SIE Exam: Regulatory Framework & Industry Rules

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Who does the SEC regulate?
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Terms in this set (40)
Who does the SEC regulate?
FINRA, MSRB, and other SROs

The SEC is not a SRO
Do the SEC and SROs have criminal authority?
No, they cannot put anyone in jail
Does the MSRB regulate issuers of municipal securities?
No, they only regular securities firms and professionals
What does it mean for a broker-dealer to be SEC and FINRA registered?
The broker-dealer is authorized to do securities business

Does not mean that the SEC is endorsing the services of the firm
How are disputes regarding sexual harassment or discrimination handled?
Will only go to arbitration if both parties agree; otherwise, they will go to court
If a registered rep engages in outside business activity away from the firm (i.e. board position or second job), what must be filed?
An amended U4
After a registered rep leaves, how long does she have to re-associate with a member firm before her licenses expire?
2 years
What is grounds for a statutory disqualification?
A conviction of any securities-related crime (whether a misdemeanor or felony).

An arrest is NOT grounds
What happens if FINRA believes a registered rep has committed a rules violation?
FINRA will send a written request for information to both the firm and representative and possibly to an interview
What is necessary in order to associate with persons subject to statutory disqualification?
A waiver from FINRA
What happens if an individual fails to complete the Regulatory Element training?Her registration becomes CE inactive -- she cannot perform any duties and is prohibited from receiving compensationWhat happens if the individual remains CE inactive for 2 years?The registration lapses and she needs to retake the examHow often must a Firm Element CE must be completed?AnnuallyWhat are blue sky laws?State securities lawsWhat are the standards of commercial honor?Can't take spouse to dinner and charge as a client expenseWhat is insider trading?Illegal practice of trading securities based on material, non-public informationWhat can a firm or employee do while in possession of non-public information?Can accept an unsolicited orderWhat are the 3 phases of money laundering?PLI: 1. Placement: depositing illegal funds into financial institutions 2. Layering: money is transferred through complex financial transactions 3. Integration: illegal funds are mixed with legal fundsWhen is a currency transaction report required?When a deposit of cash, traveler's check, or cashier's check exceeds $10,000 This is not required for a personal checkWho is responsible for following up on suspicious activity reports (SRAs)?Supervisors, not representativesWhat happens if a rep finds that a person or company is on the OFAC list?They must block the transaction and report the issue to OFAC within 10 business daysHow often must registered reps attend compliance meetings?Once a year, conducted by the firm's Chief Compliance OfficerWhat happens if a registered rep wants a second job?They must notify their employing firmWhat are the differences between selling away and outside business activities (OBAs)?Selling away: requires notice and, if compensation is involved, permission OBAs: requires only noticeAre entertainment expenses considered gifts?No, they are not considered gifts and, therefore, are not subject to $100 limitWhat does a joint account between a rep and a client require?1. Permission of the firm 2. Permission of the customer 3. Sharing must be in proportion to each person's financial contributionUnder what circumstances can reps personally lend money to clients?No notice or permission if: - client is a family member - client is a bank Permission required if: - loan is based on outside business - client is registered at same firmIs it permissible for a rep to make a loan to a client to meet a margin call?NoWhat type of complaints must be forwarded to a principal?Only written complains, not verbal complaintsDo municipal finance professionals (MFPs) include persons involved in only retail sales of municipal securities to individual customers?NoWhat is the max contribution a MFP can give per election to a candidate?$250 per election (both primary and general)What is a retail communication?Distributed to more than 25 retail investors within a 30-day calendar periodWhat is a correspondence?Distributed to 25 or fewer retail investors in a 30-day calendar periodWhat is an institutional communication?Distributed exclusively to institutional investorsWhat is required by the firm for retail communication?Approval prior to first useWhat is required by the firm for correspondence?Supervision and spot-checksWhat is required by the firm for institutional communication?Supervision and spot-checksWhat restrictions are on retail communications?- Cannot project performance - Cannot imply past performance forecasts future results - Cannot include exaggerated claimsWhat activities are permitted in retail communications?- Hypothetical mathematical illustrations - A price target if contained in a research reportCan reps communicate with clients through a personal email account?Yes, as long as they receive permission from their supervisor and firm continues to monitor