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Question 1 of 10
1. Question
Unless otherwise indicated, which of the following order information must be recorded under this Rule when an order is received or originated? For purposes of this Rule, the order origination or receipt time is the time the order is received from the customer.
I. Handling fees, specified by FINRA for purposes of this Rule
II. Any limit or stop price prescribed in the order;
III. The date on which the order expires, and, if the time in force is less than one day, the time when the order expires
IV. The time limit during which the order is in force
Correct
FINRA Rule 7440. Recording of Order Information
Unless otherwise indicated, the following order information must be recorded under this Rule when an order is received or originated. For purposes of this Rule, the order origination or receipt time is the time the order is received from the customer.
I. Any limit or stop price prescribed in the order;
II. The date on which the order expires, and, if the time in force is less than one day, the time when the order expires
III. The time limit during which the order is in force
Incorrect
FINRA Rule 7440. Recording of Order Information
Unless otherwise indicated, the following order information must be recorded under this Rule when an order is received or originated. For purposes of this Rule, the order origination or receipt time is the time the order is received from the customer.
I. Any limit or stop price prescribed in the order;
II. The date on which the order expires, and, if the time in force is less than one day, the time when the order expires
III. The time limit during which the order is in force
Question 2 of 10
2. Question
Which of the following refers to means the total number of shares of common stock outstanding without regard to class, whether voting or non-voting, convertible or non-convertible, exchangeable or non-exchangeable, redeemable or non-redeemable, as reflected on the consolidated financial statements of the company?
Correct
FINRA Rule 5121. Public Offerings of Securities With Conflicts of Interest
The term “common equity” means the total number of shares of common stock outstanding without regard to class, whether voting or non-voting, convertible or non-convertible, exchangeable or non-exchangeable, redeemable or non-redeemable, as reflected on the consolidated financial statements of the company.
Incorrect
FINRA Rule 5121. Public Offerings of Securities With Conflicts of Interest
The term “common equity” means the total number of shares of common stock outstanding without regard to class, whether voting or non-voting, convertible or non-convertible, exchangeable or non-exchangeable, redeemable or non-redeemable, as reflected on the consolidated financial statements of the company.
Question 3 of 10
3. Question
Which of the following refer to directly or indirectly providing more than 25% of a person’s income in the prior calendar year. Persons living in the same household are deemed to be providing each other with material support?
Correct
FINRA Rule 5131. New Issue Allocations and Distributions
“Material support” means directly or indirectly providing more than 25% of a person’s income in the prior calendar year. Persons living in the same household are deemed to be providing each other with material support.
Incorrect
FINRA Rule 5131. New Issue Allocations and Distributions
“Material support” means directly or indirectly providing more than 25% of a person’s income in the prior calendar year. Persons living in the same household are deemed to be providing each other with material support.
Question 4 of 10
4. Question
No member or person associated with a member shall, directly or indirectly, hold any interest or participation in any joint account for buying or selling a designated security, unless such joint account is promptly reported to FINRA. The report should contain the following information for each account:
I. Name of the account, with names of all participants and their respective interests in profits and losses
II. A statement regarding the purpose of the account
III. Name of the member carrying and clearing the account
IV. A copy of any written agreement or instrument relating to the account
Correct
FINRA Rule 6140. Other Trading Practices
No member or person associated with a member shall, directly or indirectly, hold any interest or participation in any joint account for buying or selling a designated security, unless such joint account is promptly reported to FINRA. The report should contain the following information for each account:
I. Name of the account, with names of all participants and their respective interests in profits and losses
II. A statement regarding the purpose of the account
III. Name of the member carrying and clearing the account
IV. A copy of any written agreement or instrument relating to the account
Incorrect
FINRA Rule 6140. Other Trading Practices
No member or person associated with a member shall, directly or indirectly, hold any interest or participation in any joint account for buying or selling a designated security, unless such joint account is promptly reported to FINRA. The report should contain the following information for each account:
I. Name of the account, with names of all participants and their respective interests in profits and losses
II. A statement regarding the purpose of the account
III. Name of the member carrying and clearing the account
IV. A copy of any written agreement or instrument relating to the account
Question 5 of 10
5. Question
Indirect Beneficial Owners. For the purposes of Rule 5131(b), a member may rely upon a written representation obtained within the prior 12 months from a person authorized to represent an account that does not look through to the beneficial owners of any unaffiliated private fund invested in the account, except for beneficial owners that are control persons of the investment adviser to such private fund, that such unaffiliated private fund:
I. Is managed by an investment adviser
II. Has assets greater than $50 million
III. Owns more than 25% of the account and is not a fund in which a single investor has a beneficial interest of 25% or more
IV. Was not formed for the specific purpose of investing in the account.
Correct
FINRA Rule 5131. New Issue Allocations and Distributions
Indirect Beneficial Owners. For the purposes of Rule 5131(b), a member may rely upon a written representation obtained within the prior 12 months from a person authorized to represent an account that does not look through to the beneficial owners of any unaffiliated private fund invested in the account, except for beneficial owners that are control persons of the investment adviser to such private fund, that such unaffiliated private fund:
(1) is managed by an investment adviser;
(2) has assets greater than $50 million;
(3) owns less than 25% of the account and is not a fund in which a single investor has a beneficial interest of 25% or more; and
(4) was not formed for the specific purpose of investing in the account.
Incorrect
FINRA Rule 5131. New Issue Allocations and Distributions
Indirect Beneficial Owners. For the purposes of Rule 5131(b), a member may rely upon a written representation obtained within the prior 12 months from a person authorized to represent an account that does not look through to the beneficial owners of any unaffiliated private fund invested in the account, except for beneficial owners that are control persons of the investment adviser to such private fund, that such unaffiliated private fund:
(1) is managed by an investment adviser;
(2) has assets greater than $50 million;
(3) owns less than 25% of the account and is not a fund in which a single investor has a beneficial interest of 25% or more; and
(4) was not formed for the specific purpose of investing in the account.
Question 6 of 10
6. Question
Proposed Rule 15g-1 would exempt which of the following selected transactions from the proposed disclosure obligations to customers?
1. Transactions in penny stocks by a broker-dealer that does less than 5 percent of its securities business in penny stocks and that has not been a market maker, during the past year, in the penny stock that is the subject of the transactions
II. Transactions in securities the issuer of which has net tangible assets exceeding $1 million, if that issuer has been in continuous operation for at least three years, or $4 million, if the issuer has been in continuous operation for less than three years
III. Transactions that are not recommended by the broker-dealer
IV. Transactions in securities where the customer is an institutional accredited investor
Correct
Proposed SEC Rule 15g-1 (Exemptions)
Proposed Rule 15g-1 would exempt selected transactions from the proposed disclosure obligations to customers as follows: (1) transactions in penny stocks by a broker-dealer that does less than 5 percent of its securities business in penny stocks and that has not been a market maker, during the past year, in the penny stock that is the subject of the transactions; (2) transactions in securities the issuer of which has net tangible assets exceeding $2 million, if that issuer has been in continuous operation for at least three years, or $5 million, if the issuer has been in continuous operation for less than three years; (3) transactions in securities where the customer is an institutional accredited investor; (4) transactions that are not recommended by the broker-dealer; and (5) transactions in which the purchaser is the issuer of the penny stock that is the subject of the transaction.
Incorrect
Proposed SEC Rule 15g-1 (Exemptions)
Proposed Rule 15g-1 would exempt selected transactions from the proposed disclosure obligations to customers as follows: (1) transactions in penny stocks by a broker-dealer that does less than 5 percent of its securities business in penny stocks and that has not been a market maker, during the past year, in the penny stock that is the subject of the transactions; (2) transactions in securities the issuer of which has net tangible assets exceeding $2 million, if that issuer has been in continuous operation for at least three years, or $5 million, if the issuer has been in continuous operation for less than three years; (3) transactions in securities where the customer is an institutional accredited investor; (4) transactions that are not recommended by the broker-dealer; and (5) transactions in which the purchaser is the issuer of the penny stock that is the subject of the transaction.
Question 7 of 10
7. Question
With respect to institutional customers, a member must obtain the customer’s consent prior to executing a transaction for or with the customer on a “net” basis in accordance with which of the following methods?
I. Negative consent letter that clearly discloses to the institutional customer in writing the terms and conditions for handling the customer order(s) and provides the institutional customer with a meaningful opportunity to object to the execution of transactions on a net basis.
II. Oral disclosure to and consent from the customer on an order-by-order basis. Such oral disclosure and consent must clearly explain the terms and conditions for handling the customer order and provide the institutional customer with a meaningful opportunity to object to the execution of the transaction on a net basis.
III. Written consent on an order-by-order basis prior to executing a transaction for or with the customer on a “net” basis and such consent must evidence the customer’s understanding of the terms and conditions of the order
IV. Retain and preserve all documentation relating to consent obtained pursuant to this Rule in accordance with Rule 4511.
Correct
FINRA Rule 2124 Net Transactions with Customers
(c) With respect to institutional customers, a member must obtain the customer’s consent prior to executing a transaction for or with the customer on a “net” basis in accordance with one of the following methods:
(1) a negative consent letter that clearly discloses to the institutional customer in writing the terms and conditions for handling the customer order(s) and provides the institutional customer with a meaningful opportunity to object to the execution of transactions on a net basis. If the customer does not object, then the member may reasonably conclude that the institutional customer has consented to the member trading on a “net” basis with the customer and the member may rely on such letter for all or a portion of the customer’s orders (as instructed by the customer) pursuant to this Rule;
(2) oral disclosure to and consent from the customer on an order-by-order basis. Such oral disclosure and consent must clearly explain the terms and conditions for handling the customer order and provide the institutional customer with a meaningful opportunity to object to the execution of the transaction on a net basis. The member also must document, on an order-by-order basis, the customer’s understanding of the terms and conditions of the order and the customer’s consent; or
(3) written consent on an order-by-order basis prior to executing a transaction for or with the customer on a “net” basis and such consent must evidence the customer’s understanding of the terms and conditions of the order.
Incorrect
FINRA Rule 2124 Net Transactions with Customers
(c) With respect to institutional customers, a member must obtain the customer’s consent prior to executing a transaction for or with the customer on a “net” basis in accordance with one of the following methods:
(1) a negative consent letter that clearly discloses to the institutional customer in writing the terms and conditions for handling the customer order(s) and provides the institutional customer with a meaningful opportunity to object to the execution of transactions on a net basis. If the customer does not object, then the member may reasonably conclude that the institutional customer has consented to the member trading on a “net” basis with the customer and the member may rely on such letter for all or a portion of the customer’s orders (as instructed by the customer) pursuant to this Rule;
(2) oral disclosure to and consent from the customer on an order-by-order basis. Such oral disclosure and consent must clearly explain the terms and conditions for handling the customer order and provide the institutional customer with a meaningful opportunity to object to the execution of the transaction on a net basis. The member also must document, on an order-by-order basis, the customer’s understanding of the terms and conditions of the order and the customer’s consent; or
(3) written consent on an order-by-order basis prior to executing a transaction for or with the customer on a “net” basis and such consent must evidence the customer’s understanding of the terms and conditions of the order.
Question 8 of 10
8. Question
What is the information should be included in each last sale report?
I. Stock symbol of the designated security
II. Number of shares or bonds
III. A symbol indicating whether the transaction is a buy, sell or cross, and if applicable, sell short or sell short exempt
IV. The time of execution expressed in hours, minutes and seconds based on Eastern Time in military format, unless another provision of FINRA rules requires that a different time be included in the report
Correct
FINRA Rule 6280
6282. Transactions Reported by Members to the ADF
(c) Information To Be Reported
Each last sale report shall contain the following information:
(1) Stock symbol of the designated security;
(2) Number of shares or bonds;
(3) Price of the transaction as required by paragraph (d) below;
(4) A symbol indicating whether the transaction is a buy, sell or cross, and if applicable, sell short or sell short exempt
(5)The time of execution expressed in hours, minutes and seconds based on Eastern Time in military format, unless another provision of FINRA rules requires that a different time be included in the report
Incorrect
FINRA Rule 6280
6282. Transactions Reported by Members to the ADF
(c) Information To Be Reported
Each last sale report shall contain the following information:
(1) Stock symbol of the designated security;
(2) Number of shares or bonds;
(3) Price of the transaction as required by paragraph (d) below;
(4) A symbol indicating whether the transaction is a buy, sell or cross, and if applicable, sell short or sell short exempt
(5)The time of execution expressed in hours, minutes and seconds based on Eastern Time in military format, unless another provision of FINRA rules requires that a different time be included in the report
Question 9 of 10
9. Question
Each carrying or clearing member shall promptly, but in any event within 24 hours, notify FINRA in writing if its net capital falls below which of the following percentages?
I. The member’s net capital is less than 150 percent of its minimum dollar net capital requirement or such greater percentage thereof as may from time to time be designated by FINRA
II. The member is subject to the aggregate indebtedness requirement of SEA Rule 15c3-1, and its aggregate indebtedness is more than 1,000 percent of its net capital
III. The member is registered as a Futures Commission Merchant pursuant to the Commodity Exchange Act, and its net capital is less than 130% of the minimum risk-based capital requirements of Commodity Exchange Act Rule 1.17
IV. The member elects to use the alternative method of computing net capital pursuant to SEA Rule 15c3-1(a)(1)(ii), and its net capital is less than the level specified in SEA Rule 17a-11(c)(2)
Correct
FINRA Rule 4120. Regulatory Notification and Business Curtailment
Each carrying or clearing member shall promptly, but in any event within 24 hours, notify FINRA in writing if its net capital falls below the following percentages:
(A) the member’s net capital is less than 150 percent of its minimum dollar net capital requirement or such greater percentage thereof as may from time to time be designated by FINRA;
(B) the member is subject to the aggregate indebtedness requirement of SEA Rule 15c3-1, and its aggregate indebtedness is more than 1,000 percent of its net capital;
(C) the member elects to use the alternative method of computing net capital pursuant to SEA Rule 15c3-1(a)(1)(ii), and its net capital is less than the level specified in SEA Rule 17a-11(c)(2);
(D) the member is registered as a Futures Commission Merchant pursuant to the Commodity Exchange Act, and its net capital is less than 120% of the minimum risk-based capital requirements of Commodity Exchange Act Rule 1.17
Incorrect
FINRA Rule 4120. Regulatory Notification and Business Curtailment
Each carrying or clearing member shall promptly, but in any event within 24 hours, notify FINRA in writing if its net capital falls below the following percentages:
(A) the member’s net capital is less than 150 percent of its minimum dollar net capital requirement or such greater percentage thereof as may from time to time be designated by FINRA;
(B) the member is subject to the aggregate indebtedness requirement of SEA Rule 15c3-1, and its aggregate indebtedness is more than 1,000 percent of its net capital;
(C) the member elects to use the alternative method of computing net capital pursuant to SEA Rule 15c3-1(a)(1)(ii), and its net capital is less than the level specified in SEA Rule 17a-11(c)(2);
(D) the member is registered as a Futures Commission Merchant pursuant to the Commodity Exchange Act, and its net capital is less than 120% of the minimum risk-based capital requirements of Commodity Exchange Act Rule 1.17
Question 10 of 10
10. Question
What has been determined by the Board since the adoption of the “5% Policy”?
I. The “5% Policy” is a rule, not a guide
II. A member may not justify mark-ups on the basis of expenses which are excessive
III. The mark-up over the prevailing market price is the significant spread from the point of view of fairness of dealings with customers in principal transactions. In the absence of other bona fide evidence of the prevailing market, a member’s own contemporaneous cost is the best indication of the prevailing market price of a security
IV. A mark-up pattern of 5% or even less may be considered unfair or unreasonable under the “5% Policy.”
Correct
FINRA Rule 2120. Commissions, Mark Ups and Charges
2121. Fair Prices and Commissions
(a) General Considerations
Since the adoption of the “5% Policy” the Board has determined that:
(1) The “5% Policy” is a guide, not a rule.
(2) A member may not justify mark-ups on the basis of expenses which are excessive.
(3) The mark-up over the prevailing market price is the significant spread from the point of view of fairness of dealings with customers in principal transactions. In the absence of other bona fide evidence of the prevailing market, a member’s own contemporaneous cost is the best indication of the prevailing market price of a security.
(4) A mark-up pattern of 5% or even less may be considered unfair or unreasonable under the “5% Policy.”
Incorrect
FINRA Rule 2120. Commissions, Mark Ups and Charges
2121. Fair Prices and Commissions
(a) General Considerations
Since the adoption of the “5% Policy” the Board has determined that:
(1) The “5% Policy” is a guide, not a rule.
(2) A member may not justify mark-ups on the basis of expenses which are excessive.
(3) The mark-up over the prevailing market price is the significant spread from the point of view of fairness of dealings with customers in principal transactions. In the absence of other bona fide evidence of the prevailing market, a member’s own contemporaneous cost is the best indication of the prevailing market price of a security.
(4) A mark-up pattern of 5% or even less may be considered unfair or unreasonable under the “5% Policy.”
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