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Question 1 of 10
1. Question
Which of the following statement is/are true regarding SIPC?
I. The Securities Investor Protection Corporation (SIPC) is a nonprofit corporation
II. Created by an act of Congress to protect the clients of brokerage firms that are forced into bankruptcy
III. Members to the SIPC include all brokers and dealers registered under the Securities Exchange Act of 1934
IV. SIPC is an insurance that provides brokerage customers up to $300,000 coverage for cash and securities held by the firmCorrect
Rule no 2266. SIPC Information
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. In cases where both an introducing firm and clearing firm service an account, the firms may assign these requirements to one of the firms.Incorrect
Rule no 2266. SIPC Information
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. In cases where both an introducing firm and clearing firm service an account, the firms may assign these requirements to one of the firms. -
Question 2 of 10
2. Question
Regarding Investor Education and Protection rule, what information should be provided by the members to customers once in a year?
I. FINRA BrokerCheck Hotline Number
II. Designer of the FINRA website
III. FINRA Web site address
IV. A statement as to the availability to the customer of an investor brochure that includes information describing FINRA BrokerCheckCorrect
Rule no 2267. Investor Education and Protection
Except as otherwise provided in this Rule, each member shall once every calendar year provide in writing (which may be electronic) to each customer the following items of information:
(1) FINRA BrokerCheck Hotline Number;
(2) FINRA Web site address; and
(3) A statement as to the availability to the customer of an investor brochure that includes information describing FINRA BrokerCheck.Incorrect
Rule no 2267. Investor Education and Protection
Except as otherwise provided in this Rule, each member shall once every calendar year provide in writing (which may be electronic) to each customer the following items of information:
(1) FINRA BrokerCheck Hotline Number;
(2) FINRA Web site address; and
(3) A statement as to the availability to the customer of an investor brochure that includes information describing FINRA BrokerCheck. -
Question 3 of 10
3. Question
A member should obtain a customer’s consent through which methods?
I. Oral disclosure
II. A negative consent letter
III. Written consent
IV. Through electronic media orallyCorrect
Rule no 2124. Net Transactions with Customers
With respect to institutional customers, a member must obtain the customer’s consent prior to executing a transaction for or with the customer on a “net” basis in accordance with one of the following methods:
(1) a negative consent letter that clearly discloses to the institutional customer in writing the terms and conditions for handling the customer order(s) and provides the institutional customer with a meaningful opportunity to object to the execution of transactions on a net basis. If the customer does not object, then the member may reasonably conclude that the institutional customer has consented to the member trading on a “net” basis with the customer and the member may rely on such letter for all or a portion of the customer’s orders (as instructed by the customer) pursuant to this Rule;
(2) oral disclosure to and consent from the customer on an order-by-order basis. Such oral disclosure and consent must clearly explain the terms and conditions for handling the customer order and provide the institutional customer with a meaningful opportunity to object to the execution of the transaction on a net basis. The member also must document, on an order-by-order basis, the customer’s understanding of the terms and conditions of the order and the customer’s consent; or
(3) written consent on an order-by-order basis prior to executing a transaction for or with the customer on a “net” basis and such consent must evidence the customer’s understanding of the terms and conditions of the order.Incorrect
Rule no 2124. Net Transactions with Customers
With respect to institutional customers, a member must obtain the customer’s consent prior to executing a transaction for or with the customer on a “net” basis in accordance with one of the following methods:
(1) a negative consent letter that clearly discloses to the institutional customer in writing the terms and conditions for handling the customer order(s) and provides the institutional customer with a meaningful opportunity to object to the execution of transactions on a net basis. If the customer does not object, then the member may reasonably conclude that the institutional customer has consented to the member trading on a “net” basis with the customer and the member may rely on such letter for all or a portion of the customer’s orders (as instructed by the customer) pursuant to this Rule;
(2) oral disclosure to and consent from the customer on an order-by-order basis. Such oral disclosure and consent must clearly explain the terms and conditions for handling the customer order and provide the institutional customer with a meaningful opportunity to object to the execution of the transaction on a net basis. The member also must document, on an order-by-order basis, the customer’s understanding of the terms and conditions of the order and the customer’s consent; or
(3) written consent on an order-by-order basis prior to executing a transaction for or with the customer on a “net” basis and such consent must evidence the customer’s understanding of the terms and conditions of the order. -
Question 4 of 10
4. Question
Which of the following statement is/are true regarding the covered investment pool?
I. any investment company registered under the Investment Company Act that is an investment option of a plan or program of a government entity
II. any company registered under SEC
III. any company that is exempt from registering under the Investment Company Act because it has less than 100 shareholders
IV. have collective investment funds maintained by a bankCorrect
Rule no 2030. Engaging in Distribution and Solicitation Activities with Government Entities
“Covered investment pool” means:
(A) Any investment company registered under the Investment Company Act that is an investment option of a plan or program of a government entity; or
(B) Any company that would be an investment company under Section 3(a) of the Investment Company Act but for the exclusion provided from that definition by either Section 3(c)(1), 3(c)(7) or 3(c)(11) of that Act.Incorrect
Rule no 2030. Engaging in Distribution and Solicitation Activities with Government Entities
“Covered investment pool” means:
(A) Any investment company registered under the Investment Company Act that is an investment option of a plan or program of a government entity; or
(B) Any company that would be an investment company under Section 3(a) of the Investment Company Act but for the exclusion provided from that definition by either Section 3(c)(1), 3(c)(7) or 3(c)(11) of that Act. -
Question 5 of 10
5. Question
How many times should SIPC members provide all the information in writing to all the customers?
Correct
Finra rule no 2266. SIPC Information
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. In cases where both an introducing firm and clearing firm service an account, the firms may assign these requirements to one of the firms.Incorrect
Finra rule no 2266. SIPC Information
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. In cases where both an introducing firm and clearing firm service an account, the firms may assign these requirements to one of the firms. -
Question 6 of 10
6. Question
Which of the following statement is/are true regarding the maintenance margin?
I. A margin account is an account with a brokerage firm that allows an investor to buy securities including stocks, bonds, or options
II. Maintenance margin is also called a minimum maintenance or maintenance requirement.
III. The New York Stock Exchange (NYSE) and FINRA require investors to keep at least 15% of the total value of their securities in a margin account.
IV. It stipulates the minimum amount of equity—the total value of securities in the margin account minus anything borrowed from the brokerage firm—that must be in a margin account at all timesCorrect
Rule no 4210. Margin Requirements
The margin which must be maintained in all accounts of customers, except as outlined 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 contracts. (See paragraph (f)(10) of this Rule for other provisions about 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 outlined 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 contracts. (See paragraph (f)(10) of this Rule for other provisions about security futures contracts.)
(6) 100 percent of the current market value for each non-margin eligible equity security held “long” in the account. -
Question 7 of 10
7. 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, advisor, 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, advisor, 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 8 of 10
8. Question
Which of the following statement is/are true regarding reasonable diligence?
I. reduces the possibility that illegal timber could be traded on the market
II. focuses on efforts of operators
III. focuses on providing the best market for the security
IV. reasonable diligence requirement is an operator-specific inquiryCorrect
Rule no 5310. Best Execution and Interpositioning
In any transaction for or with a customer or a customer of another broker-dealer, a member and persons associated with a member shall use reasonable diligence to ascertain the best market for the subject security and buy or sell in such market so that the resultant price to the customer is as favorable as possible under prevailing market conditions. In any transaction for or with a customer or a customer of another broker-dealer, no member or person associated with a member shall interject a third party between the member and the best market for the subject security in a manner inconsistent with paragraph (a)(1) of this Rule.Incorrect
Rule no 5310. Best Execution and Interpositioning
In any transaction for or with a customer or a customer of another broker-dealer, a member and persons associated with a member shall use reasonable diligence to ascertain the best market for the subject security and buy or sell in such market so that the resultant price to the customer is as favorable as possible under prevailing market conditions. In any transaction for or with a customer or a customer of another broker-dealer, no member or person associated with a member shall interject a third party between the member and the best market for the subject security in a manner inconsistent with paragraph (a)(1) of this Rule. -
Question 9 of 10
9. Question
Which of the following statement is/are true about business continuity plans?
I. Data backup and recovery is essential for business continuity plans
II. Reporting does not need to be done on a regular basis
III. Alternate must be available for the physical location of employees
IV. Each plan must address financial and operation assessmentsCorrect
Finra rule no 4370. Business Continuity Plans and Emergency Contact Information
Each member must create and maintain a written business continuity plan identifying procedures relating to an emergency or significant business disruption. Such procedures must be reasonably designed to enable the member to meet its existing obligations to customers. In addition, such procedures must address the member’s existing relationships with other broker-dealers and counter-parties. The business continuity plan must be made available promptly upon request to FINRA staff.
(b) Each member must update its plan in the event of any material change to the member’s operations, structure, business or location. Each member must also conduct an annual review of its business continuity plan to determine whether any modifications are necessary in light of changes to the member’s operations, structure, business, or location.Incorrect
Finra rule no 4370. Business Continuity Plans and Emergency Contact Information
Each member must create and maintain a written business continuity plan identifying procedures relating to an emergency or significant business disruption. Such procedures must be reasonably designed to enable the member to meet its existing obligations to customers. In addition, such procedures must address the member’s existing relationships with other broker-dealers and counter-parties. The business continuity plan must be made available promptly upon request to FINRA staff.
(b) Each member must update its plan in the event of any material change to the member’s operations, structure, business or location. Each member must also conduct an annual review of its business continuity plan to determine whether any modifications are necessary in light of changes to the member’s operations, structure, business, or location. -
Question 10 of 10
10. Question
Which of the following statement is/are true regarding the requirements of Form U4 Filing?
I. The member shall not use reasonable efforts to provide the associated person with a copy of the amended administrative information that was 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 amendments electronically to administrative data on Form U4 without obtaining the subject associated person’s signature on the form
IV. 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 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 makes them available promptly upon regulatory request.
(2) A member may file amendments electronically 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 acknowledgment 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 amendments electronically 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 makes them available promptly upon regulatory request.
(2) A member may file amendments electronically 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 acknowledgment 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 amendments electronically 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.