Series 10 FINRA || with 100% Verified Solutions.
According to MSRB rules, to be considered to be "regular way" settlement correct answers
Settlement date is trade date plus three business days. Regular way settlement for municipal
bond transactions is Trade date plus 3 business days (T+3).
Muni Firm has a control relationship with an issuer for which it is distributing a new issue. RR
wants to sell some of the securities to a discretionary client but the client cannot be reached.
What can the RR do with regard to executing the transaction correct answers The RR may not
execute the transaction until the customer can be contacted
When there is a control relationship between an issuer and a broker/dealer, the customer must:
correct answers the customer must be made aware of the relationship and approve the trade prior
to executing a transaction
A broker-dealer is inspected by FINRA on a 4-year cycle. Which records must be retained
covering this entire period correct answers Articles of Incorporation
Articles of incorporation must be retained for the life of the firm. correct answers
In a principal transaction, the MSRB requires that the price given to the customer consider the
dealer's correct answers best judgment of the security's fair market value; the fact that the dealer
is entitled to a profit; the expenses associated with handling the transaction; and the total dollar
amount of the transaction.
For agency transaction, the MSRB requires that the availability of the security be considered (a
"hard to find" security justifies a higher commission); correct answers as well as the expense of
executing the order, the value of services rendered by the broker; and the amount of any other
compensation received by the broker in that transaction.
A General Sales Supervisor has worked for a broker-dealer for 11 years. He becomes subject to
statutory disqualification. Which statement is TRUE correct answers This individual may be
permitted to continue working provided the employer member files a written application to
FINRA in an Eligibility Proceeding
The Securities Exchange Act of 1934 lists the reasons why an individual associated with a firm,
or the firm itself, may be subject to "statutory disqualification" - meaning that they cannot be
involved in the securities business. These include situations where the individual or member
firm: correct answers has been suspended or expelled from any other Self Regulatory
Organization, either domestic or foreign;
is the subject of an SEC order suspending or revoking registration or by his conduct while
associated with a firm has caused that firm's suspension or expulsion;
willfully filed a false or misleading application or has omitted to state material facts in the
application;
,willfully violated federal securities or commodities laws, willfully aided, abetted, counseled,
commanded or procured such violations, or failed to supervise those who commit such law
violations;
has been convicted of any securities or "money" related offense (such as embezzlement) within
the past 10 years; or
has been temporarily or permanently enjoined from engaging in the securities business.
Generally speaking, a person subject to statutory disqualification may not be associated with a
member in any capacity. However, FINRA permits a disqualified person to request permission to
enter into, or remain in, the securities industry. To do so, the member firm must file an
application seeking approval of a new or continued registration in an "Eligibility Proceeding."
The application is a package of all relevant information surrounding the disqualification. FINRA
looks at the nature and gravity of the event; the length of time since the event occurred; any
mitigating or aggravating circumstances; and the disciplinary history of the member firm and
associated person. If FINRA approves an application, the SEC is also required to review and
approve that decision; and if FINRA denies an application, an appeal may be filed with the SEC.
Confirmation contents are regulated by MSRB Rule G15 and therefore, correct answers cannot
be changed by an agreement between Municipal Dealers.
A MFP was associated with Dealer A at the time he made a political contribution which resulted
in the dealer being prohibited from engaging in muni securities business with the issuer for 2
years. Then, less than 2 years after making the contribution, the MFP becomes associated with
Dealer B. Which dealer(s) is subject to the prohibition on engaging in muni business? correct
answers Dealer A and Dealer B. Both dealers are subject to the prohibition for two years from
the date of the contribution. Dealer B's probation only begins when the MFP joins Dealer B.
All monies due as the result of a buy-in are due correct answers All monies are due as a result of
a buy in within 10 business days of execution
Which of the following branch functions can be outsourced to a third party provider correct
answers New account processing & New account customer I.D. verification. Customer account
processing & verification of customer identity are functions that can be outsourced - there is no
requirement for these to be performed by a registered person.
FINRA does NOT allow functions that must be performed by a registered person to be
outsourced unless correct answers Unless the third party firm to whom the functions are
outsourced is itself a registered broker-dealer
New account approval must be performed by a registered principal and suitability determinations
can only be made by registered representatives (or registered principals). correct answers
A customer has a NMFBA at your firm with $400,000 in assets. For the past 2 years, there has
been no activity in the account and the customer has been charged a $6,000 annual flat fee during
each of those years for account maintenance. As the BOM, you should correct answers Non-
Managed Fee Based Accounts (NMFBAs) are typically only suitable for active traders. This
customer is paying a very high annual fee for very little trading. The best answer is that the BOM
,should have the representative discuss the situation with the customer and explain the differences
between maintaining the account as a NMFBA or converting it back to a per-trade commission
charge account. Also note that FINRA permits the account to be maintained as a NMFBA, even
if this is more expensive, if the customer places a high value on aligning his or her interests with
those of the broker (e.g., he knows with the NMFBA that the broker will not make
recommendations just to induce trades for commissions).
A broker-dealer making a PIPE offering under Rule 506 of Regulation D is required to complete
a correct answers "reasonable basis" suitability determination that determines that the offering is
suitable for at least some investors & customer level suitability for both the accredited and non-
accredited investors
A "PIPE" offering is a Private Investment in Public Equity conducted under Regulation D.
FINRA views private placements as correct answers as "non-standard" offerings and applies 2
levels of suitability - both product level and customer level.
As with any "non-standard" investment, when offering a private placement, FINRA requires the
broker-dealer first to conduct a "reasonable basis" suitability determination that the investment
will be suitable for at least some clients. This investigation must look at the: correct answers
issuer and its management; business prospects of the issuer; assets held or to be acquired by the
issuer;
claims being made; & intended use of the proceeds of the offering. Once a reasonable basis
suitability determination has been completed & documented, demonstrating that the investment
is suitable for at least some customers, then a second level of suitability is required
second level of suitability is required. This is "customer level" suitability, which applies to both
accredited (wealthy) and non-accredited investors in the offering. Just because an investor is
accredited does not obviate this requirement. correct answers This is "customer level" suitability,
which applies to both accredited (wealthy) and non-accredited investors in the offering. Just
because an investor is accredited does not obviate this requirement.
To complete customer level suitability, the broker-dealer must correct answers must gather &
analyze information about the customer's other holdings, financial situation & needs, tax status,
risk tolerance, investment objectives, & any other information that would enable the firm to
make its suitability determination. (Also note that effective July 2012, FINRA extended the 2-
level suitability requirement to all recommendations, except to those made to institutional
investors.)
The FINRA interpretation on charitable solicitations covers: correct answers solicitations by
employees or agents of a customer acting in a fiduciary capacity
FINRA has issued an interpretation on "charitable solicitations." correct answers This covers the
situation where an employee of an investment adviser or mutual fund "solicits" a charitable
contribution to be made by a broker-dealer to whom he or she directs brokerage business.
, The worry of the regulators is that this individual correct answers might be requesting the
charitable contribution because he or she made a pledge to a charity and then satisfies the pledge
by coercing the broker-dealer to make the contribution (since he or she directs so much business
to that firm).
The problem is that this individual is getting a personal benefit from the brokerage firm making
the contribution, since he or she is being relieved of the liability of making that contribution. In
doing so, this individual correct answers violates his or her fiduciary responsibility to his or her
employing investment adviser or mutual fund.
The FINRA interpretation only covers employees of customers (these would be institutional
customers like mutual funds) who are soliciting charitable contributions from broker-dealers
with whom they do business. It does not cover. correct answers charitable giving by employees
of broker-dealers; by member firms; or solicitations of contributions received directly from
charitable organizations
A copy of the Official Statement for a State-sponsored 529 plan can be obtained from (the):
correct answers EMMA - Electronic Municipal Market Access
The MSRB requires the managing underwriter to file the Official Statement for new issue
municipal offerings, including municipal fund securities, with ? correct answers EMMA -
Electronic Municipal Market Access, a web portal run by the MSRB.
EMMA makes these filings available to the public, typically within . correct answers 15 minutes
of electronic filing. In addition, a copy of the Official Statement could be obtained from the
issuer itself; and from any underwriter that is currently selling the issue to the public
An elderly customer normally comes into your branch office each week on Monday to discuss
his account and place trades. This week, he comes in on Wednesday, looking confused and
disoriented. However, the trade that he wishes to place conforms to his normal investment
practice. The representative should: correct answers contact the firm's compliance department for
guidance on how to handle the situation
The SEC and FINRA are concerned about aging investors, who as their mental capacity
diminishes, are prey for investment scams. To protect senior investors, firms must correct
answers must train their employees to identify diminished mental capacity.
FINRA requires that firms have an internal process to permit representatives to get advice from
others as to what steps to take. These include: correct answers the representative should
document the suspected diminished capacity and escalate immediately; the firm should have a
clearly designated individual to whom the matter is escalated.
once the problem is identified and escalated, the next step for the firm is correct answers to stop
trading in the account until the concern no longer exists.
