Title Details

ABOUT THIS BOOK xv

ABOUT THE TEST BANK xvii

ABOUT THE SECURITIES INSTITUTE OF AMERICA xix

CHAPTER 1 SUPERVISION OF BROKERAGE OFFICE PERSONNEL AND PROCEDURES 1

Hiring New Employees 1

Resignation of a Registered Representative 2

Registration Exemptions 3

Retiring Representatives/Continuing Commissions 4

Persons Ineligible to Register 4

Disciplinary Actions Against a Registered Representative 5

Termination for Cause 6

Outside Employment 6

Private Securities Transactions 6

Gift Rule 7

Communications with the Public 8

FINRA Rule 2210 Communications with the Public 9

Broker Dealer Websites 11

Sharing in a Customer’s Account 12

Borrowing and Lending Money 12

Order Tickets 13

Executing an Order 13

Becoming a Stockholder 15

Accrued Interest 19

Close Outs 19

Customer Confi rmations 20

Rules for Good Delivery 21

Rejection of Delivery 22

Reclamation 22

Marking to the Market 23

Customer Account Statements 23

Carrying of Customer Accounts 24

Dividend Distribution 24

Proxies 27

Box Counts 27

Missing and Lost Securities 28

The Customer Protection Rule 29

Broker Dealer Books and Records 30

Pretest 35

CHAPTER 2 GENERAL SUPERVISION AND CUSTOMER RECOMMENDATIONS 39

The Role of the Principal 39

Supervisor Qualifications and Prerequisites 40

Continuing Education 41

Tape Recording Employees 43

Information Obtained from an Issuer 43

Customer Complaints 44

Mediation 44

Code of Arbitration 45

Investor Information 47

Member Offices 47

Recommendations to Customers 50

Research Reports 55

Regulation FD (Fair Disclosure) 58

The Insider Trading & Securities Fraud Enforcement Act of 1988 58

Firewall 59

Pretest 61

CHAPTER 3 SUPERVISION OF CUSTOMER ACCOUNTS 63

Opening a New Account 63

Holding Securities 65

The Depository Trust Company (DTC) 66

Mailing Instructions 67

Types of Accounts 67

Trading Authorization 70

Retirement Plans 74

Accounts for Employees of Other Broker Dealers 87

Numbered Accounts 88

Prime Brokerage Accounts 88

Account Transfers 89

Margin Accounts 90

Special Memorandum Account (SMA) for a Long Margin Account 97

Wrap Accounts 107

Regulation S-P 107

Currency Transactions 108

The Patriot Act 108

Isolated Sales Account 110

Securities Investor Protection Corporation Act of 1970 (SIPC) 110

The Penny Stock Cold Call Rule 111

Pretest 113

CHAPTER 4 SALES SUPERVISION OF NEW ISSUES 117

The Securities Act of 1933 117

Freeriding and Withholding/FINRA Rule 5130 120

Underwriting Corporate Securities 121

Exempt Securities 125

Exempt Transactions 126

Rule 137 Nonparticipants 131

Rule 138 Nonequivalent Securities 132

Rule 139 Issuing Research Reports 132

Rule 415 Shelf Registration 132

Regulation M, Rule 104 133

Underwriting Direct Participation Programs 135

Investment Company Registration 135

Mutual Fund Distribution 136

Pretest 143

CHAPTER 5 SUPERVISION OF THE SECONDARY MARKET 147

The Securities Exchange Act of 1934 147

Listing Requirements for the NYSE 152

Types of Orders 155

The Exchanges 158

The Nasdaq Market 170

Pink Sheets 182

Trade Reporting and Comparison Service (TRACS) 182

Advanced Computerized Execution System (ACES) 182

The Order Audit Trail System (OATS) 183

Electronic Communication Networks (ECNs) 183

Third Market 184

Nasdaq Market Center for Listed Securities 184

Fourth Market 185

SEC Regulation ATS 185

FINRA 5% Markup Policy 186

Markups and Markdowns When Acting as a Principal 187

Riskless Principal Transactions 188

Proceeds Transactions 188

Dominated and Controlled Markets 188

ACT/TRF Trade Scan 189

Pretest 193

CHAPTER 6 MSRB RULES AND REGULATIONS 197

Municipal Bonds 197

Issuing Municipal Securities 198

Municipal Fund Securities 209

Municipal Bond Trading 210

Recommending Municipal Bonds 214

Municipal Bond Advertising 214

Municipal Bond Insurance 215

Political Contributions 215

Registration Requirements for Municipal Securities Professionals 217

MSRB Overview 218

Pretest 223

ANSWER KEYS 227

GLOSSARY OF EXAM TERMS 233

INDEX 299