Sample Questions
Question 1
Easy
For a member firm, FINRA's jurisdiction extends to
Solution
Choice C is correct because FINRA, as a self-regulatory organization (SRO), has jurisdiction over its member firms and their associated persons. FINRA Rule 0140(a) provides that FINRA's rules apply to all members and persons associated with a member, and that associated persons have the same duties and obligations as a member. FINRA's rules, enforcement authority and examination powers extend to member broker-dealers and the individuals associated with them, not to the broader investing public, issuers or non-member entities.
Question 2
Medium
Which of the following is prohibited for a member firm's registered representative under FINRA rules?
Solution
Choice D is correct. Under FINRA Rule 3280, a representative who will receive selling compensation for a private securities transaction must give the firm prior written notice, and the firm must state in writing whether it approves or disapproves. If the firm disapproves, the representative may not take part in the transaction in any manner, directly or indirectly. So joining a paid private securities transaction after disapproval is prohibited. The other actions are permitted. A $90 gift is within the $300 per-person annual limit of Rule 3220. Rule 3270 requires prior written notice to the firm, not the firm's approval, before a registered person takes on a paid outside business activity such as tax preparation, so starting the paid work after that notice is permitted unless the firm limits or prohibits the activity. A Form U4 amendment filed within 30 days of a reportable event meets the general deadline of 30 days after learning of the facts (FINRA By-Laws Article V, Section 2(c)). An amendment involving a statutory disqualification is due within 10 days.
Question 3
Hard
On Form U4, how many years of residential history and of employment history must a registered person disclose?
Solution
Choice D is correct because Form U4 (Uniform Application for Securities Industry Registration or Transfer) requires a 5-year residential history and a 10-year employment history. Additionally, the form requires disclosure of criminal charges, regulatory actions, customer complaints, arbitration awards, civil judicial actions, terminations for cause, and financial disclosures such as bankruptcies.
