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Question 1 of 10
1. Question
What is a break point sale?
Correct
FINRA rule no 2342. “Breakpoint” Sales
Break point sale is the of a mutual fund at a set dollar amount allowing the fund holder to move into lower sales charge bracket.
No member shall sell investment company shares in dollar amounts just below the point at which the sales charge is reduced on quantity transactions so as to share in the higher sales charges applicable on sales below the break-point.
For purposes of determining whether a sale in dollar amounts just below a break-point was made in order to share in a higher sales charge, FINRA will consider the facts and circumstances, including, for example, whether a member has retained records that demonstrate that the trade was executed in accordance with a bona fide asset allocation program that the member offers to its customers:
(1) which is designed to meet their diversification needs and investment goals; and
(2) under which the member discloses to its customers that they may not qualify for break-point reductions that are otherwise available.Incorrect
FINRA rule no 2342. “Breakpoint” Sales
Break point sale is the of a mutual fund at a set dollar amount allowing the fund holder to move into lower sales charge bracket.
No member shall sell investment company shares in dollar amounts just below the point at which the sales charge is reduced on quantity transactions so as to share in the higher sales charges applicable on sales below the break-point.
For purposes of determining whether a sale in dollar amounts just below a break-point was made in order to share in a higher sales charge, FINRA will consider the facts and circumstances, including, for example, whether a member has retained records that demonstrate that the trade was executed in accordance with a bona fide asset allocation program that the member offers to its customers:
(1) which is designed to meet their diversification needs and investment goals; and
(2) under which the member discloses to its customers that they may not qualify for break-point reductions that are otherwise available. -
Question 2 of 10
2. Question
What is meant by the term ‘aggregate exercise price’ under options contract?
Correct
FINRA rule no 2360. Options
An aggregate exercise price is the value traded of the underlying asset if the holder exercises its options contract. In other words, it is the amount of money needed to buy, for a call, or sell, for a put all the underlying asset represented by the options contract.
The term ‘aggregate exercise price’ is calculated by multiplying option contract with the number of units of the underlying security covered by such option contract.Incorrect
FINRA rule no 2360. Options
An aggregate exercise price is the value traded of the underlying asset if the holder exercises its options contract. In other words, it is the amount of money needed to buy, for a call, or sell, for a put all the underlying asset represented by the options contract.
The term ‘aggregate exercise price’ is calculated by multiplying option contract with the number of units of the underlying security covered by such option contract. -
Question 3 of 10
3. Question
What is meant by closing sales transaction?
Correct
FINRA rule no 2360. Options
The term “closing sale transaction” means an option transaction in which the seller’s intention is to reduce or eliminate a long position in the series of options involved in such transaction.Incorrect
FINRA rule no 2360. Options
The term “closing sale transaction” means an option transaction in which the seller’s intention is to reduce or eliminate a long position in the series of options involved in such transaction. -
Question 4 of 10
4. Question
Which one of the factor will FINRA consider from the given options if aggregation of accounts is required?
Correct
FINRA rule no 2360. Options
FINRA will also consider the following factors in determining if aggregation of accounts is required:
(i) similar patterns of trading activity among separate entities;
(ii) the sharing of kindred business purposes and interests;
(iii) whether there is common supervision of the entities which extends beyond assuring adherence to each entity’s investment objectives and/or restrictions;
(iv) the degree of contact and communication between directors and/or managers of separate accounts.Incorrect
FINRA rule no 2360. Options
FINRA will also consider the following factors in determining if aggregation of accounts is required:
(i) similar patterns of trading activity among separate entities;
(ii) the sharing of kindred business purposes and interests;
(iii) whether there is common supervision of the entities which extends beyond assuring adherence to each entity’s investment objectives and/or restrictions;
(iv) the degree of contact and communication between directors and/or managers of separate accounts. -
Question 5 of 10
5. Question
What is meant by conventional option?
Correct
FINRA rule no 2360. Options
Conventional Option — The term “conventional option” shall mean:
(A) any option contract not issued, or subject to issuance, by The Options Clearing Corporation; or
(B) an OCC Cleared OTC Option.Incorrect
FINRA rule no 2360. Options
Conventional Option — The term “conventional option” shall mean:
(A) any option contract not issued, or subject to issuance, by The Options Clearing Corporation; or
(B) an OCC Cleared OTC Option. -
Question 6 of 10
6. Question
What is meant by the term “options contract equivalent of the net delta”?
Correct
FINRA rule no 2360. Options
The term “options contract equivalent of the net delta” means the net delta divided by the number of shares underlying the options contract.Incorrect
FINRA rule no 2360. Options
The term “options contract equivalent of the net delta” means the net delta divided by the number of shares underlying the options contract. -
Question 7 of 10
7. Question
For maintenance of records, a central file must NOT include
Correct
FINRA rule no 2360. Options
In addition to the requirements of Rules 2268, 5340 and Rule 4510 Series, every member shall maintain and keep current a separate central log, index or other file for all options-related complaints, through which these complaints can easily be identified and retrieved. The central file shall be located at the principal place of business of the member or such other principal office as shall be designated by the member. At a minimum, the central file shall include:
(i) identification of complainant;
(ii) date complaint was received;
(iii) identification of registered representative servicing the account;
(iv) a general description of the matter complained of; and
(v) a record of what action, if any, has been taken by the member with respect to the complaint.Incorrect
FINRA rule no 2360. Options
In addition to the requirements of Rules 2268, 5340 and Rule 4510 Series, every member shall maintain and keep current a separate central log, index or other file for all options-related complaints, through which these complaints can easily be identified and retrieved. The central file shall be located at the principal place of business of the member or such other principal office as shall be designated by the member. At a minimum, the central file shall include:
(i) identification of complainant;
(ii) date complaint was received;
(iii) identification of registered representative servicing the account;
(iv) a general description of the matter complained of; and
(v) a record of what action, if any, has been taken by the member with respect to the complaint. -
Question 8 of 10
8. Question
How many days should it take to locate the central file?
Correct
Central file is located not later than 30 days after receipt by the branch office that is the subject of the complaint.
Incorrect
FINRA rule no 2360. Options
Each options-related complaint received by a branch office of a member shall be forwarded to the office in which the separate, central file is located not later than 30 days after receipt by the branch office that is the subject of the complaint. A copy of every options-related complaint shall also be maintained at the branch office that is the subject of the complaint. -
Question 9 of 10
9. Question
In option programs, customers must be provided information about the nature of risk of such programs in what form?
Correct
FINRA rule no 2360. Options
Where the discretionary account utilizes options programs involving the systematic use of one or more options strategies, the customer shall be furnished with a written explanation of the nature and risks of such programs.Incorrect
FINRA rule no 2360. Options
Where the discretionary account utilizes options programs involving the systematic use of one or more options strategies, the customer shall be furnished with a written explanation of the nature and risks of such programs. -
Question 10 of 10
10. Question
Which of the following statement is TRUE regarding stocks transfer tax?
Correct
FINRA rule no 2360. Options
Any stock transfer or similar tax payable in accordance with applicable laws and regulations of a taxing jurisdiction upon the sale, transfer or delivery of securities pursuant to the exercise of an option contract shall be the responsibility of the seller (writer) to whom the exercise notice is assigned in the case of a call option contract or the exercising holder in the case of a put option contract except that
(A) in the case of a call option contract where the incidents of the tax are attributable solely to the exercising holder, the member representing such holder or another member which acts on its behalf as a clearing member of The Options Clearing Corporation, the tax shall be the responsibility of the exercising holder, and (B) in the case of a put option contract where the incidents of the tax are attributable solely to the seller (writer) to whom the exercise notice is assigned, the member representing such seller (writer) or another member which acts on its behalf as a clearing member of The Options Clearing Corporation, the tax shall be the responsibility of such seller (writer). New York levied a stock transfer tax to be paid by the seller on on all sales, deliveries, agreement to sell or transfer of shares.Incorrect
FINRA rule no 2360. Options
Any stock transfer or similar tax payable in accordance with applicable laws and regulations of a taxing jurisdiction upon the sale, transfer or delivery of securities pursuant to the exercise of an option contract shall be the responsibility of the seller (writer) to whom the exercise notice is assigned in the case of a call option contract or the exercising holder in the case of a put option contract except that
(A) in the case of a call option contract where the incidents of the tax are attributable solely to the exercising holder, the member representing such holder or another member which acts on its behalf as a clearing member of The Options Clearing Corporation, the tax shall be the responsibility of the exercising holder, and (B) in the case of a put option contract where the incidents of the tax are attributable solely to the seller (writer) to whom the exercise notice is assigned, the member representing such seller (writer) or another member which acts on its behalf as a clearing member of The Options Clearing Corporation, the tax shall be the responsibility of such seller (writer). New York levied a stock transfer tax to be paid by the seller on on all sales, deliveries, agreement to sell or transfer of shares.