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Chapter 11 SIE
| Term | Definition |
|---|---|
| Arbitration | a faster and less expensive alternative to litigation and mediation whereby all parties agree to comply with the legally binding decision of an independent 3rd party, called an aribtrator |
| Embezzlement | the misappropriation of funds by someone who has been entrusted with safeguarding them |
| Finder's fee | a fee paid to someone who acts as a intermediary for another party in a transaction |
| lien | a legal claim against an asset that is used to secure a loan |
| predispute arbitration clause | a clause in the agreement between registered securities registered securities reps and their employers mandating that any employment disputes will be handled through binding arbitration, rather than through the court system |
| respondent | a person or organization required to answer a legal proceeding |
| selling away | a prohibited activity in which a broker sells securities that are not offered or overseen by their member brokerage firm. |
| whistleblower statute | a law designed to protect employees from retaliation after reporting suspected illegal activities on the party of their employers or co-workers |
| underwriting | the process of bringing a new security issue public |
| Blue Sky Laws | securities laws designed to protect investors against fraudulent sales practices & activities |
| registered person | a person who is registered with FINRA & the SEC to conduct securities transactions and business with the public. They must pass qualification exams to demonstrate competence in their particular area of the securities business. They may sell securities |
| nonregistered person | a person who is not registered with FINRA and the SEC. They may not solicit business, qualify a potential customer, determine suitability, or charge commissions to customers. They may not accept securities orders from customers of a member firm. |
| Principal | individuals who manage a firm's securities business, including supervising the activities of reps & training associated persons must be registered as this |
| Limited Principal - Investment Company & Variable Contracts | this person is limited to dealings of shares of open-end investment companies, closed-end investment companies during the period of original issuance only, & variable contracts & insurance premium funding programs. They must take series 26 |
| Form U4 | a document that is used to license and register individuals. it is an agreement to comply with all federal securities laws, pay dues & assessments to FINRA. A background check must be completed within 30 does of filing this form with FINRA |
| statutory disqualification | addresses a person's eligibility for membership, participation or association with a member of FINRA. If subject to this, a person may be disqualified from membership or association. A conviction for a felony reported on Form U4 would be grounds for this. |
| Regulatory Element | part of continuing ed requirement that involves periodic computer based training related to regulatory, compliance, ethical, supervisory subjects and sales practice standards. It must be completed on the 2nd anniversary date of their registration |
| Firm Element | part of the FINRA continuing ed programs that requires broker/dealers to establish a formal training program to keep covered registered persons current on job & product related topics & to enhance their securities knowledge, skills & professionalism. |
| Maintaining Qualifications Program (MQP) | A way for terminated reps or principals to maintain their qualification beyond the current 2 year qualification by completing annual continuing ed through this program. Participants would have a 5 year qualification period. |
| Form U5 | When a firm terminates a registered individual this form must be filed electronically within 30 days of termination. After it is filed, FINRA has jurisdiction for 2 years during which the individual may reregister with a new broker/dealer without retestin |
| inactive status | a registered rep who volunteers for, or is called into active duty in the US Armed Forces will have his registration placed on this and will have to reregister upon return to active employment. Not required to complete continuing ed. |
| misleading information | information that is incomplete or inaccurate to the point of being misleading or intending to mislead. Filing this may result in statutory disqualification which may prevent a person from becoming registered. |
| customer complaints | must be filed electronically with FINRA on a quarterly basis, within 15 days of the end of each calendar quarter. They are retained for 4 years |
| respondent | the person named in the complaint |
| private securities transactions | transactions that take place outside the normal business of an associated persons employment w/ a member firm (broker/dealer) &that are not recorded on the firms books and records. An associated person must obtain prior written consent to engage in this. |
| written notice | associated persons of member firms must provide this to the member firm prior to entering into a private transaction. It must describe, in detail, the proposed transaction, the persons proposed role, and compensation conditions |
| selling compensation | any compensation paid directly or indirectly as a result of the purchase or sale of a security, including, but not limited to, commissions, finders fees, rights of participation in profits, tax benefits, and expense reimbursements. |
| Municipal Finance Professionals (MFPs) | must report their political contributions to their employing broker/dealer. They can only make contributions to candidates for whom they can vote and there is a contribution limit of $250 for each election cycle. |
| cash/noncash compensation | members or persons associated with a member cannot directly or indirectly accept or make payment or offers of payments of any noncash compensation, except as provided in this provision. |
| Reportable financial events | bankruptcy within the past 10 years, unsatisfied judgments or liens, and any disciplinary history, such as felony convictions, and misdemeanors that involve securities or theft, forgery or embezzlement . Must be reported within 30 days |
Created by:
emulligan