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82 Cards in this Set
- Front
- Back
what form is the application for Registration of representative submited on
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U4
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who is the U4 form filed and reviwed by
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Central Registration Depository
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what does CRD stand for
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central registration and depository
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What is CRD for
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the permanent record within the securities business
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what is answered on form U4
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questions about personal background including residential and business history
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what can lead to a statutory disqualification
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- ansering yes to background questions on the u4 about applicants history with respect to violoation of SRO rules
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what does does statutory disqualification mean
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- an applicant is not permitted to join the firm as a registered person
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how long does FINRA retain juristiction over RR
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two years following resignation
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what are the 6 things are included in page 3 of U4 form
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- criminal legal proceedings
- regulatory disciplinary actions - civil judicial actions - customer complaits - terminations - financial events |
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what 5 things would qualify for a statutory disqualification
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- 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 |
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In failing, as a principal or supervisor to reasonably supervise a subordinate who violates rules when does this not apply as a statutory disqualification
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- there was a supervisory system in place that would be reasonably expected to detect the violation
- supervisor reasonably discharged supervisory duties under the system |
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what do RR agree to by signing U4 form
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file timely amendments if the information on the form changes
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Who must be fingerprinted that works fo ra broker-dealer
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- 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 |
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what must occur if a registered person resigns or is terminated from a member firm
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the firm is required to notify FINRA within 30 days on form U5
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what is required in form U5
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reason the RR left the firm and must be updated if the answers to certain questions change within the 30 days
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what is form U6 used for (2)
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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 |
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what is the central registration depository (3)
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- 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 |
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what is brokercheck
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a tool from FINRa for investors to check the background of their existing salesperson or someone they are considering doing business with
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how can brokercheck information be obtained
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-toll-free telephone number or the website of FINRA registratoin
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what 6 things does brokercheck disclose
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- 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 |
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how long does brokercheck provide information
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person who have been registered (or terminated) within the last 10 years
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What do FINRA's investor education and protection rule require member firms to give each customer once every calender (3)
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- 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 |
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what is the series 63
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covers state securities regulations found in the uniform securities act
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what are blue-sky rules
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each RR must be registered in every state they do business in
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what does a series 7 registration permit
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- 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 |
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what can series 7 RR not engate in for transactions
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futures or commodities transactions
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what series is required for commodities and future selling
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series 3
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what compensation does a series 7 permit
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transactional compensation such as commision or sales charges
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what must someone be registered as to recieve fee income
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investment adviser representative (IAR)
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what must be passed to register as an IAR
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- series 65 or 66
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what three negative events must be reported to FINRA after hiring
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- 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 |
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how soon must member firms report negative events
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not later than 30 calender days from their discovery
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how long must you wait if you fail qualification exam
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30 days first and second time
180 days 3rd time |
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what must occur at the annual complience meeting or interview-
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discussion of compliance issues that are relevant to the business of the representatives inovlved
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how does splitting commision work
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- 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 |
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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
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- 10 business days
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what is eligibility proceeding
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applying to FINRA for special permission to employ a Statutorily DQ employeee
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What 6 things are taken into consideration for a statutorily DQ employee on the Eligibility proceeding
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- 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 |
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what are the two parts of CE
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- regulatory element which is reated and adminsitered by regulators
- firm element which is the repsonsibility of each broker dealer |
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when are RRs required to participate in regulatory element training
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second anniversary of their initial securities registaration and every three years there after for the remainder of their careers
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who writes regulatory element CE requirements
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- Securities Industry/regulatory council on continuing education
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How long does RR have from anniversary date to complete regulatory element training
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120 days
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what is considered a covered person with regard to the firm element of continuing education
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- 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
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what should thefirm element of annual training be focused on (3)
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- general investment features and associated risks
- suitability and sales practice considerations - applicable regulatory requirements |
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what occurs when military RR are on active duty (4)
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- 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 |
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what three things customer contact activites may non-registered individuals do
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- 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 |
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what must occur when an associated person of a foreign broker-dealer makes a sales calle
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- he is permitted as long as he is accompanied by a registered representative of a US broker dealer
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May commisions be paid to unregistered person
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- an RR may not offer to pay commisions or finders fees to an unregistered person such as an attorney or accountant who generates referrals
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What are the rules for outside business activities
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- 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
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what are private securities transactions
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ones outside the regular scorpe of an associated employment with the member firm, including private placements, traditional public offerings and arranging loans
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what are the rules for private securities transactions if the associated person is the recieve compensation
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- the member must specifically approve the transaction in writing in order for the person to participate
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what are the rules for private securities transactions if associated person will not be compensated for the transaction
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- the member may still require the associated person to adhere to specific conditions in order to participate in the transaction
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what is selling away
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when a RR does not disclose private securiteis transactions
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what are the three executing firm responsibiliteies for accounts for employees of other member firms
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- 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 |
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what is the responsibility of the employee opening an account at other member firm
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- required to give written notice to both the employer firm and the executing firm of his intention to open account
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who are also required to report opening new accounts with other member firms
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- RR's spouse and dependent children
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what must occur is a RR has existing accounts at other member firms
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- must notify the firm holding the account of his new status
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are there requirements on orders for accounts at other member firms once they ahve been open
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no there are not any rules to enter orders
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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
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- 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 |
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when are duplicate statements required
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- when a customer of the firm is an employee of FINRA
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what are the exceptions for accounts for employees of other member firms
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does not apply to transactions involving redeemable investment company shares such as mutual funds, varial contracts or unit investment trusts
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what is churning
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- excessive trading trypically for the purpuse of generating additional compenstaiton
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what are the rules for churning
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- 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
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what is a discretionary accounts
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customer gives the RR written permission to excute transactions without the need to obtain prior approval
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what must all trading in discretionary account must be suitable as to
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- type
- size - frequency |
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what is suitability in descretionary accounts based on
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clients profile and objectives
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what are rules for sharing in accounts for RR
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- 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
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what are the rules for compensating retired RRs
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- 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 |
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what are trials
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compensate thorugh continuing commisions
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is a broker dealer permitted to pay a fee to a RR
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yes provided this person is also registered as an investment adviser representative
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what are the rules for gifts
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- 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 |
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what are exempt from the $100 gift requirement
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- occasional meal tickets, tickets to sporting and cultural events, reminder advertising and expenses related to legitimate business travel
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what should be gifts be valued at
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higher the cost or market value
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how does splitting commision work at member firms
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- not allowed with nonregistered person
- allowed to split if both persons are registered |
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what are the rules for rebates
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- a RR may not offer a rebate commissions to a customer for previous transactions
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what are the 5 conditions in which Registered individuals may borrow or lend money to a customers
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- 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 |
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How are guarantees prohibitied
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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
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what is failure to follow customer instructions
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- fradulent practice of knowingly failing to follow a customer instructions regarding his account, the agent is not permitted to ignore the customers direction
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what are the rules for protecting the confidentiality of client information
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not permitted to release client information to a third party, including spouses, attorneys, and accountants, without the written consent of the account owenr
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what are exceptions to releasing client information to third parties
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SEC and IRS
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Describe misrepresntation of FINRA membership
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- 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
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what must be disclosed in conflicts of interest
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- the capacity in which the employee is acting and the source and amount of all compensation earned
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