If a member firm suspends a registered representative, the member firm must report the suspension to the:
A) state securities Commissioner.
B) SEC.
C) news media.
D) designated examining authority.
Answer: D
If a member firm suspends a registered representative, the firm must report the suspension to its designated examining authority (DEA), which typically is FINRA or the exchanges where the firm is a member. Each DEA is a self-regulatory organizat
Employees of a FINRA member firm must be fingerprinted if involved in any of the following EXCEPT:
A) sales.
B) the transfer of securities.
C) cashiering.
D) customer account processing.
Answer: D
Under SEC Rule 17f-2, persons registered with FINRA, persons involved in handling customer funds or securities (including employees of transfer agents), and persons involved in preparing the firm's original books and records must be fingerprinte
A statutory disqualification applies to an employee or an officer of a broker/dealer who, within the past 10 years, has:
A) been convicted of securities-related fraud.
B) been charged with driving under the influence (DUI).
C) been convicted of a minor tr
Answer: A
Anyone who has been convicted within the past 10 years of any felony or any securities- or money-related misdemeanor is subject to statutory disqualification. A mere charge is not enough.
An individual who has worked as a registered representative must requalify for registration if he subsequently takes a job outside the securities industry for more than:
A) 12 months.
B) 18 months.
C) 24 months.
D) 6 months.
Answer: C
A resigned registered representative may reenter the industry without passing an examination if his resignation lapse is less than 2 years; after 2 years, he must requalify by examination.
An employee involved in the management of a FINRA member's business, particularly in the supervision of business solicitation or in training, must be registered as a:
A) partner.
B) principal.
C) broker.
D) dealer.
Answer: B
Supervision of business solicitation or training requires that a person be registered as a principal.
Under FINRA rules, a registered representative must complete the regulatory element of continuing education within how many days of a registration anniversary date?
A) 30.
B) 60.
C) 90.
D) 120.
Answer: D
The regulatory element requires that all registered persons complete a computer-based training session within 120 days of their second registration anniversary and every third anniversary thereafter
If an individual fails a FINRA qualification exam three consecutive times, a fourth attempt may NOT be made for:
A) 60 days.
B) 90 days.
C) 6 months.
D) 30 days.
Answer: C
If a qualification exam is failed three consecutive times, a fourth attempt may not be made for 6 months.
If an individual is convicted of a money- or securities-related fraud, FINRA will deny registration to that individual for how many years from the conviction date?
A) 10.
B) 1.
C) 2.
D) 5.
Answer: A
Conviction within the past 10 years for any felony or securities-/money-related misdemeanor will lead to statutory disqualification of an applicant for registration with a FINRA member firm.
The firm element of the continuing education requirement must be completed:
A) on the 3rd registration anniversary and every 2 years thereafter.
B) annually.
C) every 3rd year.
D) on the 2nd registration anniversary and every 3 years thereafter.
Answer: B
The firm element of continuing education must be completed each year by all registered persons who have direct contact with the public.
The regulatory element of continuing education must be completed:
A) within 120 days of the 3rd registration anniversary and every 2 years thereafter.
B) within 120 days of the 2nd registration anniversary and every 3 years thereafter.
C) annually.
D) eve
Answer: B
The regulatory element must be completed within 120 days of the person's 2nd registration anniversary and every 3 years thereafter.
A registered representative who does not complete the regulatory element of continuing education within the prescribed time frame:
A) cannot function as a representative until the CE requirement is met.
B) can continue to function as a representative with
Answer: A
If a registered person does not complete the regulatory element of CE within the prescribed time frame, the representative's license will be suspended by FINRA until the CE is completed.
A customer can make a toll-free inquiry to determine the disciplinary history of a registered representative by contacting the:
A) SEC.
B) SIA.
C) SIPC.
D) CRD.
Answer: D
The Central Registration Depository (CRD), through Broker Check, maintains information on the disciplinary history of all persons currently registered.
A registered representative who leaves the industry must requalify by examination to return to the industry if he is unaffiliated with a broker/dealer for more than:
A) 3 years.
B) 5 years.
C) 10 years.
D) 2 years.
Answer: D
All securities licenses become null and void once an individual is unaffiliated for more than 2 years.
A registered person leaves the securities industry and 18 months later reassociates with another member firm. FINRA requires that this person's cycle for determining the dates for the regulatory element portion of continuing education be based on:
A) his
Answer: D
If reassociation occurs within 2 years, the cycle date remains associated with his original registration date. If it occurs after 2 years have elapsed, the new cycle is based on the reassociation date.
FINRA fees paid by a member firm are based on which of the following?
Number of registered representatives employed.
Number of trades carried out per year.
Annual revenue from over-the-counter securities transactions.
Number of branch offices registered w
Answer: B
FINRA fees are determined by the number of registered representatives, principals, and branch offices registered with FINRA. Assessments are based on annual revenue from over-the-counter securities transactions.
Before becoming registered, a representative may:
A) send research reports to prospective clients.
B) solicit indications of interest from prospective purchasers.
C) effect trades for customers with commissions deferred until registered.
D) compile a pros
Answer: D
A representative may not solicit any orders before registration. Compiling a prospect list is a passive procedure that is not soliciting.
A member firm has decided to allow a registered representative to operate from his residence. Which of the following statements are TRUE?
Prior consent of the NYSE is required.
Prior consent of the NYSE is not required.
The residence may be advertised.
Th
Answer: D
Prior approval of the exchange is required when opening any office, including a private residence. The home address and telephone number may be advertised in any normal manner such as business cards, stationery, local newspapers, and so forth.
To which of the following persons may a broker/dealer pay commissions under a continuing commission contract?
To a retired employee, for past business.
To the widow of a former employee, for past business.
To a retired employee who refers a neighbor to th
Answer: B
A FINRA member firm may continue to pay commissions to either a retired employee or a former employee's widowed spouse if a prior written contract exists. Commissions may be paid only on business generated while employed.
Under FINRA rules, a member may pay continuing commissions to a retired representative:
only if a written agreement is in effect.
based on business generated while employed.
based on business introduced after retirement.
only within 30 days of retirement.
Answer: A
Continuing commissions may be paid to a retired representative only if a written agreement exists between the member and the retired representative and if payout is based only on business generated while employed.
Which of the following violations could bar an agent from employment in the securities industry?
A) Being convicted of a traffic violation.
B) Associating with a known felon.
C) Conviction for the misdemeanor of petty theft of money from a client.
D) Fail
Answer: C
Conviction of a felony or a misdemeanor involving money within the past 10 years may subject an individual to a statutory disqualification from the industry. Failing to pass the exam would prohibit the individual from acting as an agent but woul
Continuing commissions in connection with the sale of investment company securities:
A) may be paid to a retired employee provided a bona fide contract calling for such payment was entered into by the registered representative while employed by a member.
Answer: A
FINRA rules permit the payment of continuing commissions to retired registered representatives in connection with the sale of investment company securities if a bona fide contract to do so exists between the firm and the registered representativ
A broker/dealer informs registered personnel that, to satisfy the annual compliance meeting requirements, they have recorded a Webcast that individuals can view at their own convenience. A Webcast of this type would be:
A) allowed for all registered perso
Answer: A
Using a recorded Webcast for the annual compliance meeting is allowed for all registered personnel so long as certain safeguards are in place. One such safeguard is the opportunity to ask questions and receive answers in a timely fashion; the fi
FINRA may take which of the following actions against members or associated persons who violate the Conduct Rules?
Imprisonment.
Censure.
Indictment if the charge involves a violation of criminal law.
Suspension.
A) I and III.
B) I and IV.
C) II and III.
Answer: D
FINRA members or employees of members who violate the Conduct Rules are subject to procedural penalties only. No SRO may arrest, indict, convict, or imprison a violator.
Which of the following disputes must be resolved using the Code of Arbitration?
Dispute between two FINRA members.
Dispute between two banks.
Dispute between a member and an associated person.
Dispute between two customers.
A) II and IV.
B) I and III.
C)
Answer: B
The Code of Arbitration is mandatory in member-against-member disputes, and in disputes involving a member and an associated person. FINRA has no jurisdiction over banks or over disputes between nonmembers such as customers.
Under the Code of Procedure, the maximum fine for a minor rule violation (MRV) is:
A) 7500.
B) 10000.
C) 2500.
D) 1000.
Answer: C
According to the Code of Procedure, the maximum fine for a minor rule violation is $2,500.
One of the benefits of using arbitration to settle disputes between member firms is that it:
A) does not allow for arguments from parties outside the industry.
B) gives more time to prepare arguments.
C) is relatively inexpensive.
D) is not binding on bot
Answer: C
Arbitration is a method for settling disputes between member firms that is less costly than litigation. In addition, all decisions are final and binding on all parties.
Rulings under the Code of Arbitration Procedure:
A) are binding on members but not on customers.
B) may be appealed to the FINRA National Adjudicatory Council.
C) may be appealed to the SEC.
D) are binding on all parties.
Answer: D
A customer or member who chooses to submit a claim or dispute to arbitration under the Code of Arbitration Procedure is bound by the arbitration decision, which is not subject to appeal by either party.
If a member wishes to appeal an adverse decision in a Code of Procedure hearing, the member first must appeal to the National Adjudicatory Council within how many days of the decision date?
A) 30.
B) 40.
C) 45.
D) 25.
Answer: D
If either side is displeased with a Code of Procedure decision, an appeal must be made within 25 days of the decision date.
Under the Code of Arbitration, all monetary awards must be paid within how many days of the decision date?
A) 60.
B) 30.
C) 15.
D) 45.
Answer: B
All monetary awards in a Code of Arbitration decision must be paid within 30 days of the decision date. If payment is not made, the amount of the award begins to accrue interest as of the decision date.
Penalties resulting from a Code of Procedure hearing may include:
censure.
expulsion.
suspension.
fines.
A) I, II, III and IV.
B) I and III.
C) I and IV.
D) II and IV.
Answer: A
Penalties under the Code of Procedure may include censure, expulsion, suspension, and/or fines.
Which of the following statements regarding the Code of Arbitration are TRUE?
Simplified arbitration is available for claims of $50,000 or less.
Simplified arbitration is available for claims of $25,000 or less.
The statute of limitations for filing a cla
Answer: B
Simplified arbitration is available only for claims of $25,000 or less. The statute of limitations for filing a claim is 6 years from the event giving rise to the claim.
You have just received a statement of claim from the Director of Arbitration. One of your customers is claiming that your failure to follow his instructions led to a loss of $36,000. Under FINRA rules, you must respond within:
A) 30 days.
B) 60 days.
C) 4
Answer: C
Under the Code of Arbitration, a respondent has 45 days to respond to both the director and the claimant.
Arbitration and mediation are 2 services provided by FINRA to settle disputes between members. Regarding these services, which of the following statements are NOT true?
Mediation is mandatory; arbitration is not.
Arbitration always results in a binding de
Answer: B
Arbitration is mandatory in disputes between members. If mediation takes place and is not successful, the dispute moves on to arbitration. The person who served as mediator may not be an arbitrator in the same dispute.
The Code of Arbitration Procedure would be mandatory to settle disputes between:
a member and a registered clearing corporation.
a member and one of its associated persons.
an associated person with a statutory discrimination claim against a member.
a mem
Answer: A
Disputes between anyone in the industry, including registered clearing corporations, must go to arbitration, with the exception of statutory discrimination claims, which are claims alleging sexual harassment or discrimination on the basis of, am
A customer has filed a serious complaint against your firm and is threatening to take the firm to court. When informed that he has signed a predispute arbitration agreement, he demands to see a copy of it. How long does your firm have to supply the custom
Answer: D
Upon receiving a customer request for a copy of the signed predispute arbitration agreement, the member firm has 10 business days to supply it.
Which of the following are differences between the Code of Procedure and the Code of Arbitration Procedure?
The Code of Procedure deals with violations of the Conduct Rules, whereas arbitration is used to settle disputes.
Mediation is not required with th
Answer: B
The Code of Procedure is used to deal with violations of the Conduct Rules, whereas the Code of Arbitration is used to settle disputes. Adverse decisions and penalties under the CoP can be appealed to the National Adjudicatory Council, then to t
According to MSRB rules, a dispute between 2 member firms concerning municipal securities is settled through:
A) arbitration.
B) litigation.
C) administration.
D) delegation.
Answer: A
According to MSRB rules, a complaint between a customer and a member firm concerning municipal securities is settled through the Code of Arbitration. The MSRB does not have a Code of Procedure and, therefore, does not have the use of the Office
If a registered representative is suspended by FINRA's Department of Enforcement, his first appeal would be to:
A) the SEC.
B) the SIPC.
C) a federal court.
D) the National Adjudicatory Council.
Answer: D
The Exchange has which of the following powers over a registered representative who has violated its rules?
A) The Exchange has authority to censure, fine, and expel the representative.
B) The Exchange has full authority to impose a jail sentence.
C) Acti
Answer: A
The Exchange may censor, fine, or expel a representative, but it cannot impose a jail sentence.
During a period of suspension, a suspended member must:
A) restrict its securities activities to investment banking.
B) restrict its securities activities to mutual funds.
C) be treated as a nonmember by other members.
D) have no securities dealings of an
Answer: C
A member firm under suspension is essentially a nonmember during the period of suspension. Accordingly, during that time period, other FINRA members must treat the suspended firm as a nonmember. For example, during the period of suspension, othe
Under NYSE rules, an associated person who wishes to accept outside employment must notify the:
A) NYSE in writing.
B) member firm in writing.
C) member firm.
D) NYSE.
Answer: B
Notification must be made to the member firm in writing (not the NYSE), and written consent must be received before accepting outside employment.
An employee of a firm registers to open an account at another member firm. Under NYSE rules, all of the following statements are true EXCEPT:
A) the employing member must receive duplicate statements and confirmations.
B) the NYSE must receive duplicate s
Answer: B
Under NYSE rules, the employing member must be notified in writing of the prospective account and must provide written consent before the account can be opened. The rule also requires that the employee member receive duplicate statements and con
A registered representative must receive prior employer approval to:
take an evening job as a bartender.
serve as an officer of another business organization.
own a small financial interest in any other organization engaged in the securities business.
own
Answer: D
Registered representatives must notify their employer in writing and receive permission in writing before engaging in any other business, serving as an officer or director of another business organization, or owning any interests in a privately
If an employee of an NYSE member wants to take a second job, which of the following statements is TRUE?
A) No approval is required.
B) Prior approval of the member firm is required.
C) Prior approval of the NYSE is required.
D) Prior approval of both the
Answer: B
If an employee wants to take a second job, that person must give prior written notice to the member and receive prior written consent from the member. The NYSE is not notified.
Once a broker/dealer receives an enrollment notification for an employee to test for the Series 7 licensing exam, the employee will have how long to successfully complete (pass) the exam?
A) 6 months.
B) 4 months.
C) 2 months.
D) 3 months.
Answer: B
Once notification of enrollment for testing has been received by the broker/dealer the candidate will have 120 days (4 months) to successfully complete (pass) the exam. This is commonly referred to as the "testing window".
Which of the following statements regarding investment companies is TRUE?
A) A prospectus must be provided to all investors in closed-end management company shares.
B) Only investment companies holding themselves out to be money-market funds may be insure
Answer: C
Investment companies are required to file sales literature advertisements with the FINRA advertising department within 10 days of its first use.
Which of the following statements could legally appear in mutual fund advertising or sales literature?
A) Our management is unequaled in the investment industry.
B) Our growth fund net asset value will increase faster than the market in general.
C) The fu
Answer: D
A statement such as, "Our managers are dedicated to giving you the very best service," makes no promises and is, therefore, not in violation of the Conduct Rules. Exaggerated claims about the management's investment expertise are prohibited, as
In making a sales presentation to a prospective customer, a registered representative selling open-end investment company shares may compare the shares to a savings account at a bank if:
A) a statement is made concerning the variable amounts of dividend r
Answer: B
Securities regulations prohibit the use of fraudulent or misleading statements in the sale of securities. It would be misleading for a registered representative to compare mutual fund shares with bank savings accounts without indicating that the
A prospect receives a cold call from a registered representative, and he tells the representative he is not interested in this investment or in making any future investments. Which of the following actions is required by the Telephone Consumer Protection
Answer: D
The prospect's name must be placed on the firm's Do-Not-Call list, and no one at the firm may call.
In making unsolicited cold calls to prospects, a registered representative must disclose which of the following to the called party?
The caller's name.
The name of the member firm.
The address at which the caller may be contacted.
A) I and II.
B) I and II
Answer: D
In making cold calls, the caller must disclose his name and the name of the member firm, the address at which the caller may be contacted, and that the purpose of the call is to solicit the purchase of securities.
A registered representative has been giving monthly lectures to various civic organizations on the pros and cons of investing in fixed-income securities. For what period must the employing broker/dealer keep records of these lectures?
A) 1 year.
B) 5 year
Answer: D
Because speeches and lectures are considered sales literature, records must be maintained for 3 years.
Records of speaking engagements by persons associated with a member firm must be retained for:
A) 6 years.
B) 3 years.
C) 1 year.
D) 2 years.
Answer: B
Records of advertising and sales literature must be retained for 3 years. A speaking engagement is considered sales literature.
All research reports issued by a member firm must disclose:
any control relationship with the issuer.
the price at the time the original recommendation was made.
whether the member firm has a 1% or more position in the security.
the name of the member fir
Answer: C
The source of the recommendation, the security's price, any member firm interest in the security of 1% or more, and that the member firm is a market maker in the security all must be disclosed in the research report. In addition, if a control re
Which of the following is neither advertising nor sales literature?
A) Radio broadcast describing a firm's range of services.
B) Research report on a new security being offered by the firm.
C) Market letter sent to a firm's customers.
D) Internal memorand
Answer: D
Memoranda used only within the company are not intended for the public and are therefore neither advertising nor sales literature.
Reference: 17.5.1 in the License Exam Manual
All of the following would be included under the definition of "advertising and sales literature" EXCEPT:
A) promotional material used in a newspaper or on television.
B) form letters sent to 50 prospective retail customers in any 30-calendar-day period.
Answer: C
Individual letters to customers of a specific nature are considered customer correspondence, not advertising or sales literature.
All of the following must be included in a testimonial made on behalf of a member firm and distributed to potential clients EXCEPT:
A) whether compensation was paid to the person giving the testimonial.
B) length of time the testimonial covers.
C) qualifi
Answer: B
When a member firm uses a testimonial, it must be accompanied by a statement that this person's results do not necessarily represent those of other customers; a disclosure of any compensation paid; and the testimonial giver's qualifications if a
Which of the following statements regarding recruiting advertising by FINRA member firms are TRUE?
It must include the name of the broker/dealer.
It may not contain exaggerated claims about opportunities in the securities business.
Principal approval is n
Answer: C
A firm in its first year of business must prefile all of its advertising with FINRA. Furthermore, all advertising must be approved by a principal before use. Specifically, recruitment advertisements may be blind advertisements (i.e., without the
All of the following are included under the terms "advertising" and "sales literature" EXCEPT:
A) market letters.
B) internal memos.
C) billboards.
D) research reports.
Answer: B
The terms "advertising" and "sales literature" refer only to materials prepared for publication or broadcast to a mass audience (advertising) or specific audience (sales literature). Materials intended for internal use within a broker/dealer's o
All of the following are considered advertising or sales literature EXCEPT:
A) market letters.
B) research reports.
C) telephone directory advertisements.
D) prospectuses.
Prospectuses are not considered advertising or sales literature.
When an agent explains mutual funds to a prospective investor, which of the following statements may be made?
A) The redemption value of mutual fund shares fluctuates according to the fund's portfolio value.
B) Mutual fund shares are liquid and may be swi
Answer: A
Mutual fund redemption values fluctuate according to the value of the securities in the portfolio. The tax liabilities associated with mutual fund switching may not be glossed over. While the redemption rules of the Investment Company Act of 194
Which of the following statements are accurate interpretations of FINRA rules governing the use of advertising and sales literature?
Copies of all advertising and sales literature must be kept on file for 3 years.
All advertising and sales literature copy
Answer: C
A broker/dealer's advertising and sales literature must be approved in writing by a principal of the firm before the intended use date and must be kept on file for at least 3 years.
Which of the following materials is subject to FINRA's filing requirements?
A) Prospectus for a face amount certificate company.
B) Prospectus for a closed-end management investment company.
C) Internal memo describing the benefits of an investment in a c
swer: D
Prospectuses and internal memos need not be filed with FINRA.
Which of the following observations may a registered representative make when giving a sales presentation based on performance statements and charts?
A) Yield over the last 5 years has fluctuated between 6% and 8%, indicating it will continue at 6% or bet
Answer: B
Predictions are strictly prohibited and conjecture about future trends or occurrences must be labeled as such.
Which of the following does NOT meet FINRA's definition of advertising or sales literature?
A) Research reports.
B) Advertisements in the yellow pages.
C) Videotaped presentation of an investment strategy played to an investment club.
D) Letter outlining
wer: D
Individual customer correspondence is not considered either advertising or sales literature.
If a member has already received clearance for an advertisement from another SRO, FINRA filing:
A) must be done within 3 days after initial use.
B) must be done 10 days before initial use.
C) must be done before publication.
D) is not necessary.
Answer: D
Advertisements or sales literature filed with another SRO need not be filed again with FINRA.
Which of the following must conform to FINRA standards on sales literature?
Research reports.
Letter sent to an individual client.
Reprints of published articles.
Internal memos announcing promotions.
A) II and III.
B) II and IV.
C) I and III.
D) I and IV
Answer: C
Research reports and reprints of published articles must conform to FINRA guidelines for sales literature.
When making cold calls, a representative must:
immediately record the names and telephone numbers of those who ask not to be called again.
inform the prospect of the name and telephone number or address of the broker/dealer.
limit calls to between the hou
Answer: B
The Telephone Consumer Protection Act (TCPA) requires that representatives contact prospects between 8:00 am and 9:00 pm in their time zone and disclose the name, phone number, and address of the broker/dealer. If a prospect asks not to be calle
Under the terms of the Telephone Consumer Protection Act, all of the following statements are true EXCEPT:
A) calls made to parties with whom the caller has an established business relationship are exempt.
B) calls made on behalf of tax-exempt nonprofit o
Answer: C
Any solicitation made must occur between 8:00 am and 9:00 pm in the recipient's time zone. Firms must maintain a Do-Not-Call list, and the act exempts calls made on behalf of tax-exempt nonprofit organizations and calls made to parties with whom
FINRA rules on customer correspondence apply to which of the following?
Mail delivered by the U.S. postal service.
Internal memos.
Research reports.
Email.
A) I and IV.
B) I and III.
C) II and III.
D) II and IV.
Answer: A
The rules on correspondence apply to all forms of incoming and outgoing correspondence with customers, not to internal memos or sales literature such as a research report.
If an investment representative hosts an investment seminar and intends to discuss general investment concepts and a specific mutual fund for which he has performance charts, which of the following are TRUE?
He may discuss the investment returns of the mu
Answer: B
He may discuss the investment returns of the mutual fund as long as he uses a specific time frame. When discussing an investment, he must disclose all material facts pertaining to the investment, both negative and positive.
Compensation paid to research analysts may:
be tied to specific investment banking transactions.
not be tied to specific investment banking transactions.
be tied to the firm's investment banking revenue.
not be tied to the firm's investment banking revenu
Answer: A
Compensation may never be tied to a specific investment banking transaction because the conflict of interest is too severe. However, compensation may be tied to the firm's overall investment banking revenue, but it must be disclosed in research
Which of the following is NOT considered advertising or sales literature?
A) A quarter page listing for the firm published in the telephone directory.
B) Market letters sent to a firm's customers.
C) Report sent to a firm's customers on recent changes in
Answer: C
Publications of a general nature (i.e., not recommending securities or promoting a firm) are not considered advertising or sales.
The latest issue of a newsletter your firm subscribes to is especially relevant to one of your firm's investment products. If you decide to send it to clients and prospects, you must disclose that:
A) the newsletter's purpose is to provide your clients wi
Answer: B
If a third party is the creator of the newsletter, that fact must be disclosed together with the name of the third party and the date of publication.
Communications with the public include all of the following EXCEPT:
A) television appearances by an officer of the firm.
B) independently prepared reprints.
C) institutional sales material.
D) informational material on a new mutual fund intended for sales
Answer: D
Material intended for internal use only is not considered a communication with the public.
In which of the following ways is advertising different from sales literature?
A) Advertising is not targeted to a specific audience; sales literature is.
B) Advertising is promotional; sales literature is not.
C) Advertising is a communication with the p
Answer: A
Advertising is aimed at the general public through such media as radio, television, newspapers, magazines, Websites, and billboards. Sales literature is given or mailed to a specific set of recipients.
All of the following records must be kept for 6 years EXCEPT:
A) advertising.
B) blotters.
C) the general ledger.
D) customer records.
Answer: A
Advertising and sales literature must be maintained on file for 3 years.
A registered representative has reproduced a research report prepared by an independent research analyst on his broker/dealer's letterhead, with no mention of the party who prepared the report. If this literature is forwarded to a select group of clients
Answer: C
A broker/dealer is prohibited from presenting to a client research reports, analyses, or recommendations prepared by other persons or firms without disclosing that they were prepared by a third party.
Which of the following statements regarding communications with the public are CORRECT?
Group correspondence does not include email.
Prior principal approval is required for all email.
Group correspondence includes email sent to existing customers.
Group
Answer: C
Group correspondence includes emails sent to both existing and prospective customers. It does not require prior principal approval unless it makes financial or investment recommendations and is sent to 25 or more customers or prospects within a
Which of the following pieces of sales material is exempt from routine spot-checking by FINRA?
A) A public communication that simply offers a specific security at a specific price.
B) An independently prepared reprint that has been on file for more than 1
Answer: A
Material that makes no claims for a security, but simply states its price or is not intended for the public, is exempt from spot-checking.
Under what circumstances may a member firm use a fictional name or DBA (doing business as) in its communications?
A) The name is filed with the Securities Information Center.
B) Fictional names may not be used.
C) The name is filed with both FINRA and SEC
Answer: C
A fictional name or DBA may be used, provided the name is filed with both FINRA and the SEC.
Your firm is doing interviews of the top candidates from among those who responded to a recruiting advertisement. Advertising rules require that:
A) the successful candidate be promised that she will hold the position for at least one year after being hir
Answer: C
In recruitment interviews, as in advertising, false or extravagant claims may not be made. Both the job opportunity and the industry must be represented honestly.
A brokerage firm's research department has issued a buy recommendation on XYZ Corporation common stock. The report must contain all of the following information EXCEPT:
A) that the firm was part of the selling group in a recent public offering of the stoc
Answer: A
Disclosure of participation as a selling group member is not required.
An individual is employed as a research analyst for a member firm that specializes in investment banking and has just completed a research report comparing two companies in the semiconductor business. Which of the following would be considered prohibited
Answer: B
FINRA rules restrict personal trading by research analysts. They are never permitted to acquire shares in advance of an IPO in a company in the same type of business that the analysts research. They are never permitted to engage in trading contr
A registered representative gives a financial seminar at a resort and receives the normal fee from the resort for doing so. Which of the following statements is TRUE?
A) Approval of a principal of the firm is necessary.
B) No approval is necessary.
C) A c
Answer: A
A registered representative is allowed to speak at financial seminars and receive compensation if granted approval by a principal of the employing member firm. There is no requirement for a copy of the text to be provided to FINRA or the SEC. Al
The legislation that required SRO's to establish research analyst conflict of interest rules for its members is:
A) Regulation D.
B) Securities Investors Protection Act.
C) Sarbanes-Oxley.
D) Securities Act of 1933.
Answer: C
The research analyst conflict of interest rules were mandated by the Sarbanes-Oxley Act.
A principal of a municipal securities firm with the responsibility of supervising municipal securities representatives would perform all of the following EXCEPT:
A) review a registered representative's correspondence.
B) approve the opening of a new accou
Answer: D
A principal must approve all new accounts and approve each transaction and review all correspondence. Although a principal must approve advertising, he does not have to write it.
A registered representative is preparing slides for a retirement-planning seminar for a group of invited clients. To use the slides, the registered representative must get approval from:
A) the SEC.
B) both FINRA and the SEC.
C) a principal of the broker/
Answer: C
Text and scripts used during seminars are considered to be sales literature and require principal approval before use.
Market letters may be supervised as correspondence instead of being treated as sales literature:
A) never.
B) as long as they are not distributed to 25 or more existing retail customers within any 30 calendar-day period and do not make a financial or inve
Answer: B
Market letters are treated as sales literature requiring prior principal approval. However, as long as they are not distributed to 25 or more existing retail customers within any 30 calendar-day period and do not make a financial or investment r
Regarding a FINRA member broker/dealer website which of the following is true?
When FINRA is referenced on a member broker/dealer website it is meant to imply that the broker/dealer has the approval of FINRA.
If FINRA is referenced on a member broker/deal
Answer: A
There is no requirement to list or mention FINRA membership or any other SRO membership on a broker/dealer website. If however a broker/dealer chooses to have the FINRA name or logo on its website, a hyperlink to the FINRA website is required, a