FINRA Regulations: Multiple Choice Questions and Answers, Exams of Finance

Download FINRA Regulations: Multiple Choice Questions and Answers and more Exams Finance in PDF only on Docsity!

Financial Industry

Regulatory Authority

(FINRA) Updated 2024

with 100% Correct

Answers

A registered representative with ABC Securities, a FINRA member broker/dealer, terminates his registration and affiliates with XYZ Securities, another FINRA member broker/dealer. Which of the following statements is CORRECT? - ANS-Continuing commissions on clients remaining with ABC can be paid to the registered representative if it is in the representative's contract. As long as the new affiliation takes place within two years of the termination, there would not be a requirement to re-qualify by examination. Continuing commissions may be paid on business that "continues" to accrue at the initial B/D as long as it is in the employee's contract. There is a two-year limit on re-registering without need to re-take the exam. It would be a prohibited practice to remove files from the office and there is nothing to stop the representative's clients from changing their B/D of record to the new firm FINRA was established to - ANS-encourage just and equitable principles of trade. adopt and enforce its Conduct Rules among brokers and dealers. Which of the following statements about FINRA are TRUE? - ANS-It has authority to regulate the OTC market in nonexempt securities. All branch offices of a member broker/dealer must be registered with FINRA. Firms transacting business in the over-the-counter market and/or members of the New York Stock Exchange must register with the SEC and are eligible for membership in FINRA. If a broker/dealer is a member, each branch office of the broker/dealer must be registered with FINRA. Not all broker/dealers are required to be FINRA members, and they may also hold membership in other exchanges. Which of the following changes to a U-4 form must be communicated to the registered representative's broker/dealer and to FINRA? - ANS-Bankruptcy The broker/dealer and FINRA must be notified if a registered representative files for bankruptcy; the other occurrences listed do not require FINRA notification If a FINRA member firm suspends a registered representative, the firm must report the suspension to: - ANS-FINRA. The firm must report the suspension to its designated examining authority (DEA), in this case, the Financial Industry Regulatory Authority (FINRA). A change to which of the following items requires amending the Form U-4? - ANS-A home address change requires an amendment to Form U-4. A change to the member firm's address requires the firm to amend its Form BD, but not the representative's Form U-4. Marital status and vacation home address are not items of information on Form U-4.

A registered representative with GEMCO securities, a FINRA member firm, receives a very attractive offer to affiliate with KAPCO Investments, also a FINRA member firm. The registered representative accepts the offer and switches firms. Which of the following statements are CORRECT? - ANS-When a registered person terminates, the member firm files a Form U-5 with the CRD. When a person affiliates in a registered capacity with a member firm, the person completes the Form U-4 which is then filed by the firm with the CRD. All records of customer accounts are the property of the firm and may not be removed. Al Alberts, CLU, has several clients for whom mutual funds would be suitable investments. Al contacts Bill Billings, a registered representative with CALCO Investments, a FINRA member broker/dealer. Al suggests that it would be mutually beneficial to refer to each other. Al would handle the client's insurance needs and Bill would take care of their investment requirements. They enter into a contract where each will receive a commission split with the other for these referrals. Under FINRA rules this is: - ANS-The only individuals who can receive compensation for the sale of securities, directly or indirectly (as in Al's case), are those with a proper securities license. FINRA rules do not require that commission sharing be done only amongst those with the same or affiliated members. If a member firm is notified by FINRA that it must begin tape-recording the phone calls of its assistant representatives and registered representatives to existing and potential customers, it must do so within how many days of notification? - ANS-A firm has 60 days to secure the equipment and begin recording Under FINRA rules, carrying firms must advise their customers of the BrokerCheck phone number or Web address - ANS-Under FINRA rules on investor education and protection, carrying firms must advise their customers of the phone number or web address for BrokerCheck. This disclosure must be made at least once every calendar year. BrokerCheck allows customers to access licensing information as well as check on customer complaints and the disciplinary history of registered persons. If a registered representative left her member firm 3 years ago to care for a child and is now ready to return to the securities industry, which of the following statements is NOT true? - ANS-After a leave of absence of more than 2 years, a registered representative must re-qualify by examination. When the representative left the old firm, the firm would file a Form U-5. If no U4 is filed within two years of the U-5 filing, registration is cancelled. When a new firm hires the representative, she must reapply for registration on a Form U-4. There are exceptions for those called up to active military duty. A registered representative was recently involved in a Code of Arbitration dispute with a customer and would like the resulting decision removed from FINRA's CRD system. In order for this to happen, what must occur? - ANS-Members or associated persons seeking to expunge information from the CRD system arising from disputes with customers must obtain an order from a court of competent

jurisdiction directing such expungement or confirming an arbitration award containing expungement relief. An individual was convicted of embezzlement from a bank several years ago and is, therefore, subject to statutory disqualification. Which of these statements reflects FINRA's position? - ANS-The person is statutorily disqualified until ten years has passed since the conviction. This must be reported on the Form U-4 when applying for registration. Because the conviction was for a money-related incident, even if it was treated as a misdemeanor, it still would lead to statutory disqualification. Under most circumstances, that would prevent a person from becoming employed by a FINRA member for ten years from conviction. Registration is filed on Form U-4. Which of the following statements is TRUE concerning compliance meetings? - ANS-FINRA rules require that all registered personnel participate in an annual compliance review Which of the following statements are TRUE concerning compliance meetings? - ANS-They may have other items on the agenda. They may be held in conjunction with another meeting. FINRA rules require that all registered personnel, representatives and principals, participate in an annual compliance review. The presentation must be interactive meaning a video that can be viewed at one's convenience is generally not going to qualify. This compliance review can be held in conjunction with another meeting and, therefore, may have other items on the agenda. A representative with a Series 6 license assisted an investor in the purchase of a closed-end fund IPO. The client is interested purchasing additional shares that are now being sold on an exchange. The registered rep: - ANS-may not assist in the purchase Individuals who hold Series 6 licenses are permitted to sell investment company products, which include unit investment trusts, face-amount certificates, open-end company shares, and primary offerings of closed-end company shares (not secondary market offerings) Series 6 reps May only sell - ANS-unit investment trusts, face-amount certificates, open-end company shares, and primary offerings of closed-end company shares (not secondary market offerings). A registered representative has been called into active overseas military duty. Under FINRA rules, all of the following statements are true EXCEPT - ANS-the representative's license will be placed on special active status

Raising long-term capital for corporations by underwriting new issues of securities An investment banker buys previously unissued securities from an issuer and sells them to the public. It does not lend money to corporate customers that require debt financing. Commercial bankers lend money; investment bankers help issuers raise money through securities offerings The primary difference between an underwriting syndicate and a selling group is: - ANS-the syndicate assumes liability for unsold shares; the selling group does not The underwriting syndicate makes a financial commitment to bring a new issue to market and to take liability for unsold shares. A member of a selling group only agrees to provide a sales service for a certain number of shares in exchange for a commission on shares it sells. It has no responsibility for any unsold shares. The over-the-counter market could be characterized as what type of market? - ANS-The OTC market is an inter-dealer market Which of the following terms describe a third market transaction - ANS-A third market trade takes place when listed securities are traded over-the-counter. All or None underwriting - ANS-The all or none underwriting is unique in that it requires that the entire issue be subscribed to or the deal is called off. It is a type of best efforts underwriting, but all or none is clearly the more accurate answer. Which of the following activities are characteristic of a primary offering? - ANS-A primary offering involves the sale of previously unissued securities. The issuing company receives the proceeds from the sale; once the securities are sold, more securities will be outstanding. If XYZ Corporation intends to offer stock in a public offering, it must do all of the following EXCEPT - ANS-publish a tombstone advertisement Tombstones are advertisements often appearing in business newspapers to publicize new issues and are generally placed by a syndicate manager. They are not required. If the SEC has cleared an issue, which of the following statements is TRUE? - ANS-The issuer has filed a standard registration statement The SEC does not approve, disapprove, endorse, or guarantee a registration statement's accuracy.

To which securities market does the Securities Act of 1933 apply? - ANS-The Securities Act of 1933 covers the registration and disclosure requirements regarding new issues, or the primary market. The secondary markets are covered under the Securities Exchange Act of 1934 An agent may deliver a preliminary prospectus for an IPO: - ANS-while the issue is in registration. A preliminary prospectus, or red herring, may be distributed during the registration period for a new security. It is only for the purpose of obtaining indications of interest, not soliciting sales. It is not a final sale document. If the SEC has released a security for sale, then the SEC has: - ANS-not approved the security but has cleared its sale to the public. When the SEC releases a security for sale, it allows the sale of the security but does not approve or disapprove of it as a suitable investment. The SEC also does not rule on the accuracy or adequacy of the information included in the prospectus. If your firm is in the process of underwriting a new issue, sales literature, including a record of past performance, may be included in a mailing of the - ANS-Final prospectus No literature may accompany a preliminary prospectus or red herring. All such information may only be used with a final or statutory prospectus Which of the following will NOT be found in a final prospectus? - ANS-Agreement among underwriters. The final prospectus will include information that is material to investors in order for them to make an informed decision. The agreement among underwriters is a separate document that is between the members of the underwriting syndicate. Investors do not require knowledge of what is contained in this agreement. A preliminary prospectus - ANS-A preliminary prospectus, or red herring, is prepared after the filing of a registration statement with the SEC. It is the only item allowed to be given to prospective investors while gathering indications of interest during the cooling off period. Sales literature may accompany a final prospectus but may not accompany a red herring. During the cooling off period of a securities registration, the underwriters will generally distribute a preliminary prospectus. This document: - ANS-may contain incomplete information. will not contain the effective date. A preliminary prospectus is frequently referred to as a red herring. This is due to the statement, printed in red ink, that says that information contained therein may undergo change, completion or amendment. The effective date is found in the final prospectus only. No payment of any kind may be

If selling to nonaccredited investors, general solicitation is not allowed The private placement sells to any nonaccredited investors (with the maximum number being 35) no advertising or general solicitation is allowed. If the sale is exclusively to accredited investors, the private placement may advertise. Who prepare the Prospectus - ANS-The prospectus and the preliminary prospectus are prepared by the issuer of a new security, not the broker/dealer who will sell it.