Series 79

Front 1

What is a Statutory Disqualification?

Back 1

A denial of an application for registration based soley on past transgressions

Front 2

Name a few statutory disqualifications.

Back 2

Being expelled or suspended from a self-regulatory organization.
Having a registration denied, suspended, or revoked by the SEC or another regulatory agency
Violating or assisting 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 securities, or any other felony.

Front 3

Define investment banking activities (2 part answer).

Back 3

Work performed by associated persons of a broker-dealer whose activities primarily involve:
1) Advising on, or facilitating debt or equity securities offerings through a private placement or a public offering, including but not limited to origination, underwriting, marketing, structuring, syndication, and pricing of such securities and managing the allocation and stabilization activities of such offerings, or
2) Advising on, or facilitating mergers and acquisitions, tender offers, financial restructurings, asset sales, divestitures or other corporate reorganizations or business combination transactions, including but not limited to rendering a fairness, solvency, or similar opinion.

Front 4

The rule that defines investment banking activities does not cover which three individuals?

Back 4

1) limited to public (municipal) finance offerings
2) direct participation program offerings (limited partnerships)
3) limited to effecting private securities offerings.

Front 5

It is a violation of FINRA rules to: (5 parts)

Back 5

1) Remove an examination, or a portion of an exam from an examination center.
2) Reproduce parts of an examination
3) Disclose parts of an examination to anyone
4) Receive parts of an examination from anyone
5) Compromise the contents of a past or present examination in any way

Front 6

If you fail the Series 79 exam twice, how long do you have to wait to take it again? How long if you fail it three times?

Back 6

Failing it two times makes you wait 30 days. Failing it three times makes you wait 180 days.

Front 7

(T/F): If convicted of shoplifting or DUI, you can be subjected to statutory disqualification.

Back 7

True.

Front 8

Name three activities a non-registered person may do.

Back 8

1) Extend invitations to firm-sponsored events
2) Inquire whether a prospective customer wishes to discuss investments with a registered representative
3) Inquire whether a prospective customer wishes to receive investment literature from the firm.

Front 9

Name five activities a non-registered person may NOT do.

Back 9

1) Solicit orders or new accounts
2) Provide investment advice
3) Make recommendations
4) Give pricing information
5) Execute transactions on behalf of the firm

Front 10

(T/F) All registered persons must participate in an annual compliance review, discussing compliance issues that are relevant to the business of the representatives involved.

Back 10

True.

Front 11

(T/F): Regulatory Element is a one-time training that must be taken 2 years after initial securities registration.

Back 11

False. It must be taken 2-years after initial securities registration and then every three years thereafter, for the remainder of your career.

Front 12

What is a "covered person" with regard to the Firm Element of continuing education?

Back 12

Any registered person who has direct contact with customers in the conduct of a member firm's securities sales, trading, or investment banking, and her immediate supervisor.

Front 13

What are the minimum standards for the Firm Element? How often must each firm demonstrate to regulators that it has analyzed and prioritized the training needs of its covered personnel and developed a written training plan based on that needs analysis?

Back 13

Required that the programs enhance registered representatives' securities knowledge, skill set, and professionalism.

Front 14

The Firm Element training must cover... with particular emphasis on (three things)?

Back 14

The securities products, services, and strategies offered by the firm, with particular emphasis on:
1) General investment features and associated risks
2) Suitability and sales practice considerations
3) Applicable regulatory requirements.

Front 15

What is the main federal law covering the operation of the secondary markets?

Back 15

The Securities and Exchange Act of 1934 (The Exchange Act)

Front 16

What is the narrow focus of the Securities Act of 1933? What other activities (four) in the securities market does this act cover?

Back 16

The registration and sale of new issues is the narrow focus. The activities it covers are:
1) Regulation of transactions in the secondary market, including antimanipulation rules and regulation of the extension of credit in securities transactions
2) Registration and regulation of broker-dealers
3) Oversight of industry self-regulatory organizations (SROs)
4) Registration and regulation of companies with securities trading in the secondary market, including regular financial disclosures, proxy rules, and insider reporting.

Front 17

Name two securities that are exempt from some parts of the Securities Exchange Act of 1934. Name these exemptions (four).

Back 17

U.S. government securities and municipal securities. They are not subject to the restrictions that apply to:
1) credit extensions
2) proxy solicitation
3) insider reporting requirements
4) Prohibitions against price manipulation on an exchange

Front 18

What is the SEC charged with doing?

Back 18

Enforcing the securities laws and creating rules to implement those laws.

Front 19

What is price manipulation?

Back 19

Any act (including wash sales, matched orders, and pool activities) designed to raise or depress prices of securities.

Front 20

In the Securities Exchange Act of 1934, the line "manipulative, deceptive, or other fraudulent device or contrivance" is defined to include...

Back 20

Any untrue statement of a material fact and any omission of a material fact necessary to make the statements made not misleading.

Front 21

What is a wash sale?

Back 21

The purchase and sale of securities by an individual without any beneficial change of ownership for the purpose of raising or depressing the price of the security. (Buy 1,000 shares of XYZ from Broker A and sell 1,000 shares of XYZ from Broker B)

Front 22

What is a matched order?

Back 22

Involves two persons acting in concert to buy and sell a security for the purpose of raising or depressing its price.

Front 23

What is NYSE Rule 435(5)?

Back 23

The circulation of rumors is prohibited.

Front 24

What is the goal of SEC Rule 10b-18? Why was it created?

Back 24

To control how an issuer, or an affiliate, may buy its own stock in the secondary market? To prevent an issuer of securities illegally raising the price of its own stock.

Front 25

SEC Rule 10b-18 Safe Harbor gives four conditions to for a company to meet in order to not be seen as manipulating its own stock price.

Back 25

1) Use one broker dealer to place bids and make purchase on any trading session.
2) Avoid making purchases at certain times of the day. Can't be the first trade of the day and can't trade in the 30 minutes of the day.
3)Limit the bid or purchase price of securities at certain prices. (Example: if the last transaction was $23.53 and the current bid/ask price spread is $23.50-$23.60, the highest price at which they could buy the stock would be $23.53.)
4) Limit the amount of stock purchased on any single day. The total volume on any single day may not exceed 25% of the average daily trading volume for that security.

Front 26

A block purchase under SEC rule 10b-18 Safe Harbor is defined as...? What are the conditions a block purchase can be made?

Back 26

A quantity of stock that either
1) has a purchase price of $200,000 or more, or
2) is at least 5,000 shares with a purchase price of at least $50,000, or
3) Is at least 20 round lots that total 150% or more of the trading volume for that security.
A block purchase can be made once a week if no other 10b-purchases are made that day.

Front 27

What is NYSE Rule 77?

Back 27

Addresses Prohibited Dealings and Activities, it states that a member on the Floor may not:
1) Buy or sell securities "on stop" above or below the market
2) Buy or sell securities "at the close"
3) Buy or sell dividends
4) Bet on the course of the market
5) Buy or sell privileges to receive or deliver securities.

Front 28

In the Exchange Act, what is Rule 10b-5 and what does it say?

Back 28

Deals with insider trading. Makes it unlawful, in connection with the purchase or sale of any security to:
1) Employ any device, scheme or artifice to defraud
2) Make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading
3) Engage in any act, practice or course of business that operates or would operate as a fraud or deceit upon any person.

Front 29

What is insider trading?

Back 29

Rule 10b-5 in the Exchange Act. Involves the purchase or sale of securities using material, nonpublic information about those securities in a fraudulent manner. Usually involves either the misuse of confidential information or the misappropriation of confidential information from an employer.

Front 30

(T/F): If the the tippee knows that the tipper gave confidential information and trades on it anyway, both the tippee and tipper may have violated trading rules.

Back 30

True.

Front 31

What did the Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA) do? What is the point?

Back 31

It required broker-dealers to establish, maintain, and enforce written policies and procedures reasonably designed, taking into consideration the nature of the broker dealers' business, to prevent the misuse of material, nonpublic information by the broker-dealer or any associated person. The Act holds that any individual who purchases or sells a security while in possession of material, nonpublic information, or has communicated such information to another party in connection with a transaction, may be liable for trading violations under the Act.

Front 32

What is an information barrier, in regards to insider trading?

Back 32

It consists of a set of procedures for preventing the transmission of confidential information from one department to another within a broker-dealer.