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Series 6
Section 1B
| Question | Answer |
|---|---|
| An issuer of a security must file a | Registration statement |
| In addition to the a registration statement, an issuer of a security must also prepare a | Prospectus, containing the most important information concerning the offering |
| The Prospectus must be distributed to investors | Prior to or during any solicitation for sale |
| On unsolicited orders of securities, the Prospectus must be given out | No later than the time of confirmation |
| The Prospectus | A summary of the registration statement |
| After an issuer files the registration statment | There is a 20-day cooling off period in which no sales may occur |
| Sales of a new issue are prohibited until | The issue has been cleared by the SEC |
| What advertisements are exempted from the prospectus requirement? | Tombstone ads |
| A Tombstone ad identifies | The security, the price, where a prospectus may be obtained, and who will execute orders |
| All mutual fund advertisements, sales material, and correspondence that includes performance information must be placed in a prominent text box that sets forth the fund's : | Standardized performance information for 1, 5, & 10 yr returns, Maximum sales charge, and annual expense ratio |
| Investment company sales literature cannot encourage | Withdrawal and reinvestment of money |
| A Fund Prospectus must include the following about the investment company | open-end or closed-end, diversified or non-diversified, investment objectives, |
| A Fund Prospectus must include the following about the fund | Method used to calculate its net asset value and offering prices, breakpoints/rights of accumulation/letter of intent, transfer privileges, how investors may redeem shares, info on sales charges/management & advisory fees, emrgncy loan or withdrawal plan |
| FINRA Conduct Rule 2010 | A member firm, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade |
| FINRA Conduct Rule 2020 | No member firm shall effect any transaction in or induce the purchase or sale of any security by means of any manipulative deceptive or other fraudulent device or contrivance |
| Institutional Communication | Includes written (including electronic) communication that is distributed or made available only to institutional investors |
| Who are institutional investors? | A bank, savings & loan assoc., insurance co., registered investment co., investment adviser, entity with total assets of at least $50 million, governmental entity, employee benefit plan w/ at least 100 participants |
| Retail communication | includes any written (or electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar day period |
| Retail investor | any person other than an institutional investor, regardless of whether that person has an account with the firm. |
| Correspondence | Includes any written (or electronic) communication that is distributed or made available to 25 of FEWER retail investors within any 30 calendar day period |
| Institutional communication also includes a firms internal communications. T or F? | F |
| Sales scripts intended for use with retail customers are considered | Retail communications |
| FINRA Rule 2210 | Requires an appropriately qualified registered principal of the member firm to approve each retail communication before the earlier of its use of its filing with FINRA's Advertising Regulation Dept. |
| 3 Retail communications that are exempt from the principal pre-approval rule | Any retail communication that is excepted from the definition of "research report", that is posted on an online interactive electronic forum, that does not make any financial or investment recommendation or otherwise promote a product or service of firm |
| If another firm has filed a retail communication with FINRA and another firm has the same communication | It is exempted from pre-approval so long as a letter is submitted stating that the communication has not been altered |
| NASD Rule 2711 | Defines "research report" to mean any written communication that includes an analysis of equity securities of individual companies or industries, and that provides information reasonably sufficient upon which to base an investment decision |
| All retail and institutional communications records shall be kept in a separate file for a period | beginning on the date of the first use and ending 3 years from the date of last use. |
| A firm that has not previously filed with FINRAs Advertising Reg Dept must file its initial communication at least | 10 business days prior to use |
| Pre-use filing rule | Come categories of retail communications must be filed with FINRA at least 10 business days prior to use and withheld from use until any changes specified by the Ad Reg Dept have been made |
| Communications subject to the pre-use filing rule | Retail communications concerning any registered investment company that include self-created rankings, Retail communications concerning security futures, Retail communications that include bond mutual fund volatility ratings |
| Retail communications in which the only reference to security futures is contained in a listing of the services of the firm | Does not have to follow pre-use filing rule |
| Advertisement concerning government securities | do not have to be filed with FINRA within 10 business days of first use or publication |
| A firm must provide with each filing | the actual or anticipated date of first use, the name, CRD number and title of the registered principal who approved the communication, and the date the approval was made |
| FINRA requires firms to file the Managements Discussion of Fund Performance (MDFP) and any non-required sales material that are contained in a mutual fund annual or semi annual report if | A firm intends to market the fund to prospective investors |
| Free writing prospectus | A written communication, including an electronic communication, that constitutes an offer to sell or a solicitation to buy securities in a registered offering by means other than the statutory prospectus |
| Communications may not predict or project | Performance. |
| Past performance | May not be used in a way which it looks like it will recur in the future |
| All retail communications and correspondence must | Prominently disclose the name of the firm |
| Blind recruiting advertisements do not have to include | the member firms name |
| In retail comm. & correspondence, references to tax-free or tax-exempt income must | Indicated which income taxes apply, or which do not unless income is free from all applicable taxes |
| Comparative illustrations of the mathematical principles of tax-deferred versus taxable compounding | Must depict both the taxable investment and the tax-deferred investment using identical investment amounts and identical assumed gross investment rates of return, which may not exceed 10% percent per anum |
| With Variable life insurance & Variable annuities | There must be no representation or implication that these are short term, liquid investments |
| With Variable life insurance & variable annuities | There must be no representation or implication that a guarantee applies to the investment return or principal value of the separate account |
| Variable life insurance illustrations may not | be used to project or predict investment results |
| Variable life insurance illustrations may use any combination of assumed investment returns up to and including a gross rate of ____% | 12%; provided that one of the returns is a 0% gross rate |
| Retail communications and correspondence that present the performance of a non-money market mutual fund must disclose | The fund's maximum sales charge and operating expense ratio as set forth in the fund's current prospectus fee table |
| If any testimonial used in retail comm. or correspondence with the public concerns a technical aspect of investing | The person making the testimonial must have the knowledge and experience to form a valid opinion |
| If payment of more than $_____ is made for testimonial, it must be disclosed that it is a paid testimonial | 100 |
| Firms must always have a ___________ for making any recommendation | reasonable basis |
| Past recommendations | Retail comm. are prohibited from referring to past specific recommendations of the firm that were or would have been profitable |
| Any reference to FINRA's review of communication is limited to | "Reviewed by FINRA" or "FINRA Reviewed" |
| Use of the FINRA is allowed by | No one but FINRA |
| Ranking Entity | Any entity that provides general information about investment companies to the public, that is independent of the investment company and its affiliates, and whose services are not procured by the investment company to assign the investment co. a rank |
| Member firms may not use investment company rankings in an advertisement or items of sales literature other than | Ranking created and published by a Ranking Entity or created by an investment co that are based upon the performance measurements of a Ranking Entity |
| All ads and sales literature containing investment company rankings must also disclose: | The fact that past performance is no guarantee of future results |
| Ads or sales literature must not use any category or subcategory that is based upon _________ of an investment co | Asset size |
| Bond mutual fund volatility rating | A description issued by an independent third party relating to the sensitivity of the net asset value of a portfolio of an open-end management investment company that invests in debt securities to changes in market conditions |
| A member may use a bond mutual volatility rating only in supplemental sales literature and only if | The rating dos not identify or describe volatility as a "risk" ra |
| A firm that offers or intends to offer an investment analysis tool is required to | Within 10 business days of first use, provide to FINRA ad reg dept access to the tool. |
| The time of day restriction states that telemarketing calls may be made between | 8am & 9am |
| Generic advertising | Ads that refer in general terms to securities as an investment medium and do not refer to specific investments |
| If an ad does not include a full prospectus | It may never contain an application to invest and must contain information regarding how to obtain a full prospectus |
| When advertising 'total return' | calculations must assume the reinvestment of all dividends and capital gain distributions. average annum return for 1, 5, and 10 years must be included if existence applies |
| A complete financial statement must be provided ______ & ______ to mutual fund shareholders | semi-annually & annually |
| Fund | a registered investment company |
| Selling away | A violation where a registered representative engages in a private securities transaction without first informing their firm |
| OSJ | Office of Supervisory Jurisdiction |
| Every branch office that supervises 1 or more non-branch locations must be inspected ______ | at least annually |
| Branch offices that do not supervise 1 or more non-branch locations must be inspected every _____ years | 3 |
| As part of the inspection process a written report must be kept on file regarding each and every inspection for a minimum of _____ years | 3 |
| Each registered rep must be assigned to an | Office of Supervisory Jurisdiction (OSJ) and meet with their assigned pricipal no less than annually |
Created by:
rrayos