Final Study Guide Series 24 || with 100% Error-free
Answers.
BDs may enter into a temporary subordination agreement. However, the broker-dealer is limited
to no more than 3 such agreements in any 12-month period. correct answers The duration of a
temporary subordination agreement may not exceed 45 days.
If a customer wishes to open an account as a guardian, the member firm would need:
- A copy of the court appointment.
- Guardian accounts are not necessarily limited to children, so UGMA documentation is not
always a requirement. correct answers If a customer wishes to open an account as a guardian, the
member firm would need:
- A copy of the court appointment.
- Guardian accounts are not necessarily limited to children, so UGMA documentation is not
always a requirement.
An equity IPO may not be purchased by restricted persons, including:
1. FINRA member firms and any associated person.
2. An immediate family member of an employee of a member firm.
3. Finders and fiduciaries and portfolio managers who are buying for their own account. correct
answers An exception is granted that allows a restricted person to purchase an equity IPO if an
immediate family member is a director or employee of the issuer.
This is known as an issuer-directed sale.
S.E.C. Rule 147 covers an exemption from registration for the sale of securities on an intrastate
basis.
A purchaser of stock under Rule 147 is not allowed to sell the securities to a non-resident of the
state for a period of 6 months following the last date of sale by the issuer. correct answers S.E.C.
Rule 147 covers an exemption from registration for the sale of securities on an intrastate basis.
A purchaser of stock under Rule 147 is not allowed to sell the securities to a non-resident of the
state for a period of 6 months following the last date of sale by the issuer.
Under Regulation SHO, if a BD has a fail to deliver position at a clearing firm in a *threshold
security* for a continuous period of *13 settlement days*, the BD must close out the fail to
deliver immediately by purchasing securities of a like kind and quantity. correct answers The
,close-out must take place no later than the start of the trading day after the 13th settlement day,
the morning of the 14th day.
A broker-dealer may accept a customer order subject to the terms and conditions negotiated with
the client, including the condition that the firm may trade ahead of the order. correct answers
Although the firm is not bound by Manning obligations, it does not have carte blanche to trade
ahead of the customer.
The firm must still consider its best-execution obligation to its customer when deciding whether
to execute an order for its own account or to fill a customer order.
Rule 147 deals with an exemption from registration with the SEC for intrastate offerings.
One of the conditions is that *100% of the sales be made to residents of the state* where the
issuer is organized. correct answers A corporation must have its principal office in that state to
be considered a resident of that state.
Where the company does business is not a factor.
A member firm that is registered as a market maker in a specific security must have its own two-
sided firm quote.
This is known as its Primary M.P.I.D. correct answers Supplemental M.P.I.D. quotes may be
one-sided and are not subject to unexcused withdrawal penalties. Trades should be reported
using the same MPID as the quote.
Supplemental M.P.I.D.s may not be used for passive market makers or stabilizing bids.
FINRA allows market participants to display quotes and report transactions using multiple
Market Participant Identifiers. correct answers Firms must receive FINRA approval to use other
identifications in addition to their primary market participant symbol.
A broker-dealer that carries margin accounts is required to file a *monthly report*.
This report would contain the total debit balances in its securities margin accounts, and the total
free credit balances in its cash and margin accounts. correct answers Short positions in equity
securities must be filed *twice a month*, and a broker-dealer that uses the alternative method to
calculate its net capital must file supplemental reports as prescribed by FINRA.
The filmed version of a television or video advertisement must be filed with an SRO within 10
business days of first use or broadcast.
It is assumed that the draft version or storyboard has already been filed with FINRA. correct
answers The filmed version of a television or video advertisement must be filed with an SRO
within 10 business days of first use or broadcast.
,It is assumed that the draft version or storyboard has already been filed with FINRA.
Union First Bank has agreed to purchase Mortgages of America. The purchase price of the cash
deal is valued at $10.30 per share. Which of the following statements is TRUE?
Mortgages of America is required to file proxy information on Schedule 14A. correct answers
Since the shareholders of the target company will be voting on the terms of the acquisition, the
target company is required to file this information, regardless of whether the offer consists of
cash, cash and securities, or securities.
Date of Birth is a minimum requirement under the Customer Identification Program of the USA
PATRIOT Act, as well as name, address, and ID number. correct answers Date of Birth is a
minimum requirement under the Customer Identification Program of the USA PATRIOT Act, as
well as name, address, and ID number.
According to FINRA Rule 5110, securities issued under SEC Rule 147 or Regulation A, while
exempt from SEC registration, are still subject to the filing requirements under the Corporate
Financing Rule. correct answers According to FINRA Rule 5110, securities issued under SEC
Rule 147 or Regulation A, while exempt from SEC registration, are still subject to the filing
requirements under the Corporate Financing Rule.
Rule 504 of Regulation D allows an issuer to offer securities of up to $5,000,000 in a 12-month
period. Provided the issuer complies with all of the provisions of Regulation D, this private
placement is exempt from SEC registration. correct answers Under Regulation D, if the issuer
offers securities exceeding $5,000,000, any non-accredited investor must receive a disclosure
document.
If an employee of a broker-dealer wants to open a brokerage account at another member firm, the
employee's obligation is to *obtain her employing firm's prior written consent and provide
written notification to the executing firm*. correct answers If an employee of a broker-dealer
wants to open a brokerage account at another member firm, the employee's obligation is to
*obtain her employing firm's prior written consent and provide written notification to the
executing firm*.
A broker-dealer that sells mutual funds is required to submit payments received from customers
to the investment company no later than3 business days following the receipt of the customer's
order. correct answers A broker-dealer that sells mutual funds is required to submit payments
received from customers to the investment company no later than3 business days following the
receipt of the customer's order.
An initial notice is sent 30 days before the 120-day period begins to complete the Regulatory
Element of Continuing Education. correct answers The Regulatory Element is required to be
completed within 120 days of the second anniversary of a representative's initial registration and
every 3 years thereafter.
The carrying broker-dealer has 1 business day to either protest or validate an ACAT request.
, If validated, the transfer must take place within 3 business days. correct answers Claims must be
resolved with 5 business days or take exception to the claiming member by setting forth specific
reasons for denying the claim.
The proper sequence of registration in a custodial account is the custodian's name, then the
minor's name, followed by the appropriate state.
Although registered in the name of the custodian, the securities are the property of the minor.
correct answers The proper sequence of registration in a custodial account is the custodian's
name, then the minor's name, followed by the appropriate state.
Although registered in the name of the custodian, the securities are the property of the minor.
Level 1 provides subscribers with the highest bid and lowest offer, inside market, for a security
for which there are at least 2 market makers. correct answers Level 1 provides subscribers with
the highest bid and lowest offer, inside market, for a security for which there are at least 2 market
makers.
Due to potential conflicts of interest when a member firm attempts to raise capital for itself, or
for a firm it controls, the member firm is required to provide a term sheet, or a private placement
memorandum, or a disclosure document that contains certain disclosures. correct answers The
member firm is also required to file this document with the Corporate Finance Department.
Control is defined as ownership of more than 50% of the company.
An at-the-market offering permits a company to raise capital and issue shares over a period
rather than all at once. correct answers An at-the-market offering is a registered issue of a
publicly traded company.
It may only be conducted by a company that is eligible to use Form S-3 or F-3 and sold pursuant
to a shelf registration.
According to the Investment Advisers Act, which of the following professionals is NOT required
to register as an investment adviser?
A bank offering securities to clients. The bank would be required to register as a broker-dealer.
correct answers According to the Investment Advisers Act, which of the following professionals
is NOT required to register as an investment adviser?
A bank offering securities to clients. The bank would be required to register as a broker-dealer.
A market maker that voluntarily terminates its registration in a security by withdrawing its
quotations from Nasdaq may not re-register as a market maker in that security for 20 business
days. correct answers This penalty regarding one security does not affect the market maker's
status regarding other Nasdaq securities.
