Download FINRA Series 26 Exam: Key Regulations and Concepts and more Exams Business Finance in PDF only on Docsity! FINRA Series 26 Exam 69 Questions with Verified Answers FINRA Rule 3010 - CORRECT ANSWER Rule that states each member must: I. Establish written supervisory procedures II. A registered principal is responsible for reviewing procedures III. Each rep is assigned to a principal in charge of supervising their activities, review of communication, & correspondence bw reps & the public FINRA Rule 8000 - CORRECT ANSWER Investigations & Sanctions. Must keep and maintain a current copy of the manual in a readily accessible place and provide it at a customer's request. FINRA Rule 9000 - CORRECT ANSWER Covers handling of securities violations and complaints. Think what happens after an investigation (Rule 8000) District Business Conduct Committee - CORRECT ANSWER Has initial jurisdiction in handling of complaints. Penalties the DBCC & Board of Governors can impose - CORRECT ANSWER Censure, fine, suspend, expel, bar FINRA Rule IM-3110 - CORRECT ANSWER Defines complaint, says each OSJ must maintain a record of complaints and any action taken. Complaint - CORRECT ANSWER Any written statement of a customer or any person acting on behalf of the customer alleging a grievance Code of Procedure - CORRECT ANSWER Deals with rules that cover actions by FINRA against member firms and their associated people Code of Arbitration - CORRECT ANSWER requires disputes be submitted for arbitration. Includes member and customer and/or associated person Director of Mediation - CORRECT ANSWER Person appointed by FINRA to administer proceedings FINRA Rule 3020 - CORRECT ANSWER Blanket fidelity bond. Minimum coverage amount is $25,000. Think 2=$25,000. FINRA Rule 3030 - CORRECT ANSWER Outside business activities. Must be written notification. FINRA Rule 3040 - CORRECT ANSWER Private securities transactions. Written notice must include: 1. proposed transaction 2. proposed role 3. compensation conditons Selling away - CORRECT ANSWER transaction affected outside the normal business of an associated person's employment. Not recorded on books or records. Is a violation of conduct rules. FINRA Rule 3050 - CORRECT ANSWER Transactions for or by associated people. Must have duplicate copies of confirms, statements, and other documentation. Must notify employer in writing prior to certain transactions. FINRA Rule 3060 - CORRECT ANSWER Penalty for bribing a foreign official is $100,000 fine & 5 yrs or both for a person, $2mil for a business. FINRA Rule 3070 - CORRECT ANSWER Must promptly report suspension, barring, fines over $2500, named as a defendant or respondent, associating with someone subject to statutory disqualification. Information required in a prospectus - CORRECT ANSWER Investment objectives, policies, and restrictions, sales loads & fees, expense table, breakpoints, rights of accumulations, LOI's, exchange privileges, per share income & capital charges, methods of sale, methods of redemption, investment & withdrawal plans, financial statments SEC Rule 134 - CORRECT ANSWER Tombstone ads. Not considered advertising Front End Load Plan - CORRECT ANSWER 50% of first year premium applied to sales charge. Refund sales charge AND NAV minus 15% if canceled within 18 months SEP IRA - CORRECT ANSWER Employer contributions ONLY. Don't need to contribute same amount each year, but need to be based on the same percentage. SIMPLE - CORRECT ANSWER For companies with less than 100 employees with at least $5000 in compensation. Immediately 100% vested. Employees can contribute. Keogh/HR-10 Plan - CORRECT ANSWER Must be self employed or partner who owns 10% of the business. Can't withdraw before 59.5, Employer must match percentage of employee contributions. 401k Thrift/Bonus Plan - CORRECT ANSWER Employer contributes a certain amount or percentage for each dollar contributed by the employee. Switching - CORRECT ANSWER Asset movement among fund families without a legitimate reason. Applies to mutal funds. Churning - CORRECT ANSWER Trades that are excessive in size or frequency. Reg A - CORRECT ANSWER Small issue exemption. Less than $5 mil over 12 month period Reg D - CORRECT ANSWER Private placement exemption These are not eligible for breakpoints - CORRECT ANSWER Investment clubs, co- ops, two unrelated people in a joint account Lending or borrowing money from customers - CORRECT ANSWER Inappropriate UNLESS client is a broker-dealer or engaged in the lending business How soon must insiders report trades? - CORRECT ANSWER 2 business days How soon must insiders notify the SEC of that change? - CORRECT ANSWER 10 days How a distribution effects NAV - CORRECT ANSWER It will decrease by the amount of the dividend and the customer will incur a tax liability FINRA Rule 2510 - CORRECT ANSWER Discretionary accounts. Can be full or limited. The customer must sign a POA to kept on file. SIPC Coverage - CORRECT ANSWER $500,000 for each customer, $100,000 in cash. Cash & margin accounts are considered 1 customer, & therefore only covered up to $500,000. A joint account & cash account would be considered 2 customers and covered up to $1,000,000. Cost basis - CORRECT ANSWER the original purchase price of a security inclusive of sales charge. Ads for investment company shares must be filed when? - CORRECT ANSWER 10 business days AFTER initial use Rule 2210 with regard to completion of a securites transaction - CORRECT ANSWER Must disclose if they were acting as broker or dealer Lowest annuity cost to the investor - CORRECT ANSWER Life annuity Capital gains distributions - CORRECT ANSWER Almost always long term regardless of how long the investor has held the funds Regulated Investment Company - CORRECT ANSWER Distributes at least 90% of net investment income back to shareholders. An investment advisor is exempt from state registration under what circumstance? - CORRECT ANSWER They have no place of business in that state and their only clients are institutional investors Who is responsible for review & reporting of securities transactions & correspondence between reps & the public? - CORRECT ANSWER The supervising principal What isn't covered by a 12b-1 fee? - CORRECT ANSWER Management fees Face amount certificates have a maturity of at least how long? - CORRECT ANSWER 24 months