Stc Series 79 Exam Prep: General Securities Industry Regulations

Front 1

What are FINRA's registration requirements?

Back 1

Filing of Form U4 and fingerprint card with CRD (Central Registration Depository)

Front 2

What does a form U5 do?

Back 2

Terminate registration
-Must be submitted within 30 days
-Copy provided to RR
-Re-qualification required after 2 years

Front 3

What are the statutory disqualifications?

Back 3

Having been convicted within the past 10 years of a felony or misdemeanor involving funds or securities

Expulsion from regulatory agencies

Front 4

What are investment banking activities?

Back 4

Advising:

Debt or equity securities offerings
Private placements and public offerings
Origination
Underwriting
Marketing
Structuring
Syndicating Pricing
Managing and stabilizing offerings

Individuals engaged in Public Finance or DPP offerings are not considered IB reps

Front 5

What is the waiting period if you fail?

Back 5

30 days then 180 days

Subject to annual compliance meeting or interview

Front 6

What are the two types of continuing education?

Back 6

Regulatory
-Initiated on second anniversary and ever three years after
-If not completed within 120 days registration revoked

Firm element
-Training directed by the firm
-Re-evaluated annually

Front 7

What did the 34' act do?

Back 7

Cut down on manipulation

Ended:

Front running (trading ahead of clients)

Painting the tape (creating misleading appearance of trading)

Pegging (Manipulation to keep price from calling)

Capping (Manipulation to keep price from rising)

*pro forma's must clearly state assumptions

Front 8

What are the penalties for insider trading?

Back 8

Individuals
-Max of 5mm fine and 20 years in prison

Corps
-Max fine of 25mm

Civil
-Disgorgement of profit and up to three times the damages

Bounties of up to 10%

Front 9

What is SEC rule 10b-18?

Back 9

Helps cut down on I.T

Deals with purchase of equity securities by issues

-Use one BD
-No trades in past 10 or last 30 minutes of day
-No purchase at price higher than highest indi bid or last transaction (whichever is greater)
-Purchase volume may not exceed 25 percent of ADTV

Front 10

What is insider trading?

Back 10

Posessing materials and non-public information to make profit or avoid loss

Front 11

What do Written supervisory procedures do?

Back 11

Establish a branch office
-Location where a member firm effects, or attempts to effect, securities transactions

Front 12

What is a non-branch office?

Back 12

Back office or ops office
Office of convenience
Floor of exchange
Temp or back up office
Temp location used less than 30 biz days per year
Office where less than 25 securities transactions are effected annually
Registered reps primary residence

Front 13

What makes a branch office an OSJ?

Back 13

OSJ = office of supervisory jurisdiction

Branch considered an OSJ if it:
-Orders or executes market making
-Structures offerings
-Maintains custody of customer assets
-Final approval for opening new accounts
-Review and approve customer orders
-Supervising one or more offices

Every OSJ must be supervised by a principal who approves communication

Each OSJ must maintain of complaints

Front 14

What are the AML program requirements?

Back 14

-Designate an AML Compliance Officer for firm (who must be identified to FINRA and know the Bank Secrecy Act)
-Contain procedures designed to detect violations
-Cause the reporting of certain transactions
-Be tested on an annual basis
-Provide for ongoing training for appropriate staff

*No requirement that officer must have individual training

Front 15

What is CIP?

Back 15

Customer Identification Program

FINRA requires each BD to establish a written CIP

-Verify identify of person seeking to open account
-Maintain records of the info used to verify identity
-Check name against a list maintained by the treasury department

Front 16

What is OFAC list?

Back 16

Office of Foreign Assets Control List

Suspected terrorist countries include:
CUBA, Iran, North Korea and Syria

If blocked entity appears on list all transactions must be blocked and law notified

Front 17

What is the bank secrecy act?

Back 17

Government legislation that was created in 1970 to prevent financial institutions from being used as tools by criminals to hide or launder their ill-gotten gains

Front 18

What are the BSA required reports?

Back 18

Currency Transaction Report
(CTR) (FinCEN 104)
-Filed for transactions by single customer and structured transactions during one business day exceeding $10,000

Currency / Monetary Instrument Report
(CMIR)
-Filed with physical transport or receipt of cash exceeding 10k into the US

Suspicious Activity Report
(SAR)
-Filed when transaction(s) equal or exceed 5k and the firm is suspicious

Front 19

What are the first two SRO business conduct rules?

Back 19

Private Securities Transactions
(Selling away)
-Securities activities outside the reg scope of a persons employment
-Associated person must provide notice to employer
-If associate person is compensated a member must approve and it must be recorded on the member's books

Outside Business Activity
-Non securites activities for which associated person is compensated
-Associated person must provide written notice to employer
-Charitable activities need not be reported

Front 20

What are the last two SRO business conduct rules?

Back 20

Accounts for Employees
-Opening accounts are required to provide written notice to employer

Executing firm must
-Provide written notification to the employer of the intention to open account
-Send duplicate confirmations and statements (if requested)

Front 21

What do BSA rules NOT apply to?

Back 21

Transactions involving redeemable investment company shares, variable contracts or unit investment trusts

Front 22

What do SRO rules say about borrowing or lending to clients?

Back 22

Registered persons are prohibited from unless:

Customer is immediate family member
Customer is a financial institution involved in extending credit or lending
Both parties are registered at the same firm
Loan is based on personal relationship
Loan is based on dependent business relationship

Front 23

What does SRO say about sharing in client profits and losses?

Back 23

Prohibited unless a joint account is created
Sharing must be proportionate to employee's financial contribution

Gift limit - 100 bucks

*No payments can be made to non-member firm for securities related business

Front 24

What are customer complaints?

Back 24

Written statements from customers which involved grievances related to the broker-dealer's securities business

Firms must maintain file of these

Quarterly reports are provided to FINRA

Front 25

What is the disciplinary action for members who violate industry rules?

Back 25

Complain filed
-Action initiated

Copy of complain and letter of Acceptance, Waiver and Consent (AWC)
-Responded allowed to respond or hearing held

Hearing panel
-Censure, fine, suspension,

Appeal
-To National Adjudicatory Council, then SEC then Fed Court

Front 26

What is the code of arbitration?

Back 26

System offered for resolving disputes, not rule violations
-Decisions binding and cant be appealed
-Six year status of limitations

Front 27

What are the different kinds of arbitration?

Back 27

For disputes involving public customers
-Majority of panel must be from outside the securities industry
-Predisposed arbitration agreements are allowed but may not limit awards

For disputes involving registered persons and other member firms
-If disputes involve a member firm's own employees, mandatory arbitration is not required if the dispute involves discrimination or harassment claims

Front 28

What is simplified arbitration?

Back 28

For disputes not exceeding 25k
One single arbitrator, no hearing conducted