FINRA Exam 227 Questions with Verified Answers, Exams of Business Fundamentals

Download FINRA Exam 227 Questions with Verified Answers and more Exams Business Fundamentals in PDF only on Docsity! FINRA Exam 227 Questions with Verified Answers SEC Rule 17a-5(d)(1)(i) - CORRECT ANSWER requires every broker or dealer registered to file a certified annual audit no later than 60 calendar days from their designated fiscal year end A completed SEC form X-17A-5, Part III, - CORRECT ANSWER Document used to identify annual audit reports & must accompany the annual audit. The form contains space for a firm's name and address, the name and address of an accountant, the oath or affirmation, and a checklist of items included in the report. Filing this report that they can receive confidential treatment for all parts other than the statement of financial condition. Member firms desiring such confidential treatment should review the provisions of subparagraph (e)(3) of SEC Rule 17a-5. Any portion that you wish to be treated as confidential should be bound separately from the statement of financial condition. 2 copies of the audited report must be filed with the Principal Office of the SEC in Washington, DC, one copy to the appropriate Regional/District Office of the SEC, and one copy to FINRA submitted through the Firm Gateway annual audit electronic submission interface. The audit must be submitted to FINRA in Portable Document Format (PDF). Extension request need to be done in writing Rule 4530 - CORRECT ANSWER requires firms to report to FINRA certain specified events and quarterly statistical and summary information regarding written customer complaints. FINRA Rule 4530 was modeled after NASD Rule 3070 and NYSE Rule 351. Any matter that becomes subject to reporting or filing prior to July 1, 2011, must be reported or filed in accordance with the requirements of NASD Rule 3070 and NYSE Rule 351, as applicable, including the reporting and filing deadlines of those rules. Any matter that becomes subject to reporting or filing on or after July 1, 2011, must be reported or filed in accordance with the requirements of FINRA Rule 4530 Report no later than 30 calendar days after the firm knows or should have known of their existence. Must report within 30 calendar days after the firm has concluded, or reasonably should have concluded, on its own that the firm or an associated person of the firm has violated any securities-, insurance-, commodities-, financial- or investment-related laws, rules, regulations or standards of conduct of any domestic or foreign regulatory body or self-regulatory organization. The statistical and summary information regarding customer complaints is due quarterly by the 15th calendar day from the end of the quarter. Must be filed electronically via the Regulatory Filings Application on the FINRA Firm Gateway Short Interest Reporting - CORRECT ANSWER New Exchange/Market Code for Reporting Short Interest Positions Effective December 15, 2011, FINRA's Web-based Regulation Filing Applications (RFA) will include a new exchange/market code "H" for reporting short interest positions in securities listed on the BATS Exchange firms must report short interest positions in all securities—including NASDAQ, NYSE, NYSE Amex, NYSE Arca and OTC equity securities—through a single source on a bi-monthly basis: FINRA's Web-based Regulation Filing Applications (RFA) system Blue Sheets - CORRECT ANSWER Blue sheets provide the SEC with detailed information about trades performed by a firm and its clients. The information includes the security's name, the date traded, price, transaction size and a list of the parties involved. Rule 17a-11(b) - CORRECT ANSWER Net Capital Deificiency Rule 17a-11(c)(1) - CORRECT ANSWER Aggregate indebtedness is in excess of 1,200 percent of net capital Rule 17a-11(c)(2) - CORRECT ANSWER Net capital is less than 5 percent of aggregate debit items Rule 17a-11(c)(3) - CORRECT ANSWER Net capital is less than 120 percent of required minimum dollar amount Rule 17a-11(d) - CORRECT ANSWER Failure to make and keep current books and records Rule 17a-11(e) - CORRECT ANSWER Material inadequacy in accounting systems, internal controls, or practices and procedures eFOCUS - CORRECT ANSWER provides firms with the capability to electronically submit their Financial and Operational Combined Uniform Single (FOCUS) Reports to FINRA. FINRA member firms are required to compose and submit FOCUS reports to FINRA pursuant to SEC Rule 17a-5. Public Offering System - CORRECT ANSWER The Public Offering System facilitates filings required under FINRA's Corporate Financing Rules (Rules 5110, 5121 and 2310). The Public Offering System replaces COBRADesk, which will be retired on June 20, 2012. Distribution Manager - CORRECT ANSWER used by the lead manager or book runner of a firm-commitment initial public offering (IPO) or follow-on offering to report underwriting commitments and retentions on behalf of the syndicate. In addition to the underwriting data required by FINRA Rule 5130 (Restrictions on the Purchase and Sale of Initial Equity Public Offerings), the system also allows firms to provide underwriting data on a voluntary basis for equity follow-on offerings that have been filed with FINRA pursuant to FINRA Rule 5110 FINRA 5110 - CORRECT ANSWER Corporate Financing Rule — Underwriting Terms and Arrangements FINRA 5130 - CORRECT ANSWER Restrictions on the Purchase and Sale of Initial Equity Public Offerings NASD Rule 1160 - CORRECT ANSWER update all contact information required by FINRA via FCS promptly upon any material change; review and verify contact information annually; and comply promptly with any request for contact information. Firms must complete an annual verification of their contact information within 17 business days after the end of each calendar year. FINRA Firm Clearing Arrangements Filing - CORRECT ANSWER member firms that carry accounts and/or clear transactions or act as an intermediary to facilitate the clearance of accounts through another firm must report their clearing method and clearing arrangements through the FINRA Firm Gateway, a tool that provides firms consolidated access to FINRA applications. Firms that are members of both FINRA and the NYSE must report their clearing method and arrangements under Incorporated NYSE Rule 416A. FINRA-only member firms are requested to provide this information on a voluntary basis. However, as part of FINRA's rulebook consolidation, FINRA staff anticipates proposing a similar rule that would apply to all FINRA member firms. Member firms that do not carry accounts, clear transactions or act as an intermediary in a clearing arrangement are not subject to this reporting obligation. Such firms will, however, be able to view information pertaining to them that has been filed by the reporting firms and will receive an email notice if a reporting firm adds or removes them as a correspondent. Member Private Offerings (MPOs) Rule 5122 - CORRECT ANSWER requires that firms file a private placement memorandum, term sheet or other offering document with FINRA's Corporate Financing Department at or prior to the first time such document is provided to any prospective investor. (The Securities and Exchange Commission approved FINRA Rule 5122 (Member Private Offerings) on March 19, 2009.) Firms also must file any amendments or exhibits to the offering document with the Corporate Financing Department within ten days of being provided to any investor. The information filed with the Corporate Financing Department is subject to confidential treatment. Firms can submit offering documents via email as PDFs. Firms must include their CRD number for identification purposes as part of their email submission. Customer Margin Balance Reporting FINRA Rule 4521 - CORRECT ANSWER requires member firms that carry customer margin accounts to submit—via the Customer Margin Balance Form—the total of all debit balances in securities margin accounts, and all free credit balances in all cash accounts and all securities margin accounts on a settlement date basis as of the last business day of the month. Note: If a firm has no information to submit, it should note that on the report. Accessing the Form Firms that are required to file information pursuant to FINRA Rule 4521(d) must do so through the FINRA Firm Gateway, where the new Customer Margin Balance Form will be available beginning March 1, 2010. Subordination Agreements - CORRECT ANSWER Generally, brokers and dealers use subordinated loans and notes collateralized by securities (referred to as subordinations) to borrow funds or securities from investors to increase their regulatory net capital. Pursuant to FINRA Rule 4110(e)(1), subordinations must be approved by FINRA in order to receive beneficial regulatory capital treatment. See Regulatory Notice 10-15 for more information, including details of FINRA's requirements for proposed subordinations. FINRA Form SL- 31D FINRA Form SL - 31E FINRA Form SL - 31T - CORRECT ANSWER Cash, Debt Cash, Equity Cash, Temporary ______ ______ is called a claimant. The party against whom the ______ ______ ______ is filed is called the respondent. The ______ ______ _____ should provide the details of the dispute, including relevant dates, names of entities and individuals involved, and the type of relief requested and the respondents from whom the claimant is seeking relief or damages. The type of relief a claimant may request, includes, but is not limited to, actual monetary damages, interest, and specific performance. Answer - CORRECT ANSWER An ______ is a written document that specifies the relevant facts and available defenses to the Statement of Claim. A respondent files an answer to the claimant's Statement of Claim. Number - CORRECT ANSWER The ______ of arbitrators appointed to a case depends on the amount and type of relief requested in the Statement of Claim. Initial Prehearing Conference (IPHC) - CORRECT ANSWER Once the panel is appointed, FINRA schedules the ______ ______ ______ (______). The ______ is the first time that the parties and arbitrators meet to set the schedule for the case and usually held by telephone. During this telephone conference, the arbitration panel will schedule evidentiary hearing dates, establish discovery deadlines, set briefing and motion deadlines, determine whether mediation is desirable, and address other preliminary matters. Discovery Process - CORRECT ANSWER The ______ ______ allows the parties to obtain facts and information from other parties to the arbitration in order to support their own case and prepare for the hearing. The Codes of Arbitration Procedure require parties to cooperate with each other to the fullest extent practicable in the voluntary exchange of documents and information to expedite the arbitration process. The Codes contain rules that govern the ______ ______, including making ______ requests, responding to such requests, objecting to ______ requests, and arbitrator authority to issue sanctions against parties for ______ abuses. Closing - CORRECT ANSWER After ______ the record, the arbitration panel considers all of the evidence, deliberates together, and decides what relief the claimant is entitled to, if any. Unanimous - CORRECT ANSWER In a three-arbitrator panel, an award is based on the vote of a majority of the arbitrators; a ______ decision is not required. (Rules) Announcements - CORRECT ANSWER ______ provide recent updates, changes, and notifications about Dispute Resolution rules, proposals, and procedures. Filing - CORRECT ANSWER The party filing a claim must pay a ______ fee at the time the party files a Statement of Claim. The amount of this fee is based on the total amount of the claim including any punitive and treble damages requested, but excludes interest and expenses. Fee waiver - CORRECT ANSWER Parties may submit a written request for a ______ ______ stating the reason(s) that would make payment of the filing fee a financial hardship. In support of the request, parties should include the following information with the written request: a copy of the most recently filed tax return; two of the most recent pay stubs; and documentation of garnishment or lien, or other documents that evidence hardship. Refund - CORRECT ANSWER FINRA will issue a partial ______ of the filing fee, less any fees or costs owed by that party, if the party notifies FINRA that the case is settled or withdrawn more than 10 calendar days before a scheduled hearing, Any ______ will be paid directly to the named parties, even if a non-party made payment on behalf of the named parties. FINRA will not issue a ______ if a party notifies FINRA that a claim is settled or withdrawn within 10 calendar days of a scheduled hearing. Auction Rate Securities (ARS) - CORRECT ANSWER ______ ______ ______ (_____) are debt securities that are sold through a dutch auction. A dutch auction is public offering auction structure in which the price of the offering is set after taking in all bids and determining the highest price at which the total offering can be sold. In a dutch auction, investors place a bid for the amount they are willing to buy in terms of quantity and price. In this type of auction, an _____ is sold at an interest rate that will clear the market at the lowest yield possible. This ensures that all bidders on an _____ receive the same yield on the debt issue. The interest rate is reset periodically. Investors covered by ______ final settlements with securities regulators (i.e., SEC, FINRA, and the states) may participate in a Special Arbitration Process (SAP) to recover consequential damages. Special Arbitration Process (SAP) - CORRECT ANSWER The ______ ______ ______ (_____) are voluntary. Eligible investors may choose any ______ associated with their brokerage firm. The ______ found in the various regulatory settlements are not similar. Provisions for payment of fees, damages, and other procedures may vary from settlement to settlement. Eligible investors should review all applicable ______ before filing a claim. Age - CORRECT ANSWER Arbitrators are encouraged to consider the health and ______ of a party when: Scheduling hearing dates; Considering postponement requests; and Setting discovery deadlines. Expedited - CORRECT ANSWER Various state statutes provide for speedy trials in civil actions involving seniors or seriously ill parties. FINRA recognized a need for ______ hearings in arbitrations involving such parties in its dispute resolution forum. Thus, on June 7, 2004, FINRA implemented various measures to expedite arbitration proceedings in matters involving seniors or seriously ill parties. Under these proceedings, FINRA Dispute Resolution staff (staff) will endeavor to do the following on an _____ basis: Complete the arbitrator selection process; Schedule the initial pre-hearing conference; Serve the final award; and Determine whether the parties are interested in mediation. mediators on the _______ may have subject-matter expertise or other experience, consistent with the parties' needs in the case. Mediations - CORRECT ANSWER ______ can take place in person, telephonically, or by video conference; however, all parties and the ______ must agree with the arrangements. ______ usually take one day, and are scheduled for a time and location mutually agreeable to the parties. During the ________, all parties may be represented by an attorney or represent themselves. Settlement - CORRECT ANSWER The majority of FINRA mediations conclude with a _______ between the parties. While mediation is non-binding, once parties sign a _______ agreement, the agreement is final and enforceable. When the parties reach an agreement, they are responsible for recording the ______ in writing. The mediator will help the parties document the terms of the _______, even if it is handwritten, and have the parties execute the agreement. This agreement may be finalized formally at a later date. FINRA will assist parties with enforcing written _______ agreements executed by the parties. Mediation - CORRECT ANSWER Since ______ is non-binding, there are times when the parties decide not to settle. Or they resolve only part of the case in ______ by narrowing some of the issues. In those instances, claimants maintain their right to: file an arbitration claim, proceed with an existing arbitration case or reinstate a suspended arbitration case. Regardless of whether the parties agree to settle, feedback from users of FINRA's ______ forum indicates that their _______ experience has prepared them to pursue or continue in arbitration because they have a better understanding of their case. Mediation Filing Fee - CORRECT ANSWER Once the parties agree to mediate, each side pays a ______ ______ ______ to FINRA-an administrative fee based on the amount of the claim. Fees - CORRECT ANSWER FINRA will send parties an invoice when ______ are due. Once parties agree to mediate FINRA will assess Mediation Filing ______. Mediation Filing Fee - CORRECT ANSWER Once the parties agree to mediate, each side pays a ______ ______ ______, which is an administrative fee based on the amount of the claim. The following tables provide the filing fees for mediation cases that come straight into FINRA's forum and for a mediation case that is converted from a FINRA arbitration case. room costs. Mediation Submission Agreement - CORRECT ANSWER The parties to a mediation administered under the Mediation Code must pay all of the mediator's charges, including the mediator's travel and other expenses, if any. The charges must be specified in the ______ _____ ______, and must be apportioned equally among the parties, unless they agree otherwise. Each party shall deposit with FINRA its proportionate share of the anticipated mediator charges and expenses, as determined by the Director of Mediation, prior to the first mediation session. Arbitration - CORRECT ANSWER Adjudication Arbitrators control the outcome. Arbitrator is given power to decide. Final and binding decision. Often extensive discovery is required. Arbitrator listens to facts and evidence and renders an award. Parties present case, testify under oath. Process is formal. Attorneys control party participation. Evidentiary hearings. No private communication with the arbitrator. Joint and private meetings between individual parties and their counsel. Decision based on facts, evidence, and law. Result is win/lose award—Relationships are often lost. More expensive than mediation, but less expensive than traditional litigation. Private (but decisions are publicly available). Mediation - CORRECT ANSWER Expedited negotiation Parties control the outcome. Mediator has no power to decide. Settlement only with party approval. Exchange of information is voluntary and is often limited. Parties exchange information that will assist in reaching a resolution. Arbitration - CORRECT ANSWER ______ cases are eligible to be heard in FINRA's forum if the following criteria are met: For disputes with investors: --> The cases involve an investor and an individual or entity registered with FINRA, such as cases between investors and brokers, between investors and brokerage firms, and between investors and brokers and brokerage firms; and --> The claim is filed within 6 years from the time the events giving rise to the dispute occurred. For disputes involving industry parties only: --> The cases involve an individual or entity registered with FINRA, such as cases between brokerage firms, between brokers, and between or among brokerage firms and brokers; and --> The claim is filed within 6 years from the time the events giving rise to the dispute occurred. Complaint - CORRECT ANSWER However, if you are not satisfied with the response to your ______, or want to seek monetary damages or other restitution, you may initiate more formal dispute resolution processes. Complaint - CORRECT ANSWER In the event that a discrepancy or dispute arises, your first course of action should be to report the matter in writing to your broker's manager or the brokerage firm's compliance personnel. If you make your initial ______ over the telephone, you should confirm your ______ to the brokerage firm in writing and keep written records of all conversations, including names, dates and times of your calls. Often, the brokerage firm's management has the authority and insight to take steps that will rectify the problem quickly and easily. If it is just a misunderstanding, management intervention may be enough to put the transaction back on course. Investor's Guide to Securities Industry Disputes - CORRECT ANSWER The Pace Law School Investor Rights Clinic publishes this booklet in conjunction with the FINRA Investor Education Foundation. (35 pages) Code of Arbitration Procedure for Customer Disputes - CORRECT ANSWER This Code contains the official FINRA rules governing arbitrations involving customer disputes. (66 pages) Code of Arbitration Procedure for Industry Disputes - CORRECT ANSWER This Code contains the official FINRA rules governing arbitrations involving intra- industry disputes. (71 pages) The Neutral Corner - CORRECT ANSWER This newsletter is published four times a year for arbitrators, mediators, and other neutrals. It includes updates on rules affecting dispute resolution and tips on how to be a better arbitrator or mediator. Securities Arbitration Reform (Ruder Report) - CORRECT ANSWER $20; This report provides information on the findings of the Arbitration Policy Task Force established by FINRA to review the of the dispute resolution process in the securities industry. (198 pages) Respondents - CORRECT ANSWER Once the filing requirements are met, FINRA will serve the Statement of Claim on the ______ identified in the Statement of Claim and Submission Agreement. If the filing requirements have not been met, FINRA will notify the claimant of the deficiency, so that the claimant may correct the problem. Once the claimant corrects the deficiency, FINRA will serve the Statement of Claim on the respondents identified in the Statement of Claim and Submission Agreement. Arbitration Online Claim Filing - CORRECT ANSWER To file a claim online, go to the ______ ______ ______ ______ system Uniform Forms Guide - CORRECT ANSWER To file a claim by mail, please review the ______ ______ ______. The guide contains detailed information about how to file a claim and contains a Submission Agreement form. Once the Statement of Claim and other supporting documents have been created, please assemble these documents and submit them submit them, along with the appropriate filing fees, to FINRA. Submission Agreement - CORRECT ANSWER In addition to the Statement of Claim, a claimant must also file a ______ ______ and pay the appropriate filing fees, either by check or online. 45 - CORRECT ANSWER If a respondent is named in an arbitration matter, the respondent must file with FINRA an answer within ______ days of receipt of the Statement of Claim. When answering a claim, a respondent must serve every party, all claimants and respondents, with copies of the signed Submission Agreement and answer. Three - CORRECT ANSWER In addition to this requirement, a respondent must file an original and ______ copies of the signed Submission Agreement and answer with FINRA Dispute Resolution at the same time. (If the claim will be decided by single arbitrator, the respondent should file only one additional copy.) FINRA will provide the copies to those arbitrator(s) selected to hear and determine the dispute. One - CORRECT ANSWER For claims of $25,000 or less, FINRA will appoint ______ arbitrator and the claim will be subject to the simplified arbitration procedures. (For more information on these claims, view the "Simplifed Arbitrations" section.) The remainder of the discussion focuses on claims of more than $25,000. Three - CORRECT ANSWER Generally, for claims of more than $25,000 up to $100,000, the parties will select and FINRA will appoint one arbitrator, unless the parties agree in writing to ______ arbitrators. For claims of more than $100,000, the parties will select and FINRA will appoint ______ arbitrators. Neutral List Selection System (NLSS) - CORRECT ANSWER FINRA uses the ______ ______ ______ ______ (______) to generate randomly lists of arbitrators from FINRA's arbitrator rosters to appoint a panel. Generally, the arbitrator selection process begins after the answer is due, regardless of whether the respondent answers a claim. After the answer is due, FINRA will use the ______ to generate list(s) of arbitrators, which will include their background information, called arbitrator disclosure reports. FINRA will send the lists and arbitrator disclosure reports to the parties for their review. Parties will review the information, strike any arbitrators from the lists that they do not want on their panel, and rank the remaining choices. After parties have ranked their choices, they submit their ranked lists to FINRA. FINRA combines the parties' ranked lists and appoints the highest ranked available arbitrator from each list to serve on the panel. Additional - CORRECT ANSWER After the IPHC, the arbitrators may need to convene ______ prehearing conferences with the parties to resolve issues or disputes, e.g., discovery, motions. Discovery Guide - CORRECT ANSWER For disputes in which an investor is a party, FINRA provides the ______ _______, which are guidelines to help parties and arbitrators during the discovery process. In the 2011 version of the ______ ______, FINRA revised the ______'s introduction to expand the guidance given to parties and arbitrators on the discovery process generally and to clarify how arbitrators should apply the ______ in arbitration proceedings. The 2011 ______ also contains two lists of documents the parties should exchange automatically. There are two versions of the ______ ______ available. Please use the version based on when you filed your claim at FINRA. Discovery request - CORRECT ANSWER Any party may object to a ______ ______ if it asks the party to provide documentation and information that a party believes is, for example, overly burdensome, not relevant to the case, or involves confidential or privileged information. Objecting to a ______ ______ means the party that is the subject of the request argues that the party does not have to provide the documentation or information requested. The objection must clearly state in writing the ______ to which the party is objecting and why, and send the written objection to all parties in the case. Compel - CORRECT ANSWER If the parties cannot agree on their own how to resolve any discovery dispute, then the party who still wants more documents or information may make a motion to ______ the reluctant party to produce the requested documents. In the motion, the requesting party should explain to the arbitrator(s) why the discovery is relevant and necessary to the case and ask the panel to issue an order compelling production. The arbitrator(s) may schedule a hearing before deciding the motion. prepared by FINRA to cover administrative matters. Each party then has the option to give an opening statement outlining what it intends to prove during the ______. Hearings - CORRECT ANSWER FINRA digitally records all ______, and the digital recording is the official record of the proceeding, even if the recording is transcribed. Any party may make a stenographic record of the ______. Even if a stenographic record is made, the digital recording will be the official record of the proceedings, unless the panel determines otherwise. Direct examination - CORRECT ANSWER Generally, each claimant then calls witnesses to testify on his or her behalf as to facts within the witnesses' personal knowledge. In addition, each claimant can ask expert witnesses who have specialized training or knowledge to testify as to their opinion on a technical matter to help the arbitrators draw conclusions and render a decision. The claimant conducts a ______ ______, or asks questions of any witnesses it calls to testify. Opinions - CORRECT ANSWER Awards must be in writing, but arbitrators are not required to write ______ or provide explanations or reasons for their decision. The panel will issue an award within 30 business days from the date the record is closed. Final - CORRECT ANSWER All awards rendered under the Codes are ______ and are not subject to review or appeal, except under limited circumstances. For exceptions to this rule, view "Challenges to an Arbitration Award." Public - CORRECT ANSWER For claims of more than $25,000 up to $100,000, the arbitrator will be a ______ arbitrator selected from the ______ chairperson roster, FINRA will send one list with 10 chair-qualified ______ arbitrators to each of the parties. Each separately represented party may strike up to four arbitrators on the list, leaving at least six arbitrator names remaining on each party's list. In the event no ranked public chairpersons remain on the combined list, or if all remaining _____ chairpersons are not available to serve, FINRA will randomly appoint an ______ chairperson by using the NLSS. Mediation - CORRECT ANSWER Mediator helps the parties define and understand the issues and each side's interests. Parties vent feelings, tell story, engage in creative problem-solving. Process is informal. Parties are active participants. Outcome based on needs of parties. Result is mutually satisfactory—A relationship may be maintained or created. Low cost. Private and confidential. Three - CORRECT ANSWER For claims of more than $100,000 or for unspecified or non-monetary claims, the parties will select and FINRA will appoint ______ arbitrators. In investor cases decided by _______ arbitrators, investors have the option of choosing an arbitration panel with two public arbitrators and one non- public arbitrator, referred to as a Majority-Public Panel, or a panel of all public arbitrators, referred to as an Optional All-Public Panel In these cases, only investors choose the panel selection method. Neither brokergage firms nor brokers choose the selection method. If the investor declines to elect a panel selection method, the option for selecting a Majority Public Panel will apply. The investor option of choosing the type of arbitration panel applies to all investor cases decided by three arbitrators, but not to cases involving only industry parties. Non-public - CORRECT ANSWER For claims of more than $100,000 for unspecified or non-monetary claims, the three arbitrators will be ______-______ arbitrators, one of whom will be selected from the ______-______ chairperson roster, FINRA will send two lists to each of the parties - one with 20 non-public arbitrators and one with 10 chair-qualified non-public arbitrators. Each separately represented party may strike up to eight arbitrators from the non-public arbitrator list, leaving 12 names remaining on the ______-______ list, and up to four from the chair- qualified _______-______ arbitrator list, leaving at least six names remaining on that list. In the event no ranked ______-______ arbitrators remain on the combined lists, or if all remaining non-public arbitrators are not available to serve, FINRA will randomly appoint one or more arbitrators of the required classification to complete the panel using the NLSS. Costs - CORRECT ANSWER In an award, the panel will decide whether to assess any ______ and forum fees against any party, and how to allocate those costs and fees among the parties. Copies - CORRECT ANSWER Once the award is signed by a majority of the arbitrators, FINRA will send ______ of the signed award to each party or representative of the party. FINRA makes all arbitration awards publicly available for free by posting them on Arbitration Awards Online. Award - CORRECT ANSWER An ______ will contain the following information: Names of the parties; Names of the parties' representatives, if any; An acknowledgement by the arbitrators that they have each read the pleadings and other materials filed by the parties; A summary of the issues, including the type(s) of any security or product in controversy; Damages and other relief requested; Damages and other relief awarded; A statement of any other issues resolved; Allocation of forum fees and any other fees allocable by the panel; Name(s) of the arbitrator(s); Dates the claim was filed and the award rendered; The number and dates of hearing session(s); Location of the hearings; and Arbitrator signatures. Challenge - CORRECT ANSWER FINRA does not have an appeals process through which a party may ______ an award. This means that FINRA does not hear appeals on arbitration awards. Appeal - CORRECT ANSWER However, under federal and state laws, there are limited grounds on which a court may hear a party's ______ on an award. Specifically, the law permits a district court to vacate or overturn an arbitration award if it finds that: for a firm that sold auction rate securities or themselves sold or supervised someone who sold ______ _____ securities. FINRA updated its arbitrator biographical information to easily identify arbitrators who, since January 1, 2005, worked for a firm that sold auction rate securities or sold or supervised someone who sold _____ _____ securities. We are contacting parties in pending auction rate securities cases to inform them of the new process and its impact on their case. Hearing session - CORRECT ANSWER In addition to the filing fee, FINRA charges ______ ______ fees for each hearing session that takes place with the arbitrator(s), whether telephonic or in-person. The amount of this fee will depend on the amount in dispute, the number of arbitrators selected to hear the arbitration and the number of ______ ______ conducted. A "______ ______" is a meeting with the arbitrators of no more than four hours. In the award, the panel will decide which parties are ultimately responsible for the ______ ______ fees. Affadavit - CORRECT ANSWER If a party is unable to provide this documentation in support of financial hardship, the party may submit an ______ attesting to financial hardship. After FINRA reviews the documentation, FINRA will provide written notice of its decision. FINRA may: Waive the fees, which means FINRA would forgive the amount owed for a specific fee; Partially waive the fees, which means that a party has paid or is required to pay part of the fee and FINRA would forgive the balance; Defer the fees, which means that FINRA defers temporarily the collection of a fee until it makes a final decision on whether to waive the fee(s); and Deny the request to waive the fees. Cross examination - CORRECT ANSWER Each respondent may ask questions of claimant's witnesses, too, during what is known as "______ ______," and the arbitrator(s) may also question these witnesses. The respondents may use rebuttal evidence to contradict the claimant's arguments or evidence. Claimants - CORRECT ANSWER Once the ______ have presented their case, the respondent(s) also have the right to call fact and expert witnesses, and offer relevant exhibits to present their case to the arbitrators. Each claimant may cross- examine the respondents' witnesses and the arbitrators may also question these witnesses. The claimants may use rebuttal evidence to contradict the respondent's arguments or evidence. Motion - CORRECT ANSWER A ______ is a request for the arbitrator(s) or Director to direct some act, whether by issuing an order or ruling. For example, a party must make a ______ to change the hearing location or amend the Statement of Claim after the arbitration panel is appointed. A party may make ______ in writing or orally during a hearing session. However, FINRA requires that a party make an effort to resolve the matter with the other parties before making a ______, and to include a description of those efforts as part of the motion. ______, like other arbitration filings, are not required to be in any particular form. Exhibits - CORRECT ANSWER Parties may offer into the record as ______ any documents they would like the arbitrators to consider as evidence. An ______ is a document produced and shown to an arbitration panel during a hearing. Parties may argue that any evidence presented by another party should not be considered in the arbitrators' decision by objecting orally at the hearing. After considering the objecting party's reasons for excluding the evidence, the arbitrators will examine the documents presented to determine if they will be admitted into evidence and into the case record. Closing statement - CORRECT ANSWER Once all parties have presented all their evidence on any claims and counterclaims, all parties generally make a ______ ______, summing up the evidence and arguing to the panel what they believe they have proven and what they contend the other side has not proven. Claimants will usually repeat their request for damages and any other relief, and provide specific calculations supporting their request for a damages amount. . Hearing - CORRECT ANSWER If arbitrators hold a ______, it will be conducted in this order generally, although the arbitrators have authority to change the order: Swearing in of arbitrators, parties and witnesses; Opening statement from each party (optional); Presentation of facts of the case to arbitrators, including documents and live or written testimony - claimant(s); Presentation of facts of the case to arbitrators, including documents and live or written testimony - respondent(s); Presentation of any counter-claims, cross-claims or third-party claims; Rebuttal evidence; Closing statements (claimant can choose to go last); Scheduling post-hearing submissions before closing the record; and Arbitration panel closes the record Initial filing fee - CORRECT ANSWER The fee a claimant pays to file a claim. Part of the fee is non-refundable and part is potentially refundable. Counterclaim, Cross Claim and Third Party Claim Filing Fee - CORRECT ANSWER The fee a respondent pays to file a counterclaim, cross claim or third party claim. Part of the fee is non-refundable and part is potentially refundable. Statutory Discrimination Filing Fee Claimant - CORRECT ANSWER The fee a claimant pays to file a claim involving statutory employment discrimination claims. If the claimant signed a pre-dispute agreement to arbitrate, the claimant's filing fee in cases involving statutory employment discrimination claims is capped at $200. Surcharge and Processing Fees - CORRECT ANSWER The Codes of Arbitration Procedure require a brokerage firm to pay these fees when the firm: 1) files a claim; 2) is named as respondent in a claim, counterclaim, cross claim, or third party claim; or 3) employed an associated person at the time of the dispute who is named as a respondent in a claim, counterclaim, cross claim, or third party claim: Member Surcharge Fee - CORRECT ANSWER A fee assessed when FINRA serves the claim. The fee amount is based on the amount of the initial claim; Filing fees - CORRECT ANSWER ______ ______ may be paid by check or money order made payable to "FINRA Dispute Resolution" or online after you submit your claim. Online - CORRECT ANSWER After you submit your claim through the Arbitration ______ Claim Filing System, click the "Proceed to Pay ______" button located on the tracking form to go to the online payment page. From there, you will have the option to pay using a credit card or by ACH bank transfer. Check - CORRECT ANSWER If paying by ______, please write on the check the name of the party filing the claim. To expedite filing, please send the ______ or money order along with your statement of claim or a copy of your tracking receipt if you filed your claim electronically to: FINRA Dispute Resolution One Liberty Plaza 165 Broadway 27th Floor New York, NY 10006-1404 Filing fees for counterclaims, cross claims, or third party claims may also be paid by ______ or money order made payable to "FINRA Dispute Resolution" and should be mailed to the regional Dispute Resolution Office administering the case. Please write on the check the name of the party filing the counterclaim, cross claim or third party claim and the case number. Refund - CORRECT ANSWER If a party notifies FINRA that the case is settled or withdrawn more than 10 calendar days before a scheduled hearing, FINRA will issue a partial ______ of the filing fee, less any fees or costs owed by that party. Any ______ will be paid directly to the named parties, even if a non-party made payment on behalf of the named parties. FINRA generally issues ______ 45-60 days after the date a case is closed. FINRA will not issue a ______ if it is notified that a claim is settled or withdrawn within 10 calendar days of a scheduled hearing. This will appear on your invoice as a retained filing fee. Invoice - CORRECT ANSWER When FINRA or the arbitrators assess a fee, the FINRA Finance Department will send you an ______. The _______ will show the fees assessed and any previous balance. The fees are due upon receipt of the ______. Joint and several - CORRECT ANSWER A ______ ______ ______ fee assessment means that each party is liable for the entire fee until the fee is paid in full. FINRA is entitled to determine which parties to invoice for ______ ______ ______ fees, and, therefore, may assess all or part of the fee to any liable party. Expedite - CORRECT ANSWER Although staff cannot shorten the time requirements set forth in the Customer Code (hyperlink to Code of Arb page), upon a party's request, staff will _____ the administration of arbitration proceedings in matters involving seniors or seriously ill parties. In such situations, staff will begin the arbitrator selection process, schedule the Initial Prehearing Conference (IPHC), and serve the final award as quickly as possible. By mutual agreement, parties are also free to reduce the time requirements contained in the Customer Code. Staff will also determine promptly whether the parties are interested in mediation, which could further expedite resolution of the dispute. Sensitive - CORRECT ANSWER FINRA encourages its arbitrators to be ______ to the needs of seniors or seriously ill parties when scheduling hearing dates, resolving discovery disputes, and determining the reasonableness of postponements. Expedited - CORRECT ANSWER At the IPHC, counsel for a senior or seriously ill party should advise the arbitration panel of the party's desire for ______ hearings. When a party makes such a request, the arbitration panel is expected to press for hearing dates and discovery deadlines that will expedite the process, yet still provide a fair amount of time for case preparation. Majority Public Panel - CORRECT ANSWER Under the ______ ______ ______ option, FINRA will send three lists - one with 10 chair-qualified public arbitrators, one with 10 public arbitrators, and one with 10 non-public arbitrators. Each separately represented party may strike up to four arbitrators on each list, leaving at least six arbitrator names remaining on each party's lists. In the event no ranked arbitrators remain on the list of the required classification, or if all remaining arbitrators of the required classification are not available to serve, FINRA will randomly appoint an arbitrator of the required classification by using the NLSS. Optional All Public Panel - CORRECT ANSWER Under the ______ ______ _______ ______ option, FINRA will send the parties three lists - one with 10 chair-qualified public arbitrators, one with 10 public arbitrators, and one with 10 non-public arbitrators. Each separately represented party may strike up to four arbitrators on each of the chair-qualified public and public lists, leaving at least six arbitrator names remaining on each party's lists. This option, however, allows each separately represented party to strike up to all 10 arbitrators on the non-public arbitrator list. If individually, or collectively, the parties strike all of the non-public arbitrators, FINRA will not appoint a non-public arbitrator to the case. Rather, FINRA will appoint the next highest ranked available public arbitrator to complete the panel. If none of the remaining arbitrators on the public list is available to serve, FINRA will appoint the next highest-ranked arbitrator appearing on the chair-qualified public list to complete the panel. If none of the remaining arbitrators on the chair-qualified public list is available to serve, FINRA will randomly appoint a public arbitrator using NLSS. 10 - CORRECT ANSWER INDUSTRY CASE: For claims of more than $25,000 up to $100,000, the arbitrator will be a non- public arbitrator selected from the non-public chairperson roster, FINRA will send one list with ______ chair-qualified non-public arbitrators to each of the parties. Each separately represented party may strike up to four arbitrators on the list, leaving at least six arbitrator names remaining on each party's list. In the event no ranked non-public chairpersons remain on the combined list, or if all remaining non-public chairpersons are not available to serve, FINRA will randomly appoint a non-public chairperson by using the NLSS. Four - CORRECT ANSWER INDUSTRY CASE: For claims of more than $25,000 up to $100,000, the arbitrator will be a public arbitrator selected from the public chairperson roster, FINRA will send one list with 10 chair-qualified public arbitrators to each of the parties. Each separately represented party may strike up to ______ arbitrators on the list, leaving at least six arbitrator names remaining on each party's list. In the event no ranked public chairpersons remain on the combined list, or if all remaining public chairpersons The arbitration panel must assess against the parties requesting _______ relief all forum fees for hearing sessions in which the sole topic is the determination of the appropriateness of _______. Majority - CORRECT ANSWER The first method is called the composition rules for ______-public panel. It provides for a panel comprised of a chair-qualified public arbitrator, a public arbitrator and a non-public arbitrator. All - CORRECT ANSWER The second method, called the composition rules for optional ______ public panel, allows any party to select an all public arbitration panel. Under the rule, for claims of more than $100,000, FINRA will send parties three lists of 10 arbitrators randomly generated by the computerized Neutral List Selection System (NLSS)- 10 chair-qualified public arbitrators, 10 public arbitrators and 10 non-public arbitrators. Under the majority-public panel method, each party may strike up to four arbitrators on each list; under the optional all public panel method, each party may strike up to four arbitrators on the chair-qualified public arbitrator list and on the public arbitrator list. However, under the optional ______ public panel method, each party may strike up to all of the arbitrators on the non-public arbitrator list. After striking arbitrators from the lists, the parties will rank the remaining arbitrators in order of preference and FINRA will appoint the panel from among the names remaining on the lists that the parties return. By striking all the arbitrators on the non-public list, any party may ensure that the panel will have three public arbitrators. Stipulate - CORRECT ANSWER However, where no ranked arbitrators remain from the parties' initial lists, or no remaining arbitrators are able to serve, parties may ______ to use of the short list method to select a replacement arbitrator. If the parties proceed under the short list replacement option, FINRA staff will use the Neutral List Selection System (NLSS) to generate randomly a list of three potential replacement arbitrators. FINRA staff will prescreen the arbitrators to confirm their availability for scheduled hearing dates. FINRA then sends to all parties the list of three arbitrators along with a copy of each arbitrator's Disclosure Report. Each side may strike one name from the list and may then rank all remaining arbitrators' names in order of preference within a prescribed number of days. FINRA combines each side's list to find the highest ranked replacement arbitrator. Short list - CORRECT ANSWER All parties must agree in order to use the ______ ______ option to select a replacement arbitrator. When a hearing is scheduled within five calendar days of an arbitrator's withdrawal, removal, or unavailability, the parties also will need to stipulate to a postponement to use the ______ ______ option to select a replacement arbitrator. Parties may incur postponement fees pursuant to existing Customer Code Rule 12601 and Industry Code Rule 13601 when hearing dates are postponed. If the parties do not stipulate to use the ______ ______ option, FINRA staff will appoint a replacement arbitrator by generating randomly a replacement arbitrator's name using NLSS. Parties may only challenge arbitrators selected by this method for cause. Stipulate - CORRECT ANSWER FINRA will notify parties in qualifying cases by letter of the option to _______ to the use of the short list to select a replacement arbitrator. When a hearing is scheduled within 30 calendar days of an arbitrator's withdrawal, FINRA will contact parties about the short list option by email, overnight mail, fax and/or phone in order to expedite party notification in qualifying cases. Mediator's Fee - CORRECT ANSWER In addition, the ______ _____ is a charge for the mediator's services. Mediators set their own rates, which can be an hourly fee or a flat fee. When parties are ready to select a mediator, FINRA will provide a list of suggested mediators and include a Mediator Disclosure Report for each mediator. The mediator's rate and cancellation policy, if any, will be included on each report. Parties - CORRECT ANSWER Sometimes parties will select a mediator who needs to travel to a distant location. In that instance, the travel costs are the ______' responsibility. When a mediator cannot provide conference space, and a FINRA office or party representative's office is unavailable, ______ may need to pay for conference space at a conferencing center. In those instances, FINRA staff will help parties find a location. All fees are apportioned equally, unless parties agree to a different arrangement. FINRA - CORRECT ANSWER Fees are invoiced through ______, and not paid directly to the mediator. Refunds may apply, or excess funds may be applied to other outstanding fees in a companion arbitration case. Simplified Arbitration - CORRECT ANSWER A single arbitrator will decide an arbitration administered under this rule, unless the parties agree in writing otherwise. No hearing will be held in simplified arbitrations unless the claimant requests one. If no hearings are held, the arbitrator will render an award based on the pleadings and other materials submitted by the parties. Customer- The parties may request deocuments and other information from each other. However, the Document Production Lists in the Discovery Guide and described in Rule 12506 will not apply to these arbitrations. The arbitrator may, in his or her discretion, choose to use relevant portions of the Document Production Lists in a manner consistent with the expedited nature of simplified proceedings. Industry - The parties may request documents and other information from each other. If any party to a simplified arbitration increases the amount in dispute to more than $25,000, the arbitration will no longer be administered under this rule, and the regular provisions of the Code will apply. Mediation - CORRECT ANSWER In ______ the parties control: who the ______ will be; when the ______ will occur; and how the dispute will be resolved. In addition, _______ can be faster and less expensive than arbitration or litigation. If the parties agree to ______, they will not give up any right to arbitrate or litigate if they cannot reach a satisfactory settlement. Mediation - CORRECT ANSWER FINRA's _____ program has achieved an 80% success rate — parties who ______ in the forum resolve four out of every five cases. Mediation - CORRECT ANSWER If the matter involves an arbitration at FINRA, the _______ process will run separately from the arbitration case. The arbitration case will continue concurrently unless the parties agree otherwise. Parties may choose not to have the processes run concurrently and may choose to suspend the arbitration case. If arbitration hearing dates have been scheduled, parties may agree to adjourn the hearing dates. If the parties mediate through FINRA's _______ program, the parties may receive a waiver of the fee to adjourn the arbitration case. Mediation - CORRECT ANSWER Depending on the agreement of parties, ______ can suspend activity in arbitration until the _______ concludes, or both processes may continue on parallel tracks. Mediation - CORRECT ANSWER Parties may represent themselves in ______ or be represented by an attorney—or state law may dictate others who can represent a party in _______. Mediation - CORRECT ANSWER The Director of ______ or the parties themselves can suggest potential ______. Mediation Ground Rules - CORRECT ANSWER The rules provide the framework for how a mediation must be conducted. Fee - CORRECT ANSWER Parties pay an administrative ______ for mediating through FINRA and are responsible for the mediator's ______, and also for any expenses. Mediations - CORRECT ANSWER Most often, ______ start with a joint session used to set the ground rules and an agenda. The joint session also helps define the issues and determines the parties' positions. Generally, during the process, parties move to separate caucuses. The mediator will carry messages—offers, counter offers, questions, demands, and proposals— between both sides to help the parties move closer to resolution. Mediators - CORRECT ANSWER FINRA ______ have subject-matter expertise, so that parties may select a _______ who is knowledgeable in the areas of controversy that are the subject of the dispute. Thus, _______ can often give each side an expert, yet unbiased, view of the strengths and weaknesses of the case overall. They may also discuss with the parties what might happen if the dispute does not settle. Mediator - CORRECT ANSWER The ______ has no authority to decide the settlement or even compel the parties to settle. ______ is non-binding, until parties agree on a resolution. If the matter does not settle, the claimant has preserved the right to pursue arbitration. Request to Mediate - CORRECT ANSWER Initiate a Mediation The parties may file a _______ _______ _______ to begin the process, or, if the matter is already in arbitration with FINRA, they may contact their arbitration administrator for a referral to mediation. Mediator - CORRECT ANSWER Once the parties begin the mediation process, they learn how to select a _______. Settlement - CORRECT ANSWER A _______ occurs if the parties resolve their dispute. Impasse - CORRECT ANSWER _______ occurs if the parties do not settle their dispute.