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Question 1 of 10
1. Question
Pursuant to the Rule 9600 Series, the staff, for good cause shown after taking into consideration all relevant factors, may exempt, subject to specified terms and conditions, a member from the recording and order data transmission requirements of Rules 7440 and 7450, respectively, for manual orders, if such exemption is consistent with the protection of investors and the public interest, and the member meets which of the following criteria?
I. The member and current control affiliates and associated persons of the member have not been subject within the last five years to any final disciplinary action, and within the last ten years to any disciplinary action involving fraud
II. The member has annual revenues of more than $2 million
III. The member does not conduct any market making activities in NMS stocks or OTC equity securities
IV. The member does not execute principal transactions with its customers (with limited exception for principal transactions executed pursuant to error corrections)Correct
FINRA Rule 7470. Exemption to the Order Recording and Data Transmission Requirements
Pursuant to the Rule 9600 Series, the staff, for good cause shown after taking into consideration all relevant factors, may exempt, subject to specified terms and conditions, a member from the recording and order data transmission requirements of Rules 7440 and 7450, respectively, for manual orders, if such exemption is consistent with the protection of investors and the public interest, and the member meets the following criteria:
(1) the member and current control affiliates and associated persons of the member have not been subject within the last five years to any final disciplinary action, and within the last ten years to any disciplinary action involving fraud;
(2) the member has annual revenues of less than $2 million;
(3) the member does not conduct any market making activities in NMS stocks or OTC equity securities;
(4) the member does not execute principal transactions with its customers (with limited exception for principal transactions executed pursuant to error corrections);Incorrect
FINRA Rule 7470. Exemption to the Order Recording and Data Transmission Requirements
Pursuant to the Rule 9600 Series, the staff, for good cause shown after taking into consideration all relevant factors, may exempt, subject to specified terms and conditions, a member from the recording and order data transmission requirements of Rules 7440 and 7450, respectively, for manual orders, if such exemption is consistent with the protection of investors and the public interest, and the member meets the following criteria:
(1) the member and current control affiliates and associated persons of the member have not been subject within the last five years to any final disciplinary action, and within the last ten years to any disciplinary action involving fraud;
(2) the member has annual revenues of less than $2 million;
(3) the member does not conduct any market making activities in NMS stocks or OTC equity securities;
(4) the member does not execute principal transactions with its customers (with limited exception for principal transactions executed pursuant to error corrections); -
Question 2 of 10
2. Question
Rule 6460 has included parallel exceptions currently in place in Regulation NMS’s limit order display rule (Rule 604 of SEC Regulation NMS). Thus, the new rule excepts any customer limit order that is:
I. Executed upon receipt of the order
II. Placed by a customer who expressly requests, either at the time that the order is placed or prior thereto pursuant to an individually negotiated agreement with respect to such customer’s orders, that the order not be displayed
III. Delivered after 7 days upon receipt to another OTC Market Maker that complies with the requirements of this rule with respect to that order
IV. A block size order, unless a customer placing such order requests that the order be displayedCorrect
SEC Regulation NMS
Rule 6460 has included parallel exceptions currently in place in Regulation NMS’s limit order display rule (Rule 604 of SEC Regulation NMS). Thus, the new rule excepts any customer limit order that is:
I. Executed upon receipt of the order
II. Placed by a customer who expressly requests, either at the time that the order is placed or prior thereto pursuant to an individually negotiated agreement with respect to such customer’s orders, that the order not be displayed
III. Delivered immediately upon receipt to another OTC Market Maker that complies with the requirements of this rule with respect to that order
IV. A block size order, unless a customer placing such order requests that the order be displayed;Incorrect
SEC Regulation NMS
Rule 6460 has included parallel exceptions currently in place in Regulation NMS’s limit order display rule (Rule 604 of SEC Regulation NMS). Thus, the new rule excepts any customer limit order that is:
I. Executed upon receipt of the order
II. Placed by a customer who expressly requests, either at the time that the order is placed or prior thereto pursuant to an individually negotiated agreement with respect to such customer’s orders, that the order not be displayed
III. Delivered immediately upon receipt to another OTC Market Maker that complies with the requirements of this rule with respect to that order
IV. A block size order, unless a customer placing such order requests that the order be displayed; -
Question 3 of 10
3. Question
Which of the following is correctly on System Participant Obligations?
I. Participants shall commence participation in the System by initially contacting the System Operation Center to verify authorization for submitting trade data to the System for Reportable Securities
II. A Participant that is a self-clearing firm shall be obligated to accept and clear each trade that the System identifies as having been effected by that Participant
III. A Participant that is an Introducing Broker or a Correspondent Executing Broker shall identify its Clearing Broker when it becomes a Participant and notify the System Operation Center if its Clearing Broker is to be changed; this will necessitate execution of a revised Participant Application Agreement
IV. If at any time a System Clearing Broker fails to maintain a clearing arrangement, it shall be removed from the System until such time as a clearing arrangement is reestablished, and notice of such arrangement, with an amended Participant Application Agreement, is filed with FINRA.Correct
FINRA Rule 7220A. Trade Reporting Participation Requirements
System Participant Obligations
(A) Participants shall commence participation in the System by initially contacting the System Operation Center to verify authorization for submitting trade data to the System for Reportable Securities.
(B) A Participant that is a self-clearing firm shall be obligated to accept and clear each trade that the System identifies as having been effected by that Participant.
(C) A Participant that is an Introducing Broker or a Correspondent Executing Broker shall identify its Clearing Broker when it becomes a Participant and notify the System Operation Center if its Clearing Broker is to be changed; this will necessitate execution of a revised Participant Application Agreement.
(D) If at any time a Participant fails to maintain a clearing arrangement, it shall be removed from the System until such time as a clearing arrangement is reestablished and notice of such arrangement, with an amended Reporting Participant Application Agreement, is filed with FINRA.Incorrect
FINRA Rule 7220A. Trade Reporting Participation Requirements
System Participant Obligations
(A) Participants shall commence participation in the System by initially contacting the System Operation Center to verify authorization for submitting trade data to the System for Reportable Securities.
(B) A Participant that is a self-clearing firm shall be obligated to accept and clear each trade that the System identifies as having been effected by that Participant.
(C) A Participant that is an Introducing Broker or a Correspondent Executing Broker shall identify its Clearing Broker when it becomes a Participant and notify the System Operation Center if its Clearing Broker is to be changed; this will necessitate execution of a revised Participant Application Agreement.
(D) If at any time a Participant fails to maintain a clearing arrangement, it shall be removed from the System until such time as a clearing arrangement is reestablished and notice of such arrangement, with an amended Reporting Participant Application Agreement, is filed with FINRA. -
Question 4 of 10
4. Question
The minimum amount of price improvement necessary for a member to execute an order on a proprietary basis when holding an unexecuted limit order in that same security, and not be required to execute the held limit order is as which of the following?
I. For customer limit orders priced greater than or equal to $1.00, the minimum amount of price improvement required is $0.01 for NMS stocks and the lesser of $0.01 or one-half (1/2) of the current inside spread for OTC equity securities
II. For customer limit orders priced greater than or equal to $0.01 and less than $0.50, the minimum amount of price improvement required is the lesser of $0.01 or one-half (1/2) of the current inside spread
III. For customer limit orders priced less than $0.01 but greater than or equal to $0.001, the minimum amount of price improvement required is the lesser of $0.001 or one-half (1/2) of the current inside spread
IV. For customer limit orders priced less than $0.001 but greater than or equal to $0.0001, the minimum amount of price improvement required is the lesser of $0.0001 or one-half (1/2) of the current inside spreadCorrect
FINRA Rule 5320. Prohibition Against Trading Ahead of Customer Orders
The minimum amount of price improvement necessary for a member to execute an order on a proprietary basis when holding an unexecuted limit order in that same security, and not be required to execute the held limit order is as follows:(a) For customer limit orders priced greater than or equal to $1.00, the minimum amount of price improvement required is $0.01 for NMS stocks and the lesser of $0.01 or one-half (1/2) of the current inside spread for OTC equity securities;
(b) For customer limit orders priced greater than or equal to $0.01 and less than $1.00, the minimum amount of price improvement required is the lesser of $0.01 or one-half (1/2) of the current inside spread;
(c) For customer limit orders priced less than $0.01 but greater than or equal to $0.001, the minimum amount of price improvement required is the lesser of $0.001 or one-half (1/2) of the current inside spread;
(d) For customer limit orders priced less than $0.001 but greater than or equal to $0.0001, the minimum amount of price improvement required is the lesser of $0.0001 or one-half (1/2) of the current inside spreadIncorrect
FINRA Rule 5320. Prohibition Against Trading Ahead of Customer Orders
The minimum amount of price improvement necessary for a member to execute an order on a proprietary basis when holding an unexecuted limit order in that same security, and not be required to execute the held limit order is as follows:(a) For customer limit orders priced greater than or equal to $1.00, the minimum amount of price improvement required is $0.01 for NMS stocks and the lesser of $0.01 or one-half (1/2) of the current inside spread for OTC equity securities;
(b) For customer limit orders priced greater than or equal to $0.01 and less than $1.00, the minimum amount of price improvement required is the lesser of $0.01 or one-half (1/2) of the current inside spread;
(c) For customer limit orders priced less than $0.01 but greater than or equal to $0.001, the minimum amount of price improvement required is the lesser of $0.001 or one-half (1/2) of the current inside spread;
(d) For customer limit orders priced less than $0.001 but greater than or equal to $0.0001, the minimum amount of price improvement required is the lesser of $0.0001 or one-half (1/2) of the current inside spread -
Question 5 of 10
5. Question
The Policy applies to all securities, whether oil royalties or any other security, in which of the following types of transactions?
I. A transaction in which a member buys a security to fill an order for the same security previously received from a customer. This transaction would include the so-called “riskless” or “simultaneous” transaction
II. A transaction in which the member sells a security to a customer from inventory. In such a case the amount of the mark-up would be determined on the basis of the mark-up over the bona fide representative current market. The amount of profit or loss to the member from market appreciation or depreciation before, or after, the date of the transaction with the customer would not ordinarily enter into the determination of the amount or fairness of the mark-up
III. A transaction in which a member purchases a security from a customer. The price paid to the customer or the mark-down applied by the member must be reasonably related to the prevailing market price of the security
IV. A transaction in which the member acts as agent. In such a case, the commission charged the customer must be fair in light of all relevant circumstancesCorrect
FINRA Rule 2121. Fair Prices and Commissions
The Policy applies to all securities, whether oil royalties or any other security, in the following types of transactions:
(1) A transaction in which a member buys a security to fill an order for the same security previously received from a customer. This transaction would include the so-called “riskless” or “simultaneous” transaction.
(2) A transaction in which the member sells a security to a customer from inventory. In such a case the amount of the mark-up would be determined on the basis of the mark-up over the bona fide representative current market. The amount of profit or loss to the member from market appreciation or depreciation before, or after, the date of the transaction with the customer would not ordinarily enter into the determination of the amount or fairness of the mark-up.
(3) A transaction in which a member purchases a security from a customer. The price paid to the customer or the mark-down applied by the member must be reasonably related to the prevailing market price of the security.
(4) A transaction in which the member acts as agent. In such a case, the commission charged the customer must be fair in light of all relevant circumstances.Incorrect
FINRA Rule 2121. Fair Prices and Commissions
The Policy applies to all securities, whether oil royalties or any other security, in the following types of transactions:
(1) A transaction in which a member buys a security to fill an order for the same security previously received from a customer. This transaction would include the so-called “riskless” or “simultaneous” transaction.
(2) A transaction in which the member sells a security to a customer from inventory. In such a case the amount of the mark-up would be determined on the basis of the mark-up over the bona fide representative current market. The amount of profit or loss to the member from market appreciation or depreciation before, or after, the date of the transaction with the customer would not ordinarily enter into the determination of the amount or fairness of the mark-up.
(3) A transaction in which a member purchases a security from a customer. The price paid to the customer or the mark-down applied by the member must be reasonably related to the prevailing market price of the security.
(4) A transaction in which the member acts as agent. In such a case, the commission charged the customer must be fair in light of all relevant circumstances. -
Question 6 of 10
6. Question
FINRA shall provide affected parties with prompt notice of determinations under this Rule with which of the following method? However, that if an officer nullifies or modifies a large number of transactions pursuant to Rule 11892 or 11893, FINRA may instead provide notice to parties via a press release or any other method reasonably expected to provide rapid notice to many market participants.
I. Facsimile
II. Electronic mail
III. Telephone (including voicemail)
IV. Bulk mailCorrect
FINRA Rule 11894. Review by the Uniform Practice Code (“UPC”) Committee
FINRA shall provide affected parties with prompt notice of determinations under this Rule via facsimile, electronic mail, or telephone (including voicemail); provided, however, that if an officer nullifies or modifies a large number of transactions pursuant to Rule 11892 or 11893, FINRA may instead provide notice to parties via a press release or any other method reasonably expected to provide rapid notice to many market participants.Incorrect
FINRA Rule 11894. Review by the Uniform Practice Code (“UPC”) Committee
FINRA shall provide affected parties with prompt notice of determinations under this Rule via facsimile, electronic mail, or telephone (including voicemail); provided, however, that if an officer nullifies or modifies a large number of transactions pursuant to Rule 11892 or 11893, FINRA may instead provide notice to parties via a press release or any other method reasonably expected to provide rapid notice to many market participants. -
Question 7 of 10
7. Question
Each confirmation or comparison covering a contract in a “when, as and if issued” or “when, as and if distributed” security shall, at a minimum, contain which of the following?
I. An adequate description of the security and the plan, if any, under which the security is proposed to be issued or distributed
II. Demographic information of the board of directors
III. Designation of FINRA as the authority which shall rule upon the performance of the contract
IV. Provision for marking the contract to the marketCorrect
FINRA/Nasdaq Uniform Practice Codes
11130. When, As and If Issued/Distributed Contracts
(2) Each confirmation or comparison covering a contract in a “when, as and if issued” or “when, as and if distributed” security shall, at a minimum, contain:
(A) an adequate description of the security and the plan, if any, under which the security is proposed to be issued or distributed;
(B) designation of FINRA as the authority which shall rule upon the performance of the contract; and
(C) provision for marking the contract to the market.Incorrect
FINRA/Nasdaq Uniform Practice Codes
11130. When, As and If Issued/Distributed Contracts
(2) Each confirmation or comparison covering a contract in a “when, as and if issued” or “when, as and if distributed” security shall, at a minimum, contain:
(A) an adequate description of the security and the plan, if any, under which the security is proposed to be issued or distributed;
(B) designation of FINRA as the authority which shall rule upon the performance of the contract; and
(C) provision for marking the contract to the market. -
Question 8 of 10
8. Question
Which of the following is correct?
A member seeking registration as an ADF Market Participant shall file an application with FINRA in which the member:
I. Agrees that failing to submit 70% of the ADF Market Participant’s quoting and trading volume to the ADF will result in the forfeiture of some or all of the ADF Deposit Amount pursuant to the ADF Deposit Terms
II. Provides FINRA with reasonable monthly projections of the volume of data that the member anticipates submitting to the ADF
III. Agrees to submit the ADF Deposit Amount in five equal installments into an escrow account at a bank mutually acceptable to the member and FINRA on a timetable as agreed to by the member and FINRA
IV.Agrees to the ADF Deposit TermsCorrect
FINRA Rule 6271. Registration as an ADF Market Maker or ADF ECN
A member seeking registration as an ADF Market Participant shall file an application with FINRA in which the member:
I. Agrees that failing to submit 75% of the ADF Market Participant’s quoting and trading volume to the ADF will result in the forfeiture of some or all of the ADF Deposit Amount pursuant to the ADF Deposit Terms;
II. Pprovides FINRA with reasonable monthly projections of the volume of data that the member anticipates submitting to the ADF
III. Agrees to submit the ADF Deposit Amount in five equal installments into an escrow account at a bank mutually acceptable to the member and FINRA on a timetable as agreed to by the member and FINRA
IV. grees to the ADF Deposit TermsIncorrect
FINRA Rule 6271. Registration as an ADF Market Maker or ADF ECN
A member seeking registration as an ADF Market Participant shall file an application with FINRA in which the member:
I. Agrees that failing to submit 75% of the ADF Market Participant’s quoting and trading volume to the ADF will result in the forfeiture of some or all of the ADF Deposit Amount pursuant to the ADF Deposit Terms;
II. Pprovides FINRA with reasonable monthly projections of the volume of data that the member anticipates submitting to the ADF
III. Agrees to submit the ADF Deposit Amount in five equal installments into an escrow account at a bank mutually acceptable to the member and FINRA on a timetable as agreed to by the member and FINRA
IV. grees to the ADF Deposit Terms -
Question 9 of 10
9. Question
An Applicant for FINRA membership shall file its application in the manner prescribed by FINRA with the Department of Member Regulation (“the Department”). An Applicant shall submit an application that includes which of the following?
I. Form NMA
II. An original signed and notarized paper Form BD, with applicable schedules
III. A copy of FINRA-approved fingerprint card for each Associated Person who will be subject to SEC Rule 17f-2
IV. A new member assessment reportCorrect
NASD Rule 1013. New Member Application and Interview
An Applicant for FINRA membership shall file its application in the manner prescribed by FINRA with the Department of Member Regulation (“the Department”). An Applicant shall submit an application that includes:
(A) Form NMA;
(B) an original signed and notarized paper Form BD, with applicable schedules;
(C) an original FINRA-approved fingerprint card for each Associated Person who will be subject to SEC Rule 17f-2;
(D) a new member assessment report;Incorrect
NASD Rule 1013. New Member Application and Interview
An Applicant for FINRA membership shall file its application in the manner prescribed by FINRA with the Department of Member Regulation (“the Department”). An Applicant shall submit an application that includes:
(A) Form NMA;
(B) an original signed and notarized paper Form BD, with applicable schedules;
(C) an original FINRA-approved fingerprint card for each Associated Person who will be subject to SEC Rule 17f-2;
(D) a new member assessment report; -
Question 10 of 10
10. Question
Which of the following refer to a Registered Reporting ADF Market Maker, or a Registered Reporting ADF ECN that is a “Trading Center,” as defined in Rule 600(b)(78) of SEC Regulation NMS, and that is certified, pursuant to Rule 6250, to display its quotations or orders through the ADF?
Correct
FINRA Rule 6220
“ADF Trading Center” means a Registered Reporting ADF Market Maker, or a Registered Reporting ADF ECN that is a “Trading Center,” as defined in Rule 600(b)(78) of SEC Regulation NMS, and that is certified, pursuant to Rule 6250, to display its quotations or orders through the ADF.Incorrect
FINRA Rule 6220
“ADF Trading Center” means a Registered Reporting ADF Market Maker, or a Registered Reporting ADF ECN that is a “Trading Center,” as defined in Rule 600(b)(78) of SEC Regulation NMS, and that is certified, pursuant to Rule 6250, to display its quotations or orders through the ADF.