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Question 1 of 10
1. Question
Which of the following statement are necessary factors regarding the terms of debt securities?
I. Maturity or renewal date
II. The size of the money borrowed
III. Only the amount of interest rate is considered necessary
IV. Size of loan and the interest rateCorrect
2251. Processing and Forwarding of Proxy and Other Issuer-Related Materials
A debt security represents money that is borrowed and must be repaid, with terms that stipulates the size of the loan, interest rate, and maturity or renewal date. Debt securities, which include government and corporate bonds, certificates of deposit (CDs) and collateralized securities (such as CDOs and CMOS), generally entitle their holder to the regular payment of interest and repayment of principal (regardless of the issuer’s performance), along with any other stipulated contractual rights (which do not include voting rights)Incorrect
2251. Processing and Forwarding of Proxy and Other Issuer-Related Materials
A debt security represents money that is borrowed and must be repaid, with terms that stipulates the size of the loan, interest rate, and maturity or renewal date. Debt securities, which include government and corporate bonds, certificates of deposit (CDs) and collateralized securities (such as CDOs and CMOS), generally entitle their holder to the regular payment of interest and repayment of principal (regardless of the issuer’s performance), along with any other stipulated contractual rights (which do not include voting rights) -
Question 2 of 10
2. Question
Which of the following statements is/are not TRUE about front running?
I. Front-running is the practice of a broker or trader making trades just before a large non-publicized order to gain an economic advantage.
II. Front-running is illegal and unethical because it takes advantage of private information that is not available to the public.
III. Front running affects the price of an asset
IV. Front running is a legal practice and is highly beneficial for brokers and dealersCorrect
Finra rule no 5270. Front Running of Block Transactions
This Rule applies to orders caused to be executed for any account in which such member or person associated with the member has an interest, any account with respect to which such member or person associated with a member exercises investment discretion, or for accounts of customers or affiliates of the member when the customer or affiliate has been provided such material, non-public market information by the member or any person associated with the member.
No member or person associated with a member shall cause to be executed an order to buy or sell a security or a related financial instrument when such member or person associated with a member causing such order to be executed has material, non-public market information concerning an imminent block transaction in that security, a related financial instrument or a security underlying the related financial instrument prior to the time information concerning the block transaction has been made publicly available or has otherwise become stale or obsolete.Incorrect
Finra rule no 5270. Front Running of Block Transactions
This Rule applies to orders caused to be executed for any account in which such member or person associated with the member has an interest, any account with respect to which such member or person associated with a member exercises investment discretion, or for accounts of customers or affiliates of the member when the customer or affiliate has been provided such material, non-public market information by the member or any person associated with the member.
No member or person associated with a member shall cause to be executed an order to buy or sell a security or a related financial instrument when such member or person associated with a member causing such order to be executed has material, non-public market information concerning an imminent block transaction in that security, a related financial instrument or a security underlying the related financial instrument prior to the time information concerning the block transaction has been made publicly available or has otherwise become stale or obsolete. -
Question 3 of 10
3. Question
Which of the following statement is/are true about exempted securities?
I. financial instruments that do not need to be registered with the Securities Exchange Commission (SEC)
II. financial instruments that are registered under the Bank Secrecy Act
III. these securities are backed by the government
IV. carry a lesser risk than securities offered by public companiesCorrect
Rule no 4210. Margin Requirements
Exempt securities are financial instruments that do not need to be registered with the Securities Exchange Commission (SEC). They are generally backed by the government and may carry a lesser risk than securities offered by public companies. 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 statusIncorrect
Rule no 4210. Margin Requirements
Exempt securities are financial instruments that do not need to be registered with the Securities Exchange Commission (SEC). They are generally backed by the government and may carry a lesser risk than securities offered by public companies. 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 -
Question 4 of 10
4. Question
What is the index multiplier?
Correct
Rule no 4210. Margin Requirement
The term “index multiplier” as used in reference to an index option contract means the amount specified in the contract by which the index value is to be multiplied to arrive at the value required to be delivered to the holder of a call or by the holder of a put upon valid exercise of the contract.Incorrect
Rule no 4210. Margin Requirement
The term “index multiplier” as used in reference to an index option contract means the amount specified in the contract by which the index value is to be multiplied to arrive at the value required to be delivered to the holder of a call or by the holder of a put upon valid exercise of the contract. -
Question 5 of 10
5. Question
Which of the following statement is not true about authorization records?
Correct
Rule no 4514. Authorization Records for Negotiable Instruments Drawn From a Customer’s Account
No member or person associated with a member shall obtain from a customer or submit for payment a check, draft or other form of negotiable paper drawn on a customer’s checking, savings, share or similar account, without that person’s express written authorization, which may include the customer’s signature on the negotiable instrument. Where the written authorization is separate from the negotiable instrument, the member shall preserve the authorization for a period of three years following the date the authorization expires. This provision shall not, however, require members to preserve copies of negotiable instruments signed by customers.Incorrect
Rule no 4514. Authorization Records for Negotiable Instruments Drawn From a Customer’s Account
No member or person associated with a member shall obtain from a customer or submit for payment a check, draft or other form of negotiable paper drawn on a customer’s checking, savings, share or similar account, without that person’s express written authorization, which may include the customer’s signature on the negotiable instrument. Where the written authorization is separate from the negotiable instrument, the member shall preserve the authorization for a period of three years following the date the authorization expires. This provision shall not, however, require members to preserve copies of negotiable instruments signed by customers. -
Question 6 of 10
6. Question
Which of the following statement is/are true about the “Anti Money Laundering Compliance Program”?
I. The program must establish and implement policies, procedures, and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act
II. Include appropriate risk-based procedures for conducting ongoing customer due diligence
III. Establish and implement policies and procedures that can be reasonably expected to detect and cause the reporting of transactions required under the Sarbanes Oxley Act
IV. Conducting ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer informationCorrect
Rule no 3310. Anti-Money Laundering Compliance Program
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 thereunder;
(c) Provide for annual (on a calendar-year basis) independent testing for compliance to be conducted by member personnel or by a qualified outside party, unless the member does not execute transactions for customers or otherwise hold customer accounts or act as an introducing broker with respect to customer accounts (e.g., engages solely in proprietary trading or conducts business only with other broker-dealers), in which case such “independent testing” is required every two years (on a calendar-year basis);
(d) Designate and identify to FINRA (by name, title, mailing address, e-mail address, telephone number, and facsimile number) an individual or individuals responsible for implementing and monitoring the day-to-day operations and internal controls of the program (such individual or individuals must be an associated person of the member) and provide prompt notification to FINRA regarding any change in such designation(s);
(e) Provide ongoing training for appropriate personnelIncorrect
Rule no 3310. Anti-Money Laundering Compliance Program
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 thereunder;
(c) Provide for annual (on a calendar-year basis) independent testing for compliance to be conducted by member personnel or by a qualified outside party, unless the member does not execute transactions for customers or otherwise hold customer accounts or act as an introducing broker with respect to customer accounts (e.g., engages solely in proprietary trading or conducts business only with other broker-dealers), in which case such “independent testing” is required every two years (on a calendar-year basis);
(d) Designate and identify to FINRA (by name, title, mailing address, e-mail address, telephone number, and facsimile number) an individual or individuals responsible for implementing and monitoring the day-to-day operations and internal controls of the program (such individual or individuals must be an associated person of the member) and provide prompt notification to FINRA regarding any change in such designation(s);
(e) Provide ongoing training for appropriate personnel -
Question 7 of 10
7. Question
Money Laundering Compliance Act should be implemented with the requirement of which act?
Correct
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.Incorrect
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. -
Question 8 of 10
8. Question
Which of the following statement is/are true about the broad index stock group?
I. Index stock group consisting of 25 or more stocks
II. Value of stocks are determined by current market prices
III. Value of the stocks is determined by current share prices
IV. Indexes are established and maintained by financial services or data companiesCorrect
Rule no 4210. Margin Requirements
The term “broad index stock group” means an index stock group of 25 or more stocks whose inclusion and relative representation in the group is determined by the inclusion and relative representation of their current market prices in a widely disseminated stock index reflecting the stock market as a whole or an inter-industry sector of the stock market.Incorrect
Rule no 4210. Margin Requirements
The term “broad index stock group” means an index stock group of 25 or more stocks whose inclusion and relative representation in the group is determined by the inclusion and relative representation of their current market prices in a widely disseminated stock index reflecting the stock market as a whole or an inter-industry sector of the stock market. -
Question 9 of 10
9. Question
Which of the following must be included in requirements for Borrowing of Customers’ Fully Paid or Excess Margin Securities?
I. Providing the customer in writing
II. According to the rules of Exchange Act
III. Having a reasonable explanation
IV. Notifying FINRA at least 5 days prior to engaging in such activityCorrect
FINRA rule no 4330. Customer Protection — Permissible Use of Customers’ Securities
A member that borrows fully paid or excess margin securities carried for the account of any customer shall:
(A) comply with the requirements of SEA Rule 15c3-3;
(B) comply with the requirements of Section 15(e) of the Exchange Act; and
(C) notify FINRA, in such manner and format as FINRA may require, at least 30 days prior to first engaging in such securities borrows.
(2) Prior to first entering into securities borrows with a customer pursuant to paragraph (b)(1) of this Rule, a member shall:
(A) have reasonable grounds for believing that the customer’s loan(s) of securities is appropriate for the customer. In making this determination, the member shall exercise reasonable diligence to ascertain the essential facts relative to the customer, including, but not limited to, the customer’s financial situation and needs, tax status, investment objectives, investment time horizon, liquidity needs, risk tolerance and any other information the customer may disclose to the member or associated person in connection with entering such securities loans.Incorrect
FINRA rule no 4330. Customer Protection — Permissible Use of Customers’ Securities
A member that borrows fully paid or excess margin securities carried for the account of any customer shall:
(A) comply with the requirements of SEA Rule 15c3-3;
(B) comply with the requirements of Section 15(e) of the Exchange Act; and
(C) notify FINRA, in such manner and format as FINRA may require, at least 30 days prior to first engaging in such securities borrows.
(2) Prior to first entering into securities borrows with a customer pursuant to paragraph (b)(1) of this Rule, a member shall:
(A) have reasonable grounds for believing that the customer’s loan(s) of securities is appropriate for the customer. In making this determination, the member shall exercise reasonable diligence to ascertain the essential facts relative to the customer, including, but not limited to, the customer’s financial situation and needs, tax status, investment objectives, investment time horizon, liquidity needs, risk tolerance and any other information the customer may disclose to the member or associated person in connection with entering such securities loans. -
Question 10 of 10
10. Question
Which of the following statements is/are true about the underlying stock basket?
I. the securities in the basket shall be unavailable to support any other option or warrant transaction in the account
II. the quantity of each stock is not proportional to its index
III. total market value of the basket is equal to the underlying index value of the index options
IV. the securities in the basket cannot be used to cover more than the number of index options or warrants represented by that valueCorrect
Rule no 4210. Margin Requirements
The term “underlying stock basket” means a group of securities that includes each of the component securities of the applicable index and that meets the following conditions: (1) the quantity of each stock in the basket is proportional to its representation in the index, (2) the total market value of the basket is equal to the underlying index value of the index options or warrants to be covered, (3) the securities in the basket cannot be used to cover more than the number of index options or warrants represented by that value, and (4) the securities in the basket shall be unavailable to support any other option or warrant transaction in the account.Incorrect
Rule no 4210. Margin Requirements
The term “underlying stock basket” means a group of securities that includes each of the component securities of the applicable index and that meets the following conditions: (1) the quantity of each stock in the basket is proportional to its representation in the index, (2) the total market value of the basket is equal to the underlying index value of the index options or warrants to be covered, (3) the securities in the basket cannot be used to cover more than the number of index options or warrants represented by that value, and (4) the securities in the basket shall be unavailable to support any other option or warrant transaction in the account.