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Question 1 of 10
1. Question
How many times should SIPC members provide all the information, in writing, to the customers?
Correct
FINRA rule no 2266. SIPC Information
The Securities Investor Protection Corporation (SIPC) is a non profit organization funded by members who instructs membership of the most US registered broker-dealers. All members, except those members:
(a) that pursuant to Section 3(a)(2)(A)(i) through (iii) of the Securities Investor Protection Act of 1970 (SIPA) are excluded from membership in the Securities Investor Protection Corporation (SIPC) and that are not SIPC members; or
(b) whose business consists exclusively of the sale of investments that are ineligible for SIPC protection, shall advise all new customers, in writing, at the opening of an account, that they may obtain information about SIPC, including the SIPC brochure, by contacting SIPC, and also shall provide the Web site address and telephone number of SIPC. In addition, such members shall provide all customers with the same information, in writing, at least once each year.Incorrect
FINRA rule no 2266. SIPC Information
The Securities Investor Protection Corporation (SIPC) is a non profit organization funded by members who instructs membership of the most US registered broker-dealers. All members, except those members:
(a) that pursuant to Section 3(a)(2)(A)(i) through (iii) of the Securities Investor Protection Act of 1970 (SIPA) are excluded from membership in the Securities Investor Protection Corporation (SIPC) and that are not SIPC members; or
(b) whose business consists exclusively of the sale of investments that are ineligible for SIPC protection, shall advise all new customers, in writing, at the opening of an account, that they may obtain information about SIPC, including the SIPC brochure, by contacting SIPC, and also shall provide the Web site address and telephone number of SIPC. In addition, such members shall provide all customers with the same information, in writing, at least once each year. -
Question 2 of 10
2. Question
When should a broker must give a written notification of his/her involvement in this activity to the customer?
Correct
FINRA rule no 2269. Disclosure of Participation or Interest in Primary or Secondary Distribution
A member who is acting as a broker for a customer or for both such customer and some other person, or a member who is acting as a dealer and who receives or has promise of receiving a fee from a customer for advising such customer with respect to securities, shall, at or before the completion of any transaction for or with such customer in any security in the primary or secondary distribution of which such member is participating or is otherwise financially interested, give such customer written notification of the existence of such participation or interest.Incorrect
FINRA rule no 2269. Disclosure of Participation or Interest in Primary or Secondary Distribution
A member who is acting as a broker for a customer or for both such customer and some other person, or a member who is acting as a dealer and who receives or has promise of receiving a fee from a customer for advising such customer with respect to securities, shall, at or before the completion of any transaction for or with such customer in any security in the primary or secondary distribution of which such member is participating or is otherwise financially interested, give such customer written notification of the existence of such participation or interest. -
Question 3 of 10
3. Question
The ‘promoter’ is the beneficial owner of what percent of an issuer’s securities?
Correct
FINRA rule no 5250. Payments for Market Making
A “promoter” means any person who founded or organized the business or enterprise of an issuer, is a director or employee of an issuer, acts or has acted as a consultant, adviser, accountant or attorney to an issuer, is the beneficial owner of any of an issuer’s securities that are considered “restricted securities” under Securities Act Rule 144, or is the beneficial owner of five percent (5%) or more of the public float of any class of an issuer’s securities, and any other person with a similar interest in promoting the entry of quotations or market making in an issuer’s securities.Incorrect
FINRA rule no 5250. Payments for Market Making
A “promoter” means any person who founded or organized the business or enterprise of an issuer, is a director or employee of an issuer, acts or has acted as a consultant, adviser, accountant or attorney to an issuer, is the beneficial owner of any of an issuer’s securities that are considered “restricted securities” under Securities Act Rule 144, or is the beneficial owner of five percent (5%) or more of the public float of any class of an issuer’s securities, and any other person with a similar interest in promoting the entry of quotations or market making in an issuer’s securities. -
Question 4 of 10
4. Question
What is the correct way to disclose a statement of financial condition?
Correct
FINRA rule no 2261. Disclosure of Financial Condition
A member shall make available to inspection by any bona fide regular customer, upon request, the information relative to such member’s financial condition as disclosed in its most recent balance sheet prepared either in accordance with such member’s usual practice or as required by any state or federal securities laws, or any rule or regulation there-under. In lieu of making such balance sheet available to inspection, a member may deliver the balance sheet to the requesting bona fide regular customer in paper or electronic form; provided that, with respect to electronic delivery, the customer must consent to receive the balance sheet in electronic form.Incorrect
FINRA rule no 2261. Disclosure of Financial Condition
A member shall make available to inspection by any bona fide regular customer, upon request, the information relative to such member’s financial condition as disclosed in its most recent balance sheet prepared either in accordance with such member’s usual practice or as required by any state or federal securities laws, or any rule or regulation there-under. In lieu of making such balance sheet available to inspection, a member may deliver the balance sheet to the requesting bona fide regular customer in paper or electronic form; provided that, with respect to electronic delivery, the customer must consent to receive the balance sheet in electronic form. -
Question 5 of 10
5. Question
According to rule of “Disclosure of Financial Condition”, what does the term ‘customer’ means?
Correct
FINRA rule no 2261. Disclosure of Financial Condition
The term “customer” means any person who, in the regular course of such member’s business, has cash or securities in the possession of such member.Incorrect
FINRA rule no 2261. Disclosure of Financial Condition
The term “customer” means any person who, in the regular course of such member’s business, has cash or securities in the possession of such member. -
Question 6 of 10
6. Question
Which of the following statement is false regarding cash flow?
Correct
FINRA rule no 2310. Direct Participation Programs
Cash flows are cash funds provided from operations, including lease payments on net leases from builders and sellers, without deduction for depreciation, but after deducting cash funds used to pay all other expenses, debt payments, capital improvements and replacements. Moreover, cash flows are classified as operating, investing, and financing activities.Incorrect
FINRA rule no 2310. Direct Participation Programs
Cash flows are cash funds provided from operations, including lease payments on net leases from builders and sellers, without deduction for depreciation, but after deducting cash funds used to pay all other expenses, debt payments, capital improvements and replacements. Moreover, cash flows are classified as operating, investing, and financing activities. -
Question 7 of 10
7. Question
What is the correct formula to calculate fair market net worth?
Correct
FINRA rule no 2310. Direct Participation Programs
Fair market net worth — total assets computed at fair market value less total liabilities. Fair market net worth is the price an asset would bring if it were sold on a voluntary basis, meaning neither buyer nor seller has an obligation to make the exchange.Incorrect
FINRA rule no 2310. Direct Participation Programs
Fair market net worth — total assets computed at fair market value less total liabilities. Fair market net worth is the price an asset would bring if it were sold on a voluntary basis, meaning neither buyer nor seller has an obligation to make the exchange. -
Question 8 of 10
8. Question
What is equity interest with respect to partnership?
Correct
FINRA rule no 2310. Direct Participation Programs
Equity interest — when used with respect to a corporation, means common stock and any security convertible into, exchangeable or exerciser for common stock, and, when used with respect to a partnership, means an interest in the capital or profits or losses of the partnership.Incorrect
FINRA rule no 2310. Direct Participation Programs
Equity interest — when used with respect to a corporation, means common stock and any security convertible into, exchangeable or exerciser for common stock, and, when used with respect to a partnership, means an interest in the capital or profits or losses of the partnership. -
Question 9 of 10
9. Question
What is meant by limited partnership roll up transaction?
Correct
FINRA rule no 2310. Direct Participation Programs
Limited partnership roll-up transaction is a transaction involving the combination or reorganization of one or more limited partnerships, directly or indirectly, in which:
(A) some or all of the investors in any of such limited partnerships will receive new securities, or securities in another entity, that will be reported under a transaction reporting plan declared effective before January 1, 1991, by the SEC under Section 11A of the Exchange Act.
(B) any of the investors’ limited partnership securities are not, as of the date of the filing, reported under a transaction reporting plan declared effective before January 1, 1991, by the SEC under Section 11A of the Exchange Act.
C) investors in any of the limited partnerships involved in the transaction are subject to a significant adverse change with respect to voting rights, the term of existence of the entity, management compensation, or investment objectives.Incorrect
FINRA rule no 2310. Direct Participation Programs
Limited partnership roll-up transaction is a transaction involving the combination or reorganization of one or more limited partnerships, directly or indirectly, in which:
(A) some or all of the investors in any of such limited partnerships will receive new securities, or securities in another entity, that will be reported under a transaction reporting plan declared effective before January 1, 1991, by the SEC under Section 11A of the Exchange Act.
(B) any of the investors’ limited partnership securities are not, as of the date of the filing, reported under a transaction reporting plan declared effective before January 1, 1991, by the SEC under Section 11A of the Exchange Act.
C) investors in any of the limited partnerships involved in the transaction are subject to a significant adverse change with respect to voting rights, the term of existence of the entity, management compensation, or investment objectives. -
Question 10 of 10
10. Question
What are solicitation expenses?
Correct
FINRA rule no 2310. Direct Participation Programs
Solicitation expenses are direct marketing expenses incurred by a member, in connection with a limited partnership roll-up transaction such as telephone calls, broker-dealer fact sheets, members’ legal and other fees related to the solicitation, as well as direct solicitation compensation to members.Incorrect
FINRA rule no 2310. Direct Participation Programs
Solicitation expenses are direct marketing expenses incurred by a member, in connection with a limited partnership roll-up transaction such as telephone calls, broker-dealer fact sheets, members’ legal and other fees related to the solicitation, as well as direct solicitation compensation to members.