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82 Cards in this Set

  • Front
  • Back
what form is the application for Registration of representative submited on
U4
who is the U4 form filed and reviwed by
Central Registration Depository
what does CRD stand for
central registration and depository
What is CRD for
the permanent record within the securities business
what is answered on form U4
questions about personal background including residential and business history
what can lead to a statutory disqualification
- ansering yes to background questions on the u4 about applicants history with respect to violoation of SRO rules
what does does statutory disqualification mean
- an applicant is not permitted to join the firm as a registered person
how long does FINRA retain juristiction over RR
two years following resignation
what are the 6 things are included in page 3 of U4 form
- criminal legal proceedings
- regulatory disciplinary actions
- civil judicial actions
- customer complaits
- terminations
- financial events
what 5 things would qualify for a statutory disqualification
- being suspended or expelled from a SRO
- having a registration denied, suspended, or revoked by the SEC or other regulatory agency including commodities futures trading commission and foreign regulators
- violating or assiisting in the violation of any securities or commodities law, or the rules of the MSRB
- failing as a principal or supervisor, to reasonably supervise a subordinate who violates rules
- being convicted within the last 10 years of a felony or misdemeanor involving false reports, bribery, perjury, crimes related to funds or securites or any other felony
In failing, as a principal or supervisor to reasonably supervise a subordinate who violates rules when does this not apply as a statutory disqualification
- there was a supervisory system in place that would be reasonably expected to detect the violation
- supervisor reasonably discharged supervisory duties under the system
what do RR agree to by signing U4 form
file timely amendments if the information on the form changes
Who must be fingerprinted that works fo ra broker-dealer
- is engaged in the sale of securites
- regularly comes in contact with money or securities
- has access to the keeping, handling, or processing of securities, or the records of original entry of the broker dealer
what must occur if a registered person resigns or is terminated from a member firm
the firm is required to notify FINRA within 30 days on form U5
what is required in form U5
reason the RR left the firm and must be updated if the answers to certain questions change within the 30 days
what is form U6 used for (2)
regulators, states and/or jurisdictions use this to report disciplinary actions against an RR or firm
- also used to report final arbitration awards against RRs and firms
what is the central registration depository (3)
- automated database containing information concerning the employment and disciplinary histories of registered persons
- used to process applications for agents registrations for the states
- processing applications for withdrawal for agents and broker dealers
what is brokercheck
a tool from FINRa for investors to check the background of their existing salesperson or someone they are considering doing business with
how can brokercheck information be obtained
-toll-free telephone number or the website of FINRA registratoin
what 6 things does brokercheck disclose
- employment history (10 yr)
- current employing firm
- all approved registrations
- current legal and regulatory charges and actions brought against the RR
- pending customer-initated arbitrationa nd civil proceeding involving investment related activities
- any arbitrations or civil proceedings that resulted in an award to a customer
- settlements of 10 or more in an arbitration, civil proceeding, or complaint involving investment related activities
- written customer complaints alleging sales practice violations and and compensatory damages of 5k or more were filed within the last 24 months
- formal investigations involving criminal or regulatory matters
- terminations of employment after allegations involving violations of investment-related statutes or rules, fraud, theft or failure to supervise investment- related activities
how long does brokercheck provide information
person who have been registered (or terminated) within the last 10 years
What do FINRA's investor education and protection rule require member firms to give each customer once every calender (3)
- FINRA regulation's public disclosure Program (brokercheck) hotline number
- FINRA's web site address
- A statement as to the availability to the customer of an investor brochure that includes information describing FINRA's brokercheck
what is the series 63
covers state securities regulations found in the uniform securities act
what are blue-sky rules
each RR must be registered in every state they do business in
what does a series 7 registration permit
- professionals to transact business and recieve transactional compensation on a wide variety of instruments such as stocks, bonds, options and investment company products such as mutual funs
- also sell variable annuities and life insurance policies if they possess the proper insurance licensing
what can series 7 RR not engate in for transactions
futures or commodities transactions
what series is required for commodities and future selling
series 3
what compensation does a series 7 permit
transactional compensation such as commision or sales charges
what must someone be registered as to recieve fee income
investment adviser representative (IAR)
what must be passed to register as an IAR
- series 65 or 66
what three negative events must be reported to FINRA after hiring
- has violated a securities, insurance, or commodities law, rule or regulation
- subject of a written customer complain involving allegations of theft or misappropriation of funds or securities or forgery
- has been been denied registration or is expelled from a domestic or foreign regulatory body
how soon must member firms report negative events
not later than 30 calender days from their discovery
how long must you wait if you fail qualification exam
30 days first and second time
180 days 3rd time
what must occur at the annual complience meeting or interview-
discussion of compliance issues that are relevant to the business of the representatives inovlved
how does splitting commision work
- each RR involved must have the proper FINRA and or state registrations
- if a customer moves to anothe rstate but retains the same represneative, the RR may need to obtain the required state registration to continue to service the account
how soon must a member firm inform finra is a person is subject to action by a state or federal securities, insurance or commodities regulators
- 10 business days
what is eligibility proceeding
applying to FINRA for special permission to employ a Statutorily DQ employeee
What 6 things are taken into consideration for a statutorily DQ employee on the Eligibility proceeding
- nature and gravity of the disqualifying event
- length of time that has elapsed since the disqualifying event
- whether any intervening misconduct has occured
- any other mitigating or aggravating circumstances
- the nature of the securities-related activity in which the applicant wishes to participate
- the disciplinary history and industry experience of both the member firm and the person proposed by the firm to serve as teh responsible supervisor of the DQ person
what are the two parts of CE
- regulatory element which is reated and adminsitered by regulators
- firm element which is the repsonsibility of each broker dealer
when are RRs required to participate in regulatory element training
second anniversary of their initial securities registaration and every three years there after for the remainder of their careers
who writes regulatory element CE requirements
- Securities Industry/regulatory council on continuing education
How long does RR have from anniversary date to complete regulatory element training
120 days
what is considered a covered person with regard to the firm element of continuing education
- any registered person who has direct contact with customers in the conduct of a member firm's securities sales, trading, or investment banking activites, and her immediate supervisors
what should thefirm element of annual training be focused on (3)
- general investment features and associated risks
- suitability and sales practice considerations
- applicable regulatory requirements
what occurs when military RR are on active duty (4)
- indivudals are not permitted to function as RR's or contact customers
- may continue to recieve compensation based on securites transaction executed by existing clients
- exempt fromt eh two year inactive status limtation
- exempt from CE requirements
what three things customer contact activites may non-registered individuals do
- extend invitation to a firm sponsored event
- inquire whether a prospective customer wishes to discuss investments with a RR
- inquire whether a prospective customer wishes to recieve investment literature from the firm
what must occur when an associated person of a foreign broker-dealer makes a sales calle
- he is permitted as long as he is accompanied by a registered representative of a US broker dealer
May commisions be paid to unregistered person
- an RR may not offer to pay commisions or finders fees to an unregistered person such as an attorney or accountant who generates referrals
What are the rules for outside business activities
- must provide written notice to their employing broker-dealer before participating in any business activities outside the scope of the persons normal relationship with firm
what are private securities transactions
ones outside the regular scorpe of an associated employment with the member firm, including private placements, traditional public offerings and arranging loans
what are the rules for private securities transactions if the associated person is the recieve compensation
- the member must specifically approve the transaction in writing in order for the person to participate
what are the rules for private securities transactions if associated person will not be compensated for the transaction
- the member may still require the associated person to adhere to specific conditions in order to participate in the transaction
what is selling away
when a RR does not disclose private securiteis transactions
what are the three executing firm responsibiliteies for accounts for employees of other member firms
- notifying the employer member in writing of the intention to open the account
- sending duplicate confirmations and statements to the employer member if requested
- notifying the person opening the account that these proceedures will be followed
what is the responsibility of the employee opening an account at other member firm
- required to give written notice to both the employer firm and the executing firm of his intention to open account
who are also required to report opening new accounts with other member firms
- RR's spouse and dependent children
what must occur is a RR has existing accounts at other member firms
- must notify the firm holding the account of his new status
are there requirements on orders for accounts at other member firms once they ahve been open
no there are not any rules to enter orders
what must occur if a person associated with a member firm wishes to open an account with an investment adviser, bank or other financial institution that is not a member of FINRA
- must notify the empoyeer in writing before opening account
- the employer may request that employee make a written reuest of the financial institution opening the account that it issue duplicate confirmations, statements and other information to the empolying member
- the employing firm is not required to grant approal
when are duplicate statements required
- when a customer of the firm is an employee of FINRA
what are the exceptions for accounts for employees of other member firms
does not apply to transactions involving redeemable investment company shares such as mutual funds, varial contracts or unit investment trusts
what is churning
- excessive trading trypically for the purpuse of generating additional compenstaiton
what are the rules for churning
- no set number of trades or percentage of portfolio turnover that constitutes a violation, the trading activity is viewed in light of the customers objective
what is a discretionary accounts
customer gives the RR written permission to excute transactions without the need to obtain prior approval
what must all trading in discretionary account must be suitable as to
- type
- size
- frequency
what is suitability in descretionary accounts based on
clients profile and objectives
what are rules for sharing in accounts for RR
- Employees of FINRA members may not share in profits or losses in a customers account unless the employee has mad a financial contribution to the account and shares in the profits or losses in direct proportion to the employee's financial contribution
what are the rules for compensating retired RRs
- allowed to continue to compensate retired RR for sales made prior to retirement if a contract is signed with the RR who has retired
- may be made to RRs widow or other benefciary
- only exisiting business, not for new business or accounts obtained after the RR ceases to be employed by member firm
what are trials
compensate thorugh continuing commisions
is a broker dealer permitted to pay a fee to a RR
yes provided this person is also registered as an investment adviser representative
what are the rules for gifts
- member firm personally may not give a gift eceeding 100 per recipient per year to personnel employed by someone else
- does not apply to personal gifts such as birth of a child or wedding gift
what are exempt from the $100 gift requirement
- occasional meal tickets, tickets to sporting and cultural events, reminder advertising and expenses related to legitimate business travel
what should be gifts be valued at
higher the cost or market value
how does splitting commision work at member firms
- not allowed with nonregistered person
- allowed to split if both persons are registered
what are the rules for rebates
- a RR may not offer a rebate commissions to a customer for previous transactions
what are the 5 conditions in which Registered individuals may borrow or lend money to a customers
- customer and RR are immediate family member
- customers is a financial instuttion regularly involved in the business of extending credit or providing loans
- both parties are registered wiht the same firm
- the loan is based on a personal relationship between teh customer and registered person
- the loan is based on a business relationship independent of the customer- broker relationship
How are guarantees prohibitied
employees of member firms may not guarantee against losses in customer accounts or transcations within customer accounts, normay they reimburse a customer for loses in ay way
what is failure to follow customer instructions
- fradulent practice of knowingly failing to follow a customer instructions regarding his account, the agent is not permitted to ignore the customers direction
what are the rules for protecting the confidentiality of client information
not permitted to release client information to a third party, including spouses, attorneys, and accountants, without the written consent of the account owenr
what are exceptions to releasing client information to third parties
SEC and IRS
Describe misrepresntation of FINRA membership
- RR may inform clients that they are FINRA-registered or that their broker-dealer is a FINRA member, however they may not imply that FINRA membership denotes any type of endorsement or approval from the regulators
what must be disclosed in conflicts of interest
- the capacity in which the employee is acting and the source and amount of all compensation earned