Chapter 5 Practice Question Answers
- 1. Answer: B. All registered persons must complete the regulatory element of his continuing education requirement within 120 days of the person’s second registration anniversary and every three years thereafter. The firm element requires member firms to prepare an annual training plan that covers relevant compliance issues.
- 2. Answer: C. A disciplined firm is one that has been expelled from membership in any self-regulatory organization or is subject to an SEC order revoking its registration as a broker-dealer or futures commission merchant.
- 3. Answer: B. An office must register as an OSJ if any of the following activities take place: order execution, market making, structuring of public offerings or private placements, maintaining custody of customers’ funds, approval of new accounts, and approval of advertising. The soliciting or receiving of customer orders may be done at any branch office, as long as it does not execute the order.
- 4. Answer: A. If the representative attends an entertainment event with a customer, it is considered “business entertainment” and is exempt from the $100 gift rule. Two $75 tickets in which a customer does not attend would not be considered business entertainment and would be subject to the $100 gift rule, and at a total of $150, exceed the limit. A $125 holiday basket would exceed the $100 gift limit, as would a $150 stroller.
- 5. Answer: D. Written procedures will allow agents to borrow from or lend funds to members of the agent’s immediate family; financial institutions that regularly provide credit, financing, or loans as part of their normal business activities; and to persons outside of the broker-customer relationship.
- 6. Answer: C. When an associated person who is employed by one member firm opens an investment account with another member firm, the executing member firm’s only responsibility is to provide duplicated statements of account transaction