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Question 1 of 10
1. Question
Which statement describes non-registered foreign finders?
Correct
FINRA rule no 2040. Payments to Unregistered Persons
A member may pay to a non-registered foreign person (the “finder”) transaction-related compensation based upon the business of customers the finder directs to the member if the following conditions are met:
(1) the member has assured itself that the finder who will receive the compensation is not required to register in the United States as a broker-dealer nor is subject to a disqualification as defined in Article III, Section 4 of FINRA’s By-Laws, and has further assured itself that the compensation arrangement does not violate applicable foreign law;
(2) the finder is a foreign national (not a U.S. citizen) or foreign entity domiciled abroad;
(3) the customers are foreign nationals (not U.S. citizens) or foreign entities domiciled abroad transacting business in either foreign or U.S. securitiesIncorrect
FINRA rule no 2040. Payments to Unregistered Persons
A member may pay to a non-registered foreign person (the “finder”) transaction-related compensation based upon the business of customers the finder directs to the member if the following conditions are met:
(1) the member has assured itself that the finder who will receive the compensation is not required to register in the United States as a broker-dealer nor is subject to a disqualification as defined in Article III, Section 4 of FINRA’s By-Laws, and has further assured itself that the compensation arrangement does not violate applicable foreign law;
(2) the finder is a foreign national (not a U.S. citizen) or foreign entity domiciled abroad;
(3) the customers are foreign nationals (not U.S. citizens) or foreign entities domiciled abroad transacting business in either foreign or U.S. securities -
Question 2 of 10
2. Question
The board has determined that 5% policy is
Correct
FINRA rule no 2120. Commissions, Mark Ups and Charges
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.”
(5) Determination of the fairness of mark-ups must be based on a consideration of all the relevant factors, of which the percentage of mark-up is only one.Incorrect
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Question 3 of 10
3. Question
What does ‘specified adults’ mean under the rule of Financial Exploitation of Specified Adults?
Correct
FINRA rule no 2165. Financial Exploitation of Specified Adults
For purposes of this Rule, the term “Specified Adult” shall mean: (A) a natural person age 65 and older; or (B) a natural person age 18 and older who the member reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her own interests.Incorrect
FINRA rule no 2165. Financial Exploitation of Specified Adults
For purposes of this Rule, the term “Specified Adult” shall mean: (A) a natural person age 65 and older; or (B) a natural person age 18 and older who the member reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her own interests. -
Question 4 of 10
4. Question
What is meant by institutional communication?
Correct
FINRA rule no 2210. Communications with the Public
“Institutional communication” means any written (including electronic) communication that is distributed or made available only to institutional investors, but does not include a member’s internal communications.Each member shall establish written procedures that are appropriate to its business, size, structure, and customers for the review by an appropriately qualified registered principal of institutional communications used by the member and its associated persons. Such procedures must be reasonably designed to ensure that institutional communications comply with applicable standards.Incorrect
FINRA rule no 2210. Communications with the Public
“Institutional communication” means any written (including electronic) communication that is distributed or made available only to institutional investors, but does not include a member’s internal communications.Each member shall establish written procedures that are appropriate to its business, size, structure, and customers for the review by an appropriately qualified registered principal of institutional communications used by the member and its associated persons. Such procedures must be reasonably designed to ensure that institutional communications comply with applicable standards. -
Question 5 of 10
5. Question
Under the rule Communications with the Public, what does the word communications does NOT include?
Correct
FINRA rule no 2210. Communications with the Public
Under the rule Communications with the Public, the word “communications” consist of correspondence, retail communications and institutional communications.Although the communications described in paragraphs (c)(7)(H) through (K) are excluded from the foregoing filing requirements, investment company communications described in those paragraphs shall be deemed filed with FINRA for purposes of Section 24(b) of the Investment Company Act and Rule 24b-3 thereunder.Incorrect
FINRA rule no 2210. Communications with the Public
Under the rule Communications with the Public, the word “communications” consist of correspondence, retail communications and institutional communications.Although the communications described in paragraphs (c)(7)(H) through (K) are excluded from the foregoing filing requirements, investment company communications described in those paragraphs shall be deemed filed with FINRA for purposes of Section 24(b) of the Investment Company Act and Rule 24b-3 thereunder. -
Question 6 of 10
6. Question
Which of the following statement is NOT true about disclosing regarding the testimonial concerning investment performance?
Correct
FINRA rule no 2210. Communications with the Public
An appropriately qualified registered principal of the member must approve each retail communication before the earlier of its use or filing with FINRA’s Advertising Regulation Department (“Department”).
Retail communications or correspondence providing any testimonial concerning the investment advice or investment performance of a member or its products must prominently disclose the following:
(i) The fact that the testimonial may not be representative of the experience of other customers.
(ii) The fact that the testimonial is no guarantee of future performance or success.
(iii) If more than $100 in value is paid for the testimonial, the fact that it is a paid testimonial.Incorrect
FINRA rule no 2210. Communications with the Public
An appropriately qualified registered principal of the member must approve each retail communication before the earlier of its use or filing with FINRA’s Advertising Regulation Department (“Department”).
Retail communications or correspondence providing any testimonial concerning the investment advice or investment performance of a member or its products must prominently disclose the following:
(i) The fact that the testimonial may not be representative of the experience of other customers.
(ii) The fact that the testimonial is no guarantee of future performance or success.
(iii) If more than $100 in value is paid for the testimonial, the fact that it is a paid testimonial. -
Question 7 of 10
7. Question
On which basis debt security is NOT bought or sold between the two parties?
Correct
FINRA rule no 2251. Processing and Forwarding of Proxy and Other Issuer-Related Materials
For a debt security other than a municipal security, the member, subject to paragraph (e) of this Rule and applicable SEC rules, shall make reasonable efforts to process and forward any communication, document, or collection of documents pertaining to the issue that:
(A) was prepared by or on behalf of, the issuer, or was prepared by or on behalf of, the trustee of the specific issue of the security; and
(B) contains material information about such issue including, but not limited to, notices concerning monetary or technical defaults, financial reports, information statements, and material event notices.
Debt security refers to a debt instrument, such as a government bond, corporate bond, certificate of deposit (CD), municipal bond or preferred stock, that can be bought or sold between two parties and has basic terms defined, such as national amount (amount borrowed), interest rate, and maturity and renewal date.Incorrect
FINRA rule no 2251. Processing and Forwarding of Proxy and Other Issuer-Related Materials
For a debt security other than a municipal security, the member, subject to paragraph (e) of this Rule and applicable SEC rules, shall make reasonable efforts to process and forward any communication, document, or collection of documents pertaining to the issue that:
(A) was prepared by or on behalf of, the issuer, or was prepared by or on behalf of, the trustee of the specific issue of the security; and
(B) contains material information about such issue including, but not limited to, notices concerning monetary or technical defaults, financial reports, information statements, and material event notices.
Debt security refers to a debt instrument, such as a government bond, corporate bond, certificate of deposit (CD), municipal bond or preferred stock, that can be bought or sold between two parties and has basic terms defined, such as national amount (amount borrowed), interest rate, and maturity and renewal date. -
Question 8 of 10
8. Question
Which of the following statement is TRUE about margin disclosure statement?
Correct
FINRA rule no 2264. Margin Disclosure Statement
When you purchase securities, you may pay for the securities in full or you may borrow part of the purchase price from your brokerage firm. If you choose to borrow funds from your firm, you will open a margin account with the firm. The securities purchased are the firm’s collateral for the loan to you. If the securities in your account decline in value, so does the value of the collateral supporting your loan, and, as a result, the firm can take action, such as issue a margin call and/or sell securities or other assets in any of your accounts held with the member, in order to maintain the required equity in the account.
In trading securities on margin, there are some risks associated with it that one must be aware of. One of the most dangerous risk is one can lose more funds than he/she has deposited in the margin account.Incorrect
FINRA rule no 2264. Margin Disclosure Statement
When you purchase securities, you may pay for the securities in full or you may borrow part of the purchase price from your brokerage firm. If you choose to borrow funds from your firm, you will open a margin account with the firm. The securities purchased are the firm’s collateral for the loan to you. If the securities in your account decline in value, so does the value of the collateral supporting your loan, and, as a result, the firm can take action, such as issue a margin call and/or sell securities or other assets in any of your accounts held with the member, in order to maintain the required equity in the account.
In trading securities on margin, there are some risks associated with it that one must be aware of. One of the most dangerous risk is one can lose more funds than he/she has deposited in the margin account. -
Question 9 of 10
9. Question
What is meant by “arms length transaction”?
Correct
FINRA rule no 2232. Customer Confirmations
The “arms-length transaction” shall mean a transaction that was conducted through a competitive process in which non-affiliate firms could also participate, and where the affiliate relationship did not influence the price paid or proceeds received by the memberIncorrect
FINRA rule no 2232. Customer Confirmations
The “arms-length transaction” shall mean a transaction that was conducted through a competitive process in which non-affiliate firms could also participate, and where the affiliate relationship did not influence the price paid or proceeds received by the member -
Question 10 of 10
10. Question
Under which department regulations are promulgated for anti-money laundering compliance program?
Correct
FINRA rule no 3310. Anti-Money Laundering Compliance Program
Each member shall develop and implement a written anti-money laundering program reasonably designed to achieve and monitor the member’s compliance with the requirements of the Bank Secrecy Act (31 U.S.C. 5311, et seq.), and the implementing regulations promulgated thereunder by the Department of the Treasury. Each member’s anti-money laundering program must be approved, in writing, by a member of senior management.The anti-money laundering programs required by this Rule shall, at a minimum,
(a) Establish and implement policies and procedures that can be reasonably expected to detect and cause the reporting of transactions required under 31 U.S.C. 5318(g) and the implementing regulations thereunder;
(b) Establish and implement policies, procedures, and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act and the implementing regulations.Incorrect
FINRA rule no 3310. Anti-Money Laundering Compliance Program
Each member shall develop and implement a written anti-money laundering program reasonably designed to achieve and monitor the member’s compliance with the requirements of the Bank Secrecy Act (31 U.S.C. 5311, et seq.), and the implementing regulations promulgated thereunder by the Department of the Treasury. Each member’s anti-money laundering program must be approved, in writing, by a member of senior management.The anti-money laundering programs required by this Rule shall, at a minimum,
(a) Establish and implement policies and procedures that can be reasonably expected to detect and cause the reporting of transactions required under 31 U.S.C. 5318(g) and the implementing regulations thereunder;
(b) Establish and implement policies, procedures, and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act and the implementing regulations.