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Question 1 of 10
1. Question
Which of the following statement is/are true regarding the requirements of Form U4 Filing?
I.Form U4 shall be based on a manually signed Form U4 provided to the member or applicant for membership by the person on whose behalf the Form U4 is being filed
II. The member shall use reasonable efforts to provide the associated person with a copy of the amended disclosure information that was filed.
III. A member may file electronically amendments to administrative data on Form U4 without obtaining the subject associated person’s signature on the form
IV. The member shall NOT use reasonable efforts to provide the associated person with a copy of the amended administrative information that was filedCorrect
Rule no 1010. Electronic Filing Requirements for Uniform Forms
(1) Except as provided in paragraphs (c)(2) and (c)(3) below, every initial and transfer electronic Form U4 filing and any amendments to the disclosure information on Form U4 shall be based on a manually signed Form U4 provided to the member or applicant for membership by the person on whose behalf the Form U4 is being filed. As part of the member’s recordkeeping requirements, it shall retain the person’s manually signed Form U4 or amendments to the disclosure information on Form U4 in accordance with SEA Rule 17a-4(e)(1) and make them available promptly upon regulatory request. An applicant for membership also shall retain in accordance with SEA Rule 17a-4(e)(1) every manually signed Form U4 it receives during the application process and make them available promptly upon regulatory request.
(2) A member may file electronically amendments to the disclosure information on Form U4 without obtaining the subject associated person’s manual signature on the form, provided that the member shall use reasonable efforts to:
(A) provide the associated person with a copy of the amended disclosure information prior to filing; and
(B) obtain the associated person’s written acknowledgment (which may be electronic) prior to filing that the information has been received and reviewed. As part of the member’s recordkeeping requirements, the member shall retain this acknowledgment in accordance with SEA Rule 17a-4(e)(1) and make it available promptly upon regulatory request.
(3) In the event a member is not able to obtain an associated person’s manual signature or written acknowledgement of amended disclosure information on Form U4 prior to filing of such information pursuant to paragraph (c)(1) or (2), the member is obligated to file the disclosure information as to which it has knowledge in accordance with Article V, Section 2 of the FINRA By-Laws. The member shall use reasonable efforts to provide the associated person with a copy of the amended disclosure information that was filed.
(4) A member may file electronically amendments to administrative data on Form U4 without obtaining the subject associated person’s signature on the form. The member shall use reasonable efforts to provide the associated person with a copy of the amended administrative information that was filed.Incorrect
Rule no 1010. Electronic Filing Requirements for Uniform Forms
(1) Except as provided in paragraphs (c)(2) and (c)(3) below, every initial and transfer electronic Form U4 filing and any amendments to the disclosure information on Form U4 shall be based on a manually signed Form U4 provided to the member or applicant for membership by the person on whose behalf the Form U4 is being filed. As part of the member’s recordkeeping requirements, it shall retain the person’s manually signed Form U4 or amendments to the disclosure information on Form U4 in accordance with SEA Rule 17a-4(e)(1) and make them available promptly upon regulatory request. An applicant for membership also shall retain in accordance with SEA Rule 17a-4(e)(1) every manually signed Form U4 it receives during the application process and make them available promptly upon regulatory request.
(2) A member may file electronically amendments to the disclosure information on Form U4 without obtaining the subject associated person’s manual signature on the form, provided that the member shall use reasonable efforts to:
(A) provide the associated person with a copy of the amended disclosure information prior to filing; and
(B) obtain the associated person’s written acknowledgment (which may be electronic) prior to filing that the information has been received and reviewed. As part of the member’s recordkeeping requirements, the member shall retain this acknowledgment in accordance with SEA Rule 17a-4(e)(1) and make it available promptly upon regulatory request.
(3) In the event a member is not able to obtain an associated person’s manual signature or written acknowledgement of amended disclosure information on Form U4 prior to filing of such information pursuant to paragraph (c)(1) or (2), the member is obligated to file the disclosure information as to which it has knowledge in accordance with Article V, Section 2 of the FINRA By-Laws. The member shall use reasonable efforts to provide the associated person with a copy of the amended disclosure information that was filed.
(4) A member may file electronically amendments to administrative data on Form U4 without obtaining the subject associated person’s signature on the form. The member shall use reasonable efforts to provide the associated person with a copy of the amended administrative information that was filed. -
Question 2 of 10
2. Question
Which of the following statement is/are true regarding the fingerprint information upon filing an electronic U4 form?
I.If a member fails to submit the fingerprint information within 30 days after FINRA receives the electronic Form U4, the person’s registration shall be deemed inactive
II. If a member fails to submit the fingerprint information within 60 days after FINRA receives the electronic Form U4, the person’s registration shall be deemed inactive
III. If a member fails to submit the fingerprint information within 90 days after FINRA receives the electronic Form U4, the person’s registration shall be deemed inactive
IV. If a member fails to submit the fingerprint information within 120 days after FINRA receives the electronic Form U4, the person’s registration shall be deemed inactiveCorrect
Rule no 1010. Electronic Filing Requirements for Uniform Forms
Upon filing an electronic Form U4 on behalf of a person applying for registration, a member shall promptly submit fingerprint information for that person. FINRA may make a registration effective pending receipt of the fingerprint information. If a member fails to submit the fingerprint information within 30 days after FINRA receives the electronic Form U4, the person’s registration shall be deemed inactive. In such case, FINRA shall notify the member that the person must immediately cease all activities requiring registration and is prohibited from performing any duties and functioning in any capacity requiring registration. FINRA shall administratively terminate a registration that is inactive for a period of two years. A person whose registration is administratively terminated may reactivate the registration only by reapplying for registration and meeting the qualification requirements of the applicable provisions of the Rules 1210 and 1220. Upon application and a showing of good cause, FINRA may extend the 30-day period.Incorrect
Rule no 1010. Electronic Filing Requirements for Uniform Forms
Upon filing an electronic Form U4 on behalf of a person applying for registration, a member shall promptly submit fingerprint information for that person. FINRA may make a registration effective pending receipt of the fingerprint information. If a member fails to submit the fingerprint information within 30 days after FINRA receives the electronic Form U4, the person’s registration shall be deemed inactive. In such case, FINRA shall notify the member that the person must immediately cease all activities requiring registration and is prohibited from performing any duties and functioning in any capacity requiring registration. FINRA shall administratively terminate a registration that is inactive for a period of two years. A person whose registration is administratively terminated may reactivate the registration only by reapplying for registration and meeting the qualification requirements of the applicable provisions of the Rules 1210 and 1220. Upon application and a showing of good cause, FINRA may extend the 30-day period. -
Question 3 of 10
3. Question
Which of the following statement is/are true regarding filing of new applicant for FINRA membership?
I. a trial balance, balance sheet, supporting schedules, and computation of net capital, each of which has been prepared as of a date that is within 30 days before the filing date of the application
II. An NMA form
III. a new member assessment report
IV. an original signed and notarized paper Form BD, with applicable schedulesCorrect
Rule no 1013. New Member Application and Interview
An Applicant for FINRA membership shall file its application with the Department in the manner prescribed by FINRA. 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 SEA Rule 17f-2;
(D) a new member assessment report;
(E) a detailed business plan that adequately and comprehensively describes all material aspects of the business that will be, or are reasonably anticipated to be, performed at and after the initiation of business operations, including future business expansion plans, if any, and includes:
(i) a trial balance, balance sheet, supporting schedules, and computation of net capital, each of which has been prepared as of a date that is within 30 days before the filing date of the application;
(ii) a monthly projection of income and expenses, with a supporting rationale, for the first 12 months of operations;
(iii) an organizational chart;Incorrect
Rule no 1013. New Member Application and Interview
An Applicant for FINRA membership shall file its application with the Department in the manner prescribed by FINRA. 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 SEA Rule 17f-2;
(D) a new member assessment report;
(E) a detailed business plan that adequately and comprehensively describes all material aspects of the business that will be, or are reasonably anticipated to be, performed at and after the initiation of business operations, including future business expansion plans, if any, and includes:
(i) a trial balance, balance sheet, supporting schedules, and computation of net capital, each of which has been prepared as of a date that is within 30 days before the filing date of the application;
(ii) a monthly projection of income and expenses, with a supporting rationale, for the first 12 months of operations;
(iii) an organizational chart; -
Question 4 of 10
4. Question
Which of the following statement is true regarding the withdrawal of application from FINRA?
Correct
Rule no 1013. New Member Application and Interview
If an Applicant withdraws an application within 30 days after filing the application, FINRA shall refund the application fee, less $500, which shall be retained by FINRA as a processing fee. If the Applicant determines to again seek membership, the Applicant shall submit a new application under this Rule and fee pursuant to Schedule A to the FINRA By-Laws.Incorrect
Rule no 1013. New Member Application and Interview
If an Applicant withdraws an application within 30 days after filing the application, FINRA shall refund the application fee, less $500, which shall be retained by FINRA as a processing fee. If the Applicant determines to again seek membership, the Applicant shall submit a new application under this Rule and fee pursuant to Schedule A to the FINRA By-Laws. -
Question 5 of 10
5. Question
What are the factors that should be considered while determining the fairness of mark ups?
I. The price of the security
II. The availability of the security
III. The previous price of the security
IV. The amount of money involved in a transactionCorrect
Rule no 2121. Fair Prices and Commissions
Some of the factors which the Board believes that members and the Association’s committees should take into consideration in determining the fairness of a mark-up are as follows:
(1) The Type of Security Involved
Some securities customarily carry a higher mark-up than others. For example, a higher percentage of mark-up customarily applies to a common stock transaction than to a bond transaction of the same size. Likewise, a higher percentage applies to sales of units of direct participation programs and condominium securities than to sales of common stock.
(2) The Availability of the Security in the Market
In the case of an inactive security the effort and cost of buying or selling the security, or any other unusual circumstances connected with its acquisition or sale, may have a bearing on the amount of mark-up justified.
(3) The Price of the Security
While there is no direct correlation, the percentage of mark-up or rate of commission generally increases as the price of the security decreases. Even where the amount of money is substantial, transactions in lower priced securities may require more handling and expense and may warrant a wider spread.
(4) The Amount of Money Involved in a Transaction
A transaction which involves a small amount of money may warrant a higher percentage of mark-up to cover the expenses of handling.
(5) Disclosure
Any disclosure to the customer, before the transaction is effected, of information which would indicate (A) the amount of commission charged in an agency transaction or (B) mark-up made in a principal transaction is a factor to be considered. Disclosure itself, however, does not justify a commission or mark-up which is unfair or excessive in light of all other relevant circumstances.
(6) The Pattern of Mark-Ups
While each transaction must meet the test of fairness, the Board believes that particular attention should be given to the pattern of a member’s mark-ups.
(7) The Nature of the Member’s Business
The Board is aware of the differences in the services and facilities which are needed by, and provided for, customers of members. If not excessive, the cost of providing such services and facilities, particularly when they are of a continuing nature, may properly be considered in determining the fairness of a member’s mark-ups.Incorrect
Rule no 2121. Fair Prices and Commissions
Some of the factors which the Board believes that members and the Association’s committees should take into consideration in determining the fairness of a mark-up are as follows:
(1) The Type of Security Involved
Some securities customarily carry a higher mark-up than others. For example, a higher percentage of mark-up customarily applies to a common stock transaction than to a bond transaction of the same size. Likewise, a higher percentage applies to sales of units of direct participation programs and condominium securities than to sales of common stock.
(2) The Availability of the Security in the Market
In the case of an inactive security the effort and cost of buying or selling the security, or any other unusual circumstances connected with its acquisition or sale, may have a bearing on the amount of mark-up justified.
(3) The Price of the Security
While there is no direct correlation, the percentage of mark-up or rate of commission generally increases as the price of the security decreases. Even where the amount of money is substantial, transactions in lower priced securities may require more handling and expense and may warrant a wider spread.
(4) The Amount of Money Involved in a Transaction
A transaction which involves a small amount of money may warrant a higher percentage of mark-up to cover the expenses of handling.
(5) Disclosure
Any disclosure to the customer, before the transaction is effected, of information which would indicate (A) the amount of commission charged in an agency transaction or (B) mark-up made in a principal transaction is a factor to be considered. Disclosure itself, however, does not justify a commission or mark-up which is unfair or excessive in light of all other relevant circumstances.
(6) The Pattern of Mark-Ups
While each transaction must meet the test of fairness, the Board believes that particular attention should be given to the pattern of a member’s mark-ups.
(7) The Nature of the Member’s Business
The Board is aware of the differences in the services and facilities which are needed by, and provided for, customers of members. If not excessive, the cost of providing such services and facilities, particularly when they are of a continuing nature, may properly be considered in determining the fairness of a member’s mark-ups. -
Question 6 of 10
6. Question
Which of the following function is/are part of “Office of Supervisory Jurisdiction”?
I. order execution or market making
II. new applicant registration Of FINRA
III. final acceptance (approval) of new accounts on behalf of the member
IV. maintaining custody of customers’ funds or securitiesCorrect
Rule no 3110. Supervision
“Office of Supervisory Jurisdiction” means any office of a member at which any one or more of the following functions take place:(A) order execution or market making;
(B) structuring of public offerings or private placements;
(C) maintaining custody of customers’ funds or securities;
(D) final acceptance (approval) of new accounts on behalf of the member;
(E) review and endorsement of customer orders, pursuant to paragraph (b)(2) above;
(F) final approval of retail communications for use by persons associated with the member, pursuant to Rule 2210(b)(1), except for an office that solely conducts final approval of research reports
Incorrect
Rule no 3110. Supervision
“Office of Supervisory Jurisdiction” means any office of a member at which any one or more of the following functions take place:(A) order execution or market making;
(B) structuring of public offerings or private placements;
(C) maintaining custody of customers’ funds or securities;
(D) final acceptance (approval) of new accounts on behalf of the member;
(E) review and endorsement of customer orders, pursuant to paragraph (b)(2) above;
(F) final approval of retail communications for use by persons associated with the member, pursuant to Rule 2210(b)(1), except for an office that solely conducts final approval of research reports
-
Question 7 of 10
7. Question
Which of the following statement is/are true regarding current market value?
I. Market value is the price an asset would fetch in the marketplace
II. Market value is easiest to determine for exchange-traded instruments such as stocks and futures
III. Market value is calculated by taking the difference between assets and liabilities in the balance sheet
IV. Market value is also commonly used to refer to the market capitalization of a publicly traded companyCorrect
Rule no 4210. Margin Requirements
The term “current market value” means the total cost or net proceeds of a security on the day it was purchased or sold or at any other time the preceding business day’s closing price as shown by any regularly published reporting or quotation service except for security futures contracts (see paragraph (f)(10)(C)(ii)). If there is no closing price, a member may use a reasonable estimate of the market value of the security as of the close of business on the preceding business day.Incorrect
Rule no 4210. Margin Requirements
The term “current market value” means the total cost or net proceeds of a security on the day it was purchased or sold or at any other time the preceding business day’s closing price as shown by any regularly published reporting or quotation service except for security futures contracts (see paragraph (f)(10)(C)(ii)). If there is no closing price, a member may use a reasonable estimate of the market value of the security as of the close of business on the preceding business day. -
Question 8 of 10
8. Question
Which of the following statement is/are true about maintenance margin?
I. A maintenance margin is the minimum amount of equity that must be maintained in a margin account
II. FINRA require investors to keep at least 35% of the total value of their securities in a margin account
III. Many brokerage firms may require a higher maintenance requirement—as much as 30% to 40
IV. Maintenance margin is also called a minimum maintenance or maintenance requirementCorrect
Rule no 4210. Margin Requirements
The margin which must be maintained in all accounts of customers, except as set forth in paragraph (e), (f) or (g) and for cash accounts subject to other provisions of this Rule, shall be as follows:
(1) 25 percent of the current market value of all margin securities, as defined in Section 220.2 of Regulation T, except for security futures contracts, “long” in the account.
(2) $2.50 per share or 100 percent of the current market value, whichever amount is greater, of each stock “short” in the account selling at less than $5.00 per share; plus
(3) $5.00 per share or 30 percent of the current market value, whichever amount is greater, of each stock “short” in the account selling at $5.00 per share or above; plus
(4) 5 percent of the principal amount or 30 percent of the current market value, whichever amount is greater, of each bond “short” in the account.
(5) The minimum maintenance margin levels for security futures contracts, “long” and “short”, shall be 20 percent of the current market value of such contract. (See paragraph (f)(10) of this Rule for other provisions pertaining to security futures contracts.)
(6) 100 percent of the current market value for each non-margin eligible equity security held “long” in the account.Incorrect
Rule no 4210. Margin Requirements
The margin which must be maintained in all accounts of customers, except as set forth in paragraph (e), (f) or (g) and for cash accounts subject to other provisions of this Rule, shall be as follows:
(1) 25 percent of the current market value of all margin securities, as defined in Section 220.2 of Regulation T, except for security futures contracts, “long” in the account.
(2) $2.50 per share or 100 percent of the current market value, whichever amount is greater, of each stock “short” in the account selling at less than $5.00 per share; plus
(3) $5.00 per share or 30 percent of the current market value, whichever amount is greater, of each stock “short” in the account selling at $5.00 per share or above; plus
(4) 5 percent of the principal amount or 30 percent of the current market value, whichever amount is greater, of each bond “short” in the account.
(5) The minimum maintenance margin levels for security futures contracts, “long” and “short”, shall be 20 percent of the current market value of such contract. (See paragraph (f)(10) of this Rule for other provisions pertaining to security futures contracts.)
(6) 100 percent of the current market value for each non-margin eligible equity security held “long” in the account. -
Question 9 of 10
9. Question
Which of the following statement is true about non-equity securities?
Correct
Rule no 4210. Margin Requirements
On any “long” or “short” positions in non-equity securities, the margin to be maintained (except where a lesser requirement is imposed by other provisions of this Rule) shall be:
(i) 10 percent of the current market value in the case of investment grade debt securities; and
(ii) 20 percent of the current market value or 7 percent of the principal amount, whichever amount is greater, in the case of all other listed non-equity securities, and all other margin eligible non-equity securities as defined in paragraph (a)(16) of this Rule.Incorrect
Rule no 4210. Margin Requirements
On any “long” or “short” positions in non-equity securities, the margin to be maintained (except where a lesser requirement is imposed by other provisions of this Rule) shall be:
(i) 10 percent of the current market value in the case of investment grade debt securities; and
(ii) 20 percent of the current market value or 7 percent of the principal amount, whichever amount is greater, in the case of all other listed non-equity securities, and all other margin eligible non-equity securities as defined in paragraph (a)(16) of this Rule. -
Question 10 of 10
10. Question
What are the types of exempt securities?
I. Non profit securities
II. Government securities
III. Securities issued by insurance company
IV. Securities issued by private company or businessCorrect
Rule no 4210. Margin Requirements
The term “exempted security” or “exempted securities” has the meaning as in Section 3(a)(12) of the Exchange Act.Exempt securities, under Section 4 of the Securities Act of 1933, are financial instruments that carry government backing and typically have a government or tax-exempt status.Incorrect
Rule no 4210. Margin Requirements
The term “exempted security” or “exempted securities” has the meaning as in Section 3(a)(12) of the Exchange Act.Exempt securities, under Section 4 of the Securities Act of 1933, are financial instruments that carry government backing and typically have a government or tax-exempt status.