Regulations
There is a violation of Rule G-37 because the contribution was made to a campaign where the MFP is not entitled to vote
A Municipal Finance Professional (MFP) who lives in San Francisco makes a political contribution to the election campaign of an individual running for mayor of Los Angeles. Which statement is TRUE about this?
This individual must be State-registered This individual must pass either the Series 65 exam or the Series 66 exam
A Series 7 licensed individual wishes to sell "wrap" accounts. Which statements are TRUE?
New Account Municipal Transaction Customer Complaint
All of the following must be approved or reviewed by the municipal principal:
Voluntary Faster Cheaper Mediation is NOT BINDING. Can move on to arbitration if either party objects to mediator decision.
All of the following terms apply when comparing the FINRA Code of Mediation to the FINRA Code of Arbitration:
This is prohibited for both competitive bid and negotiated underwritings
A broker-dealer who acted as financial advisor to a municipality in structuring a new issue now wishes to act as underwriter in the bond offering. Which statement is TRUE?
The corporate officer is considered to be a tipper Each analyst is considered to be a tippee
A corporate executive holds a meeting with a select group of research analysts and gives information about the company's expected revenue and income for the upcoming quarter. If the analysts use the information to make recommendations, which statements are TRUE under Regulation FD?
4 b days
A corporate issuer is obligated to file an 8K report of significant events within how many business days of the event?
The customer will become a general creditor in the amount of $90,000
A customer has a cash account holding $160,000 of securities and $340,000 of cash. If the broker-dealer were to fail, which statement is TRUE regarding the status of the account in an SIPC liquidation?
The account is covered for $200,000. NOT the customer must deposit $150,000 to receive the $350,000 of securities.
A customer has an account with a brokerage firm that is in receivership. The account holds $350,000 of securities and has a $150,000 debit. Which statement is TRUE regarding SIPC coverage? #10
The customer is defined as an "insider" under the Securities Exchange Act of 1934 The customer is prohibited from selling ABC stock short; however, the customer may short against the box at year end, as long as the position is covered within 20 days If the customer trades ABC stock at a profit after having held the stock for less than 6 months, the gain is forfeited The customer must report trading activity to the SEC
A customer inherits 3,000,000 shares of ABC stock, a company listed on the NYSE which has 10,000,000 shares outstanding. The customer is not a director or officer of the company. Which of the following statements is (are) TRUE?
The order is the same as a not held order The order can be accepted without a prior written discretionary power of attorney from the customer
A customer instructs a registered representative to "Buy 500 shares of ADP whenever you think the price is right." Which of the following statements are true about this order?
Account statements. Under SEC rules, customer account records (statements of account) must be retained for 6 years. Written customer complaints must be retained for 4 years. Trade confirms and order tickets ("memoranda") must be retained for 3 years.
A customer opened an account with a member firm exactly 6 years ago. Under FINRA rules, which records must the firm have retained for this entire time period?
positive representation that he or she is not restricted within 12 months preceding the first purchase negative representation that he or she is not restricted annually thereafter
A customer that wishes to open an account to buy new issues is required to make a:
only if the clients are major institutional investors
A foreign broker-dealer that is not SEC registered is permitted to deal with clients in the United States:
Because the issuer official no longer holds elected office, the contribution limits of Rule G-37 do not apply
A municipal issuer official has lost her re-election campaign and has just left elected office. She is soliciting political contributions in a "clean-up" campaign to settle her campaign debt. Which statement is TRUE about an MFP that wishes to contribute $500 to the "clean-up" campaign?
2 years
A registered individual leaves the industry. The individual's license(s) will expire if that person remains unaffiliated with a brokerage firm for how long?
This event must be reported as an Outside Business Activity to both FINRA on the individual's U-4 Form and to his or her employer
A registered representative at a FINRA member firm goes on the Board of Directors of a not-for-profit charity. Which statement is TRUE?
is defined as a research report; 15 or more requires prior approval of the supervisory analyst
A registered representative at a FINRA member firm wishes to hold a seminar after work at the branch location. It will feature a dinner buffet, followed by a talk about the firm's latest investment recommendations and their possible suitability for the attendees. Each attendee will be asked to complete a suitability questionnaire prior to the dinner so that appropriate recommendations can be made. If the event is attended by 12 existing customers and 8 prospective customers, then the "talk:"
This is prohibited. Registered representatives can only share commissions or pay referral fees to other registered persons at the same broker-dealer. Because these 2 representatives work for different firms, payment of the referral fee is prohibited.
A registered representative at another member firm has a client who wishes to buy a Direct Participation Program (DPP) unit, a product that is not offered through his firm. He has a friend that is a registered representative at another member firm where DPPs are sold, and offers to refer the prospective client in exchange for a small fee. Which statement is TRUE?
The registered representative can direct customers to the private placement only with the prior written approval of his employer
A registered representative employed by ABC broker/dealer is good friends with an independent venture capitalist. The venture capitalist asks the registered representative to obtain investors for a private placement that he is forming. Which statement is TRUE?
FINRA describes a public appearance as a spontaneous, unscripted, live presentation to potential investors. These are not subject to FINRA filing rules and do not require prior principal approval (unless the firm requires this as an internal procedure). However, they are subject to the firm's written supervisory procedures, which must include post-use review and approval by a principal.
A registered representative has been contacted by a local television station to participate in a televised roundtable about senior citizen investing. This is defined by FINRA as a(n):
prohibited since this is making a recommendation based upon a rumor
A registered representative hears from a good friend that "ACME Fund has taken a large position in ABCD stock." Based on this, the registered representative calls all of her customers with the recommendation that ABCD stock be purchased immediately. This action is:
The account can buy the issue without restriction
A registered representative is a 5% participant in an investment club formed by members of the local Elks Club. The Elks Club investment club has opened a securities account at ABC Brokerage. The account wishes to buy an IPO being offered by an underwriter. Which statement is TRUE?
The commercial must be approved in advance by the designated Registered Options Principal
A registered representative wishes to appear in a television commercial about options strategies. Which statement is TRUE? #6
The speech must be approved in writing by a compliance officer or principal The speech should be informational, not promotional in nature The speech can contain comparisons of past performance of recommended investments to that of recognized market indices A written copy of the speech must be retained by the member firm for 3 years
A registered representative wishes to give a speech about investments in growth stocks versus value stocks to a group of 50 retail attendees. Which of the following statements are TRUE regarding the speech?
Regulation Crowdfunding typically purchased by small investor, 2k minimum, 100k max
A start-up company looking to raise a small amount of "seed" capital would most likely use:
13D
An investor who accumulates a 5% or greater position in the common stock of a registered issuer must file which of the following forms with the SEC?
there is no holding period requirement a Form 144 must be filed with the SEC
An officer of a company has acquired shares of that issuer in the open market. If the officer wishes to sell the shares:
semi annually
Broker-dealers are required to report their computed Net Capital and balance sheet to customers:
MSRB writes rules for municipal market participants; but cannot enforce its own rules. It relies on the existing enforcement network for this: Office of Comptroller of Currency Federal Reserve Board Federal Deposit Insurance Corporation
Enforcement of MSRB rules for bank dealers is performed by all of the following EXCEPT the:
Correspondence: A communication made available to 25 or fewer existing or prospective retail clients Retail Communication: A communication made available to more than 25 existing or prospective retail clients
FINRA defines communications with the public as either:
suspension
Failure to complete the Regulatory Element within the stated time period will result in a registered representative's:
Restricted stock must be held fully paid for a minimum of 6 months prior to sale while control stock can be sold immediately
How does restricted stock differ from control stock in a Rule 144 sale?
10 days following the effective date 3 days following the effective date for a secondary offering
If a member firm acts as the managing underwriter in an initial public offering of an issuer's securities, then the member is prohibited from issuing a research report on that company for:
disclose whether the yield is the coupon rate or yield to maturity
If a municipal securities firm wishes to advertise a given percentage yield on a security, the advertisement must:
give a blanket certification to all appearances made each quarter
If an analyst makes a public appearance, under Regulation AC (Analyst Certification) , the analyst MUST:
3x, paid to us treasury dept
If an individual is found guilty of insider trading, the civil penalty imposed can be how many times the profit achieved or loss avoided?
identity of sender time, place and address from which sent phone number from which sent
If an unsolicited facsimile is sent to a potential client, all of the following information must be included
Investment Banking and Research Trading and Investment Banking
Information barriers are required between which brokerage firm departments?
selling calls on their own stock
Issuers of securities are prohibited from:
each account separately, per customer name on acct.
John Jones has an individual cash account; a joint margin account with his wife; a custodian account for his minor daughter; and a custodial account for his minor son; all at the same brokerage firm. If the firm should fail, Securities Investor Protection Corporation will cover:
FINRA
Margins on government and municipal securities are set by:
3 years
Records of speaking engagements must be maintained by FINRA member firms for:
ESOPs (Employee Stock Ownership Plans)
Restricted shares subject to sale under Rule 144 are most commonly acquired through:
A security which was never registered and can only be sold in the public markets when it is either registered, or sold under an exemption provision
Restricted stock is best described by which of the following?
5 business days prior to the effective date cannot be covered by purchasing the issue from the syndicate
Rule 105 of Regulation M, covering transactions that occur in the secondary market during the 20-day cooling off period for "add on" securities offerings, requires that any short sales of the issue that occur:
at the highest independent bid or the last reported sale price, whichever is higher
SEC Rule 10b-18 allows an issuer to buy its shares in the open market:
court appoints a trustee in bankruptcy
The "valuation date" for securities in a SIPC liquidation is the date the:
Immediately. As long as the 6-month holding period requirement has been met on the restricted shares (the officer held them 3 years) when they are donated, the charity can sell them immediately. There is no requirement that another 6-month holding period be met.
The President of PDQ Corporation donates restricted PDQ shares to the United Way after holding them for 3 years fully paid. United Way can sell the stock without restriction:
chief corporate officers to certify the company's financial disclosures research analysts to be separated from investment banking functions at broker-dealers
The Sarbanes-Oxley Act of 2002 requires:
Securities Exchange Act of 1934
The Securities and Exchange Commission was created by the:
corporate bondholders from being taken advantage of by the issuing corporation
The Trust Indenture Act of 1939 protects:
six months by an insider
The definition of a "short swing" profit under the Securities Exchange Act of 1934 is a completed round turn trade effected at a profit within:
advertising and sales literature
The designated Registered Options Principal (designated ROP) is responsible for the approval of options:
Unregistered restricted stock must be held for 6 months, fully paid, before it can be sold If the sale is for 5,000 shares or less, worth $50,000 or less, no SEC filing is required Any short swing profits (within 6 months) from trading the stock must be returned to the corporation
The director of a public corporation wishes to sell stock of that company in compliance with Rule 144. Which statements are TRUE?
$50 million
The minimum asset size threshold for an investor to be considered an "institutional client" for purposes of the FINRA communications rules is:
The offering must be registered with the SEC The offering is subject to regulation by FINRA
To make a public offering of a Direct Participation Program, which statements are TRUE?
Filing of a Form 144 Issuer's representation that the corporation is current with all required SEC filings Seller's representation that the securities have been held fully paid for 6 months Broker's representation that it did not solicit the transaction
To sell restricted stock in compliance with the provisions of Rule 144, which of the following are required?
A FINRA registered representative A person who is financially dependent on a FINRA registered representative A financially independent sibling of a FINRA registered representative
Under FINRA Rule 5130, which of the following are prohibited from buying a new issue directly from an underwriter?
Public Appearances
Under FINRA communications rules, if a representative participates in an Internet Chat Room, this is defined as:
The research report does not have to be filed with FINRA The research report must be approved by a supervisory analyst
Under FINRA rules, which of the following statements are TRUE regarding research reports?
does not have to disclose the underwriter's spread to customers in a competitive bid issue must disclose the underwriter's spread to customers in a negotiated offering
Under MSRB rules for new issues, the dealer:
registered representative must receive approval to do so from the principal registered representative must share only in proportion to the capital contributed registered representative must share in both gain and loss
Under MSRB rules, all of the following statements are true about a registered representative sharing in a customer account:
cannot disseminate quotes severally for the securities held by the account; any quote can only indicate that one market exists
Under MSRB rules, municipal securities traders that participate in secondary market joint accounts:
Trade comparisons Customer account statements Customer complaints
Under MSRB rules, which of the following records must be kept for specified time periods?
An Offering Memorandum must be delivered to all purchasers Full disclosure must be made to investors
Under Regulation D, which of the following statements are TRUE?
There is no time limitation on the period that a stabilizing bid can be maintained A stabilizing bid cannot be placed unless a "Notice of Stabilization" is included in the prospectus
Under Regulation M, which statements are TRUE regarding stabilizing bids entered by market makers?
Syndicate members that are not market makers are permitted to buy Tier 1 securities anytime prior to the effective date Syndicate members that are not market makers are restricted from buying Tier 3 securities for the 5 business day window of time prior to the effective date
Under Regulation M, which statements are TRUE?
at, or prior to, the placement of the sell order by the seller of the restricted shares
Under Rule 144, a customer wishing to sell must file the 144 "Notice of Sale" with the SEC:
1% of the outstanding shares or the average of the last 4 weeks' trading volume, whichever is greater
Under Rule 144, how much of the issuer's outstanding shares can be sold every 90 days?
5,000 shares $50k
Under Rule 144, no filing is required if the sale amount every 90 days does not exceed:
analyzes securities and provides a basis upon which to make an investment decision is distributed to 15 or more clients
Under SEC rules, a representative would be considered to be delivering a "research report" to customers if the communication:
3
Under the "penny stock rule," a customer is considered to be "established" and does not have to sign a suitability statement to buy a penny stock if that customer has bought how many penny stock issues previously from that broker-dealer?
Rule 144 allows the sale of the greater of 1% of the outstanding shares or the weekly average of the preceding 4 weeks trading volume every 90 days. 1% of 50,000,000 shares = 500,000 shares.
What is rule 144?
Coupon Anticipated Yield and Average Life of Investment Specific Tranche ID - Number and Class Final Maturity Date Underlying Collateral
Which disclosure is required when advertising a CMO Tranche?
Merger with another publicly held company Spin off of a subsidiary as a publicly held company
Which of the following actions on the part of a corporation would require registration statement filing with the SEC under Rule 145?
none. Prior to the filing of the registration statement, nothing can be done. Once the registration statement is filed, a preliminary prospectus may be used to obtain indications of interest. Once the registration is effective, the final prospectus can be used to offer and sell the issue.
Which of the following activities are allowed prior to the filing of the registration statement?
$29.75 $29.88 $30.00
Which of the following can be a stabilizing bid for a new issue that has a Public Offering Price of $30 per share?
Office of the Comptroller of Currency Federal Deposit Insurance Corporation Federal Reserve Board
Which of the following enforce MSRB rules for bank dealers that are NOT registered with FINRA?
Official Statements for municipal bond issues, notes, and 529 plans Details of bonds that have been pre-refunded Real-time prices and yields for municipal bond trades, as reported through RTRS Real-time price and yields for municipal note trades as reported through SHORT
Which of the following information is available on EMMA? ("Electronic Municipal Market Access" - the MSRB's public web portal for information about the municipal market, including Official Statements for new issues and real-time bond trade reports.)
Options research report Standard option worksheet Lecture on options investing Options Sales Literature is any communication distributed to customers or the public that contains any analysis, performance report, projection or recommendation.
Which of the following is defined as options "sales literature"?
Seminar text for a speech that will be delivered to 30 prospective retail clients
Which of the following is defined as sales literature?
Issuer's representation letter Broker's representation letter Seller's representation letter
Which of the following is required to sell "144" stock?
American Depositary Receipts American Depositary Shares American Style Options
Which of the following is subject to the registration requirements of the Securities Act of 1933?
The offer must remain open for at least 20 business days Each "sweetening" of the offer must extend the offer for an additional 10 business days During the life of the offer, any subscribing investors' shares that are tendered are held in escrow pending the outcome of the offer During the offer, they are prohibited from buying the stock in the market.
Which of the following statements are TRUE about a tender offer for common shares:
Rule 144A allows qualified institutional buyers to buy and trade between themselves large blocks of privately placed issues Rule 144A permits issuers to sell tradeable private placement units to qualified institutional buyers
Which of the following statements are TRUE regarding Rule 144A?
Margin securities can be commingled with the securities of other customers and rehypothecated Fully paid securities must be segregated and placed in safekeeping
Which of the following statements are TRUE regarding a broker-dealer holding margin and fully paid securities?
The brokerage firm can charge for safekeeping the securities The brokerage firm can charge for collecting dividends and interest on the securities
Which of the following statements are TRUE regarding a customer's securities held in a margin account at a brokerage firm?
Registered representatives must be trained by the firm about what content is permitted in such communications Registered representative communications must be supervised and reviewed by the member firm Registered representative communications may only be sent from a location supervised by the member firm
Which of the following statements are TRUE regarding electronic communications sent by registered representatives at member firms that have a communications compliance program in place?
The spread must be disclosed The initial offering price of each maturity must be disclosed The participation amount of each underwriter does not have to be disclosed The names of the underwriters do not have to be disclosed
Which of the following statements are TRUE regarding negotiated municipal underwritings?
It must be approved prior to use by the designated Registered Options Principal The use of recommendations, or of past or projected performance, is prohibited
Which of the following statements are TRUE regarding options advertising that is not accompanied by the ODD (Options Disclosure Document)?
It must be approved prior to use by the designated Registered Options Principal It must be accompanied or preceded by a copy of the latest Options Disclosure Document Showing past or projected performance is permitted
Which of the following statements are TRUE regarding options sales literature that includes a recommendation?
The securities must be sold on an agency basis The firm is prohibited from soliciting orders to buy 144 shares solicitation of orders to buy is restricted to customers expressing interest within the past 10 days the issuer is reporting currently to the SEC
Which of the following statements are TRUE regarding restricted securities being sold under Rule 144?
They are normally acquired through Regulation D private placement transactions They can be sold publicly under a Rule 144 exemption
Which of the following statements are TRUE regarding restricted shares?
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
Which of the following statements are TRUE regarding the Official Statement?
Offering to trade mutual fund shares for a customer Recommending to a customer that he should get a group of friends together to buy mutual fund shares at a breakpoint
Which of the following would constitute violations of the FINRA Conduct Rules?
The minimum life of the initial offer is 5 business days Each "sweetening" of the offer must extend the offer for another 5 business days
Which statements are TRUE about an issuer making a tender offer for its non-convertible bonds?
A registered representative is prohibited from buying a new issue directly from the underwriter(s) A registered representative is permitted to buy a new issue once it starts trading in the secondary market
Which statements are TRUE?
OTCBB or pink sheet securities
penny stock rule requires that new customers who receive a recommendation and purchase non-exchange listed securities priced under $5 per share sign and return a suitability statement before sale can be confirmed
Listed securities trade in the first (exchanges), third (OTC trading of exchange listed securities) and fourth (direct trades between institutions via ECNs) markets.
where do listed securities trade?
