts not subject to cancellation. A principal must review and approve every order either by signature or initials.
In a seller's option, securities may be delivered before the date specified if the seller A) gives 1 day's written notice to the buyer. B) gives notice to the buyer on the day of delivery . C) cannot deliver on the specified date. D) wishes to be paid earlier.
Answer: A In a seller's option trade, the seller may (at his option) give the buyer written notice 1 day before making delivery.
If a buyer cannot pay for a trade within five business days from the trade date, the broker/dealer may request an extension from its designated examining authority (DEA). Regarding extensions, all of the following are TRUE EXCEPT: A) introducing broker/dealers who do not clear their own trades may request extensions for their customers directly from the DEA. B) the broker/dealer has the option of ignoring amounts due of $1,000 or less without violating Regulation T requirements. C) if the customer cannot pay by the end of the extension, the broker/dealer has the option to either request an additional extension from its DEA or sell the securities to close the position. D) if the broker/dealer chooses to close out the position the account will be frozen for 90 days.
Answer: A Introducing broker/dealers, those not clearing their own trades, may not request extensions directly from their DEA. Such requests must be made by the clearing firm.
An instrument that illustrates the transfer of title to any dividend, interest, or right that pertains to securities contracted for is called: A) a due bill. B) a warrant. C) a power of attorney. D) a right.
Answer: A A due bill is an assignment of a forthcoming distribution from the seller to the new owner
If a member firm acting as a proxy solicitor for LRK Corporation is given a shareholder list by LRK, which of the following statements is TRUE? A) The member firm cannot use the list for any purpose other than to solicit proxies. B) The member firm can use the list to solicit new business. C) The member can use the list only to solicit new business with the written consent of LRK. D) The member can use the list only to solicit new business with the written consent of FINRA
Answer: A A member given a shareholder list can use the list only to solicit proxies. It can be used for no other purpose.
Written notice of intent to deliver before the expiration date is required in which of the following transactions? A) In a seller's option. B) In regular way settlement. C) In a delayed delivery. D) In a Regulation T delivery.
Answer: A A seller's option trade gives the seller a specified date that exceeds the regular way delivery date to deliver the securities. If the seller wishes to deliver them before the agreed on settlement date, he must provide 24-hour notice to the buyer.
A broker/dealer may charge customers for each of the following EXCEPT: A) forwarding proxy materials to the beneficial owners. B) safekeeping and maintaining custody of securities. C) collecting dividends and interest. D) exchanging and transferring securities.
Answer: A Broker/dealers may not charge customers for forwarding proxy material
A certificate in the name of Smith & Company may be signed: A) Smith & Company, "Smith & Co.," or "Smith and Company". B) Smith & Company. C) Smith & Company or "Smith & Co.". D) Smith & Company, aka SmithCo.
Answer: A Corporate signers are the exception to the general rule that endorsement of a certificate must match exactly the name on the front. The word "and "may be substituted with "&" and the word "company" may be abbreviated.
You received a proxy in the mail from one of your customers. He signed it but did not specify a vote. Which of the following statements is TRUE? A) His proxy will be voted as recommended by management. B) He has given up the right to vote. C) He has transferred the power to specify a vote to your firm. D) None of these..
Answer: A If a customer returns a signed proxy and fails to indicate how the shares are to be voted, the member must vote the shares as recommended by management of the issuer.
A customer receives a call from his registered representative (RR) telling him that he purchased 200 shares of RCA at 34.50 for the market order he had entered earlier that day. Later that day, his broker tells him that the report he received was in error, and the shares were bought for 34.75. The customer: A) must pay 34.75 per share. B) must pay 34.50 per share. C) may cancel the order. D) may require that his broker pay the difference.
Answer: A If an error has been made in the notice of execution and reported to a customer, the customer must pay for the shares at the correct price. The correct price, is the price at which the order was actually executed, either on the exchange or in the market where the execution occurred.
A member firm receives a signed proxy from a customer who failed to indicate how his shares held in street name are to be voted at the annual shareholder's meeting. Under NYSE rules, the member firm: A) must vote the shares as recommended by management of the issuer. B) may vote the shares as it sees fit. C) may vote the shares as it sees fit only if a principal attends the meeting. D) cannot vote the shares.
Answer: A If the beneficial owner of street name stock returns a signed proxy statement but fails to indicate how the shares are to be voted, the member must vote the shares as recommended by management of the issuer.
If your client has a certificate registered in his own name, to be a good delivery, the certificate must be accompanied by: A) a properly-executed assignment to the brokerage firm on the reverse side of the certificate. B) the promise that it has not been called for redemption. C) a buyer's option. D) the legal opinion, unless the client is selling municipal bonds.
Answer: A If the certificate is registered in your client's name, a stock power or a properly executed assignment to the brokerage firm must appear on the reverse side of the certificate.
In an interdealer trade, if the seller delivers before the settlement date, which of the following statements is TRUE? A) The buyer may accept the stock or may refuse it without prejudice. B) The buyer must only accept delivery if the seller gave advance notice of his intention. C) The seller has violated the Uniform Practice Code. D) The buyer must accept delivery.
Answer: A In a regular way trade, the firm is not obligated to accept securities delivered before settlement date (3 business days after the trade date) but may do so if it wishes.
For a dealer who has sold municipal securities to another dealer, all of the following are possible reasons for failing to deliver the bonds EXCEPT: A) a change in the market price of the bonds. B) lack of proper endorsement on a registered bond. C) mutilated coupons. D) lack of legal opinion.
Answer: A The MSRB requires delivery regardless of subsequent price changes. The price was fixed at the time of trade.
Regulation T requires payment from a customer in a margin account: A) within 5 business days. B) before purchase. C) within 3 business days. D) within 10 business days.
Answer: A The Regulation T payment date is the fifth business day from the trade date. Regular way settlement, according to FINRA rules, is 3 business days from the trade date.
Customer statements must be sent at least: A) quarterly. B) monthly. C) semiannually. D) annually.
Answer: A The SEC and FINRA require member firms to send customer account statements at least once per calendar quarter.
Which of the following items appears on the confirmation statement for a when-issued trade of municipal bonds? A) Principal or agency trade. B) Settlement date. C) Total contract price. D) Accrued interest.
Answer: A The capacity of the firm, principal or agent, must be disclosed on all confirms. The settlement date, accrued interest, and total price would not appear on a when-issued confirm.
Which of the following trades settle next business day? U.S. government debt. U.S. government agency debt. Municipal bonds. Listed options. A) I and IV. B) I and II. C) I and III. D) II and III.
Answer: A U.S. government debt and listed options settle next day; government agency debt and municipal bonds are subject to regular way settlement of T + 3.
A customer buys a municipal bond regular way on Tuesday, December 23. The transaction will settle on the following: A) Tuesday. B) Monday. C) Thursday. D) Friday.
Answer: B Municipal bonds, like corporate bonds, settle 3 business days after the trade date. December 25 (Christmas) is not a business day.
Under FINRA rules, delivery on a seller's option can be made no sooner than the: A) 5th business day following the transaction. B) 4th business day following the transaction. C) day following the trade date. D) 3rd business day following the transaction.
Answer: B Seller's option trades, under FINRA rules, allow a seller to settle later than a regular-way settlement. With T + 3 regular-way settlements, a seller's option would settle no earlier than 4 business days after the trade date. If the seller could deliver any earlier in compliance with regular-way, there would be no need for a seller's option contract.
In a proxy contest, a member firm holding securities in street name for clients who are beneficial owners must: A) send a list of the beneficial owners' names and addresses to the issuing company so that it may send proxy materials to those owners. B) send the proxy material to the beneficial owners at the issuing company's expense. C) send the proxy material to the beneficial owners at the member firm's expense. D) vote the proxies as it wishes.
Answer: B A securities firm that is a member of FINRA must forward all proxy material to the beneficial owners for all securities held in street name, and the issuers must bear the expense of shipping the proxy material.
A stock or bond power is a(n): A) legal right of the owner to vote stock as he chooses. B) document that can be attached to a stock certificate, authorizing transfer of ownership to another party. C) document delegating discretion to purchase or sell securities to another party. D) authorization delegating voting power to another person.
Answer: B A stock or bond power is an instrument separate from the stock certificate by which an owner indicates the intent to transfer ownership of the securities.
After receiving securities from another firm, a broker/dealer discovers that the securities received were not in good deliverable form. His recourse is to: A) cancel the trade and file a complaint. B) file a reclamation. C) buy in. D) sell out.
Answer: B After receiving the securities, the broker/dealer can file a reclamation and demand good delivery.
Which of the following statements are TRUE? A certificate registered in the names of two joint tenants must be signed by both of the tenants before it can be transferred. The signatures on assignments or powers of substitution must match the names on the registration. A certificate with an assignment or a power of substitution executed by someone who has since died is good delivery as long as the signature was witnessed. A stock power gives the right to vote a proxy to someone else. A) III and IV. B) I and II. C) I and IV. D) II and III.
Answer: B Certificates held jointly must be signed by both parties before they can be transferred. Signatures on assignments or stock powers to transfer securities must match the names of the registered owners of the securities exactly. Certificates are never good delivery if signed by a deceased person.
One broker/dealer receives a don't know (DK) notice from another. Which of the following would be a reason for a DK to be sent? A) The broker/dealer who sent the DK wants to know if the other broker's customer wants to trade more stock at the same price. B) The broker/dealer who sent the DK was expecting 200 shares of ABC common stock and received 200 shares of ABC preferred shares. C) The broker/dealer who sent the DK is alerting the other broker that one of their clients has opened a new account with them. D) The broker/dealer who sent the DK is confirming that the trade specifications are good
Answer: B DKs are sent between brokers when delivery is made that is either not expected or where the specifications of the delivery do not match what was expected.
If a contract calls for a delivery between brokers of 500 shares of stock, all of the following trading units would be good delivery EXCEPT: A) 1 certificate for 200 shares and 1 certificate for 300 shares. B) 10 certificates for 30 shares each and 4 certificates for 50 shares each. C) 5 certificates for 40 shares each and 5 certificates for 60 shares each. D) 10 certificates for 50 shares each.
Answer: B Good delivery between brokers requires delivery of certificates of 100 shares, multiples of 100, or the ability to stack certificates in piles of 100 shares. Note that, the 10 certificates each for 30 shares could not be stacked in units of 100.
Government agency securities settle: A) the seventh calendar day. B) the third business day. C) the next business day. D) in 2 business days.
Answer: B Most government agencies are treated as a corporate issue. Trades of corporate securities settle regular way (in 3 business days).
Your customer owns 100 shares of ABC Corporation being held in street name. What procedure will apply regarding your customer's proxy? A) The customer is required to sign one proxy card for his 100 shares. B) The brokerage firm must forward the proxy to your customer. C) ABC Corporation must send a proxy to your customer. D) The brokerage firm holding the shares must vote the proxy.
Answer: B The broker/dealer must forward the proxy to the beneficial owner.
A client with no ABC shares in his account wants to place an order to sell long 200 shares of ABC stock. Which of the following must a representative determine before accepting the order? A) Whether the client will pledge other securities as collateral to secure a stock loan and effect timely delivery. B) Where the stock is currently held and whether it can be delivered in 3 business days. C) The availability of ABC shares from a stock lending firm. D) The client's willingness to deliver other securities from his account should he fail to deliver the stock.
Answer: B The representative must make affirmative determination (i.e., ascertain the stock's location and whether the customer can deliver it within 3 business days). The client's willingness to deliver other securities does not guarantee that ABC shares will be delivered on time
Which of the following is NOT good delivery for 300 shares of stock? A) 6 certificates for 50 shares each. B) 4 certificates for 75 shares each. C) 3 certificates for 60 shares each and 3 certificates for 40 shares each. D) 3 certificates for 100 shares each.
Answer: B To be good delivery, certificates must generally be stackable, or breakable, into 100-share units or multiples of 100.
A customer, after placing an order to buy 1,000 shares of XYZ at the market, receives a report that the stock was bought at 31.30. The following day, the customer receives a corrected report stating that the shares were purchased at 31.40. Under the rules regarding erroneous trade reports to customers, which of the following statements is TRUE? A) The trade will be canceled. B) The price discrepancy must be resolved through arbitration. C) The customer will pay 31.40. D) The customer will pay 31.30.
Answer: C Errors made when reporting trade details to a customer will not cancel or alter the trade that was executed. The customer must pay the executed price; in this case, 31.40.
If a customer fails to return a proxy statement to a member firm by the 10th day before the annual meeting, the member may vote the shares: A) with the permission of the issuer. B) under no circumstances. C) provided the matters to be voted on are of minor importance. D) without restriction.
Answer: C If a customer signs and returns a proxy statement and fails to indicate how the shares are to be voted, the member must vote the shares as recommended by management of the issuer. If, however, the customer does not return the proxy by the 10th day before the annual meeting, the member may vote the shares as it sees fit as long as the matters to be voted on are of minor importance. If the matters are of major importance (e.g., a merger or the issuance of additional shares), the member may never vote the shares.
A client places a sell stop order good for the day only. Under NYSE rules, you must: A) partially write an order ticket and complete only upon execution. B) write an order ticket only if the order is executed. C) write an order ticket upon receipt of the order. D) partially write an order ticket and complete the ticket before market close.
Answer: C Order tickets must be written and time stamped upon receipt of the order.
Which of the following must be included on a municipal securities order ticket? A) Statement that the name of the contra party will be given on request. B) Statement that time of settlement will be given on request. C) Indication of whether the order is solicited, unsolicited, or discretionary. D) Broker/dealer firm's capacity.
Answer: C Whether the trade is solicited, unsolicited, or discretionary on the order ticket. The other items, which may not be known yet, go on the confirmation.
A customer sells $5,000 worth of a security in a cash account and on the same day purchases $8,000 worth of a different security in the same account. At the close of the 5th business day following these transactions, no payment has been received from the customer and no extension has been obtained. Assuming no change in market value, the firm must: A) liquidate $5,000 of securities and freeze the account for 90 days. B) cancel both the purchase and the sale and freeze the account for 90 days. C) liquidate $3,000 of securities and freeze the account for 90 days. D) liquidate the $8,000 transaction and freeze the account for 90 days.
Answer: C When an investor buys and sells different securities in the same account on the same day, the two transactions can be netted against each other to determine whether money is due to the client or the client owes money to the firm. In this question the client owes the firm $3,000 (an $8,000 purchase netted against a $5,000 sale). According to Regulation T, the investor has 2 business days after settlement (5 days total) to pay the amount owed. Since he has failed to do so and no extension has been obtained, the unpaid-for portion of the trade, which is $3,000, will be liquidated and, according to Regulation T, the account will be frozen for 90 days.
If a broker/dealer erroneously reports the purchase of 100 shares of ALF at 28.65 on a market order, and the firm later finds the actual price paid at execution was 29, what price does the customer pay for the shares? A) 28.65. B) 29.65, with the difference split between the firm and the customer. C) He has the option of canceling the order. D) 29.
Answer: D If the actual price was 29, the customer must accept the trade at that price even though the trade was confirmed erroneously at a different price. Note that at the execution price of 29 the transaction is still within the parameters of the order instruction given which was to purchase 100 shares at the market.
Which of the following would be found on a when-, as-, and if-issued confirmation? Trade date. Settlement date. Price. Accrued interest. A) I and II. B) II and IV. C) III and IV. D) I and III.
Answer: D Information that does not appear on a when-issued confirmation can easily be remembered as SAT (settlement date, accrued interest, and total amount due). The trade date and price per bond are included on the when-issued confirmation.
A municipal bond transaction is labeled T+3. This means that: A) it is a dealer-to-dealer trade involving a 3% markup. B) the bond was issued at a premium of 3 points over par. C) the bond has 3 months of accrued interest . D) the trade is settled regular way in 3 business days.
Answer: D T+3 means settlement takes place 3 business days after the trade. This is regular way settlement.
All of the following statements regarding customer confirmations are true EXCEPT: A) the confirmation must disclose whether the broker/dealer is a market maker in the security sold. B) the confirmation must disclose commissions if the firm acted as agent. C) the confirmation must disclose if a control relationship exists. D) the customer must receive the confirmation no later than the business day after the trade.
Answer: D The customer must be sent or receive a confirmation from the broker/dealer no later than completion of the transaction.
Under the Uniform Practice Code, regular way transactions for common stock settle on the: A) same day as the trade date . B) 2nd business day following the trade date. C) 5th business day following the trade date. D) 3rd business day following the trade date.
Answer: D Under the Uniform Practice Code, regular way trades settle 3 business days after the trade date (T+3). Cash settlement for a trade occurs on the same day as the trade date, and Regulation T settlement is T+5.
A confirmation of each customer trade must be given or sent: A) on the trade date. B) before the trade date. C) before the settlement date. D) on or before the settlement date.
Answer: D A confirmation must be sent to a customer on or before the completion of the transaction (the settlement date).
When a customer enters a sell order and the customer is in possession of the certificates, a broker/dealer must determine all of the following EXCEPT: A) whether the securities are in deliverable form. B) the location of the securities. C) whether the client can make delivery promptly . D) whether the transfer agent has accepted the securities.
Answer: D A firm must make an affirmative determination and be reasonably sure the client can make prompt delivery. Conversely, approval of the transfer agent is not a factor when accepting a sell order.
A member firm may charge a customer for: forwarding proxy materials. safekeeping of securities. collection of dividends and interest. providing research reports. A) I and III. B) I and IV. C) II and IV. D) II and III.
Answer: D A member can never charge a customer for forwarding proxy material because the member is reimbursed by the issuer for this service. Charging a customer separately for research requires the member to register as an investment adviser. A member may charge for holding securities or for collecting interest and dividends.
If a registered representative marked a solicited order ticket as unsolicited, this act is: A) prohibited by the markup policy. B) permitted with the permission of a branch manager. C) a violation of FOMC regulations. D) a violation of FINRA rules.
Answer: D It would be a violation of FINRA rules.
An order memorandum or ticket must be completed: A) by the close of business or trade date. B) by the close of business on T + 1. C) by settlement date. D) prior to order execution.
Answer: D Order tickets must be prepared prior to order execution
Regular way settlement of the following transactions must settle on the third business day after the trade date EXCEPT: A) for a broker/dealer buying a corporate bond from another dealer. B) for a customer selling a municipal bond through a broker/dealer. C) for a customer buying closed-end fund shares through a broker/dealer. D) for a broker/dealer buying a Treasury bond for its own account
Answer: D Regular way settlement for U.S. government bonds occurs on the business day after the trade date. Corporate bonds and closed-end funds fall under the SEC's settlement rule, and MSRB rules require three-day settlement of municipal bond secondary transactions.
Regular way settlement for U.S. government bonds is: A) same day. B) two business days. C) three business days. D) next business day.
Answer: D Regular way settlement of government bonds occurs on the next business day
A broker/dealer may charge customers for which of the following services? Safekeeping of customer's securities, exchange, or transfer. Collection of customer's interest or dividends. Forwarding of proxy material to the customer. Loans made to customers. A) I and II. B) II and IV. C) I, II, III and IV. D) I, II and IV.
Answer: D The Conduct Rules permit FINRA members to charge reasonable fees to their customers for a variety of services. Included in chargeable services are the collection of interest and dividends, finding a buyer for a client who wishes to sell a relatively illiquid investment, and holding customers' securities in safekeeping. Members may also charge interest on loans made to customers. However, the expenses associated with sending proxy statements to customers whose securities are being held in trust by the member cannot be charged to the customer. Instead, the member may seek (and receive) reimbursement from the issuer for these expenses, since the issuer would have incurred these expenses had the customer/shareholder been holding the securities directly
A bona fide regular customer, upon request, may inspect a broker/dealer firm's: A) officers' personal holdings. B) income statement. C) underwriting agreements. D) balance sheet.
Answer: D The conduct rules require that a broker/dealer make available, for inspection to a regular customer, a copy of the firm's most recent balance sheet
Which of the following persons must sign a stock or bond power to effect good delivery of securities sold from an account set up under the Uniform Transfer to Minors Act? A) Minor. B) Parent. C) Donor. D) Custodian.
Answer: D The custodian must sign securities in a custodial account to effect good delivery
If an order is executed for a customer and the registered representative (RR) later notices that he entered the wrong account number on the order ticket, what action must he take? A) Contact that account's owner and ask if he wants to buy the stock. B) Transfer the stock into the correct account. C) Transfer the stock into his own account and pay for the purchase. D) Inform a principal, who will take or direct any action needed to correct the error.
Answer: D The representative should report the mistake and not take any action to remedy the mistake without the approval of a principal.
All of the following are true regarding a fail to deliver EXCEPT A) the BD representing the seller can also be liable for buying in the securities if the BD's customer has not made good delivery on the securities sold B) the buyer may buy in the securities owed to him and charge the seller for any loss incurred C) fail to deliver occurs when the selling BD does not deliver the securities in good deliverable form D) even though a fail to deliver has occurred and is still outstanding, FINRA mandates that the seller still be paid
Answer: D The seller cannot be paid as long as the fail to deliver exists. Fail to deliver occurs when the selling BD does not deliver the securities in good deliverable form. The buyer or the selling BD can buy in the securities to complete the transaction, and any loss incurred to do so will become the responsibility of the seller who failed to deliver.
If a mutilated certificate has been authenticated by the transfer agent prior to delivery, the certificate: A) is not in good deliverable form. B) must be authenticated by the issuer to be good delivery. C) must be authenticated by the selling dealer to be good delivery. D) is in good deliverable form.
Answer: D The transfer agent has the authority to decide whether or not a certificate is in good deliverable form.
A municipal bond in default is in good delivery form if past-due coupons are attached. currently due coupons are attached. subsequently due coupons are attached. the issuer files a default guarantee letter with the MSRB. A) I and IV. B) I and III. C) III and IV. D) I, II and III.
Answer: D To be in good delivery form, a municipal bond must be accompanied by all unpaid coupons: past due, currently due, and subsequently due.