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Series 99 Chapter 1
| Question | Answer |
|---|---|
| What are the four required pieces of information for opening a customer account under FINRA rules? | Name (numbered/coded acceptable), Address (not P.O. box only, military P.O. box OK), Whether of legal age, Registered representative(s) of record |
| How often must a copy of account information be provided to clients? | At least every 36 months |
| What are the three main suitability obligations? | (1) Reasonable Basis - suitable for some investors, (2) Customer-Specific - suitable for that particular customer (NOT institutional), (3) Quantitative - series of transactions not excessive |
| What is a numbered or nominee account? | An account opened under a number or code name instead of customer's legal name, providing privacy. CIP requires firms maintain beneficial owner records. |
| Explain JTWROS vs. JTIC accounts. | JTWROS (spouses, common): equal ownership, passes to survivor without probate. JTIC (business partners, common): specified ownership %, goes to decedent's estate. |
| What are the three restrictions on UGMA/UTMA custodial accounts? | (1) NO margin (no uncovered options, short sales, commodities), (2) Irrevocable gifts, (3) No limit on # of donors or gift value (but gift tax if exceeds $19,000/year) |
| What is required to open a discretionary account? | (1) Power of Attorney signed by client AND authorized person, (2) Principal approval IN WRITING BEFORE opening, (3) Each order reviewed/approved PROMPTLY (not in advance), (4) Monitor for churning |
| How do "Not Held" orders work? What is the "Three A" rule? | Client specifies Action (buy/sell), Amount (quantity), Asset (security). RR decides only time & price. Oral authorization OK. One day only; written required for longer. |
| What distinguishes Limited Trading Authorization from Full Trading Authorization? | Limited = execution of trades only. Full = execution, cash/securities withdrawal, check writing privileges. |
| What is Prime Brokerage? | Large client (e.g., hedge fund) uses prime broker to clear all trades through ONE firm with executions at MULTIPLE B/Ds. Includes custody, securities lending, margin financing, clearing, research. |
| Explain DVP vs. RVP accounts. | DVP/COD (buying): B/D delivers securities to client's bank; bank pays. RVP (selling): Client's bank delivers to B/D; B/D pays. Both require institutional identifier (account # + agent bank). |
| Define a penny stock and suitability requirements. | OTC stock with bid price below $5. Clients must be approved + receive risk disclosure. Solicited sales need: current quote, compensation disclosure. Suitability rules apply to NEW clients only. |
| What is an "established client" for penny stock purposes? | Client with firm for 1+ year OR has made 3 separate purchases of 3 different penny stocks on 3 different days. |
| Compare Traditional IRA vs. Roth IRA. | Traditional: contributions deductible, RMD at 73, withdrawals taxable. Roth: contributions NOT deductible, NO RMD, qualifying withdrawals tax-free. Both: $7,500 max, 10% penalty before 59½ (except death, disability, education). |
| What is the difference between a Rollover and Trustee-to-Trustee Transfer? | Rollover: owner receives proceeds, once/year (rolling 12 months), 60-day deadline. Trustee-to-Trustee: owner doesn't access funds, unlimited frequency/year. |
| What is ERISA and what are its key requirements? | Employee Retirement Income Security Act (1974) for private sector pension plans. Requires: non-discriminatory, offered to employees 21+ with 1+ year service (1,000 hours), approved vesting schedule. |
| When must customer information be updated? | When client moves to new state (firm + RR must be registered there), financial background changes, age/objectives shift. SEC: every 3 years. FINRA: within 30 days or at next statement. |
| What are the requirements for account registration changes (marriage, divorce, add/remove person)? | Require: marriage certificate/divorce decree OR new person's DOB, SSN, contact info. Both parties sign forms. Principal approval BEFORE execution. Use stock transfer form for securities. |
| What is Escheatment? | Process of turning over unclaimed/abandoned property to STATE authority (not federal). Occurs when client dies intestate OR cannot be located. |
| What are the CIP (Customer Identification Program) required identifying elements? | Name, Legal address (residence/business), Date of birth, Identification number (SSN for US, passport/alien ID/government-issued doc for non-US). OFAC check blocks if name on terrorist/criminal list. |
| What are the four FINRA rule categories? | (1) Conduct Rules - customer/firm interaction, (2) Uniform Practice Code - standardizes procedures, (3) Code of Procedure - discipline process, (4) Code of Arbitration - dispute resolution |
| Information on customer complaints must be electronically filed with FINRA | FINRA rules require members to electronically file information on customer complaints within 15 days of the end of each calendar quarter. If the complaint involves allegations of theft within 10 days |
| Retail communications for options must be filed | Retail communications regarding options must be filed at least 10 days prior to its use. |
| Form 3 Filing Deadline | Within 10 days of becoming an insider |
| Form 4 Filing Deadline | By the 2nd business day after a change in stock position |
| Account Information to Customer | Within 30 days of account opening OR at time of next statement |
| Customer Information Updates | At least every 36 months |
| Record Accessibility Requirement | First 2 years of records must be in easily accessible place |
| Employee Outside Account Consent | Within 30 days of employment |
| TRACE Bond Trade Reporting | Within 15 minutes of execution |
| TRACE US Treasury Reporting | Within 60 minutes of execution |
| CAT Industry Member Data Recording | By 8:00 a.m. ET on the trading day following recording |
| CAT Error Correction Deadline | By 8:00 a.m. ET on the 3rd business day following trade (T+3) |
| Customer Confirmation Delivery | At or before the settlement date |
| Non-Electronic Confirmation (Regular-Way) | 1st business day after transaction |
| Non-Electronic Confirmation (Cash Trade) | Same business day as transaction |
| DK (Don't Know) Notice | Within 4 business days of trade |
| Corrected Confirmation After Discrepancy | Within 1 business day |
| Blotter Preparation | By the next business day |
| Order Ticket Preparation | Before execution of transaction |
| Options Record Preparation | By the next business day after option is written |
| Corporate Securities Settlement | T + 1 (1 business day after trade) |
| Municipal Securities Settlement | T + 1 (1 business day after trade) |
| US Government Securities Settlement | T + 1 (1 business day after trade) |
| Options Settlement | T + 1 (1 business day after trade) |
| Cash Settlement | T + 0 (Same day as trade) |
| Seller's Option Settlement | At least T + 2, negotiated between parties |
| Regulation T Payment (Customer Payment) | S + 2 or T + 3 (3 business days from trade date) |
| Account Freeze Duration (Non-Payment) | 90 days |
| Position Closeout (Non-Payment) | T + 4 (Next day after Reg T payment due) |
| Client Buy-In (Failed Delivery) | S + 10 (10 business days after settlement) |
| Dealer-to-Dealer Buy-In | T + 4 (Notify by 12:00 p.m. on T+3) |
| Dealer-to-Dealer Sell-Out | T + 2 (Immediate sell-out for non-acceptance) |
| Client Sell-Out | T + 4 (Next day after Reg T payment due) |
| Easy-to-Borrow List Freshness | Must be less than 24 hours old |
| Regulation SHO Rule 204 Delivery | T + 1 (Settlement date) |
| Rule 204 Close-Out of Fail | By beginning of trading on T + 2 |
| Threshold Security Close-Out Period | 13 consecutive settlement days |
| Threshold Security Close-Out Execution | Morning of 14th settlement day |
| Market Maker/Long Sale Exception (Rule 204) | T + 4 (2 extra settlement days) |
| Rule 144 Restricted Stock Close-Out | Within 35 calendar days after trade date |
| ACATS Transfer Validation/Protest | Within 1 business day |
| ACATS Transfer Completion | Within 3 business days after validation |
| ACATS Discrepancy Resolution | Within 5 business days from claim receipt |
| Residual Credits Transfer (ACATS) | Within 10 business days of each accrual |
| General Ledger Posting Deadline | Within 10 business days of month-end |
| General Ledger Retention Period | 6 years |
| Customer Account Ledger Posting | By settlement date |
| Customer Account Ledger Retention | 6 years |
| Position Record Posting | By next business day after settlement or securities movement |
| Position Record Retention | 6 years |
| Fail to Deliver Posting Deadline | By 2 business days after settlement date |
| Fail to Receive Posting Deadline | By 2 business days after settlement date |
| Securities Differences Posting | By 7 business days after discovery |
| Securities Differences Retention | 3 years |
| Trial Balance Preparation | By 10 business days after end of accounting period |
| Trial Balance Retention | 3 years |
| Confirmation/Comparison Retention | 3 years |
| Order Ticket Retention | 3 years |
| Associated Person Application Cards Retention | 3 years |
| Employment Termination Notice Timing | After conclusion of employment |
| Written Supervisory Procedures Manual Update | Must be current; former version retained 3 years |
| Blotter Retention Period | 6 years |
| Ledger Retention Period | 6 years |
| New Account Forms Retention | 6 years |
| Powers of Attorney Retention | 6 years |
| Municipal Complaints Retention | 4 years |
| Corporate Documents Retention | Lifetime |
| Partnership Documents Retention | Lifetime |
| Articles of Incorporation Retention | Lifetime |
| Minute Books Retention | Lifetime |
| Stock Certificate Books Retention | Lifetime |
| Non-Current Books/Records Notice to SEC | Same day of failure |
| Correction Report to SEC | Within 48 hours (overnight delivery) |
| Stolen/Counterfeit Securities Report | 1 business day of discovery |
| Lost/Missing Securities Report | 1 business day after 2-day search |
| Lost/Missing from Box Count Report | No later than 10 business days after count |
| Recovered Securities Report | 1 business day of recovery |
| Box Count Frequency | At least once per calendar quarter |
| Minimum Gap Between Box Counts | Minimum 60 days |
| Maximum Gap Between Box Counts | Maximum 4 months from previous count |
| Securities Difference Recording | By 7 business days after count |
| Short Securities Difference Net Capital (7 days) | 25% deducted from net capital |
| Short Securities Difference Net Capital (14 days) | 50% deducted from net capital |
| Short Securities Difference Net Capital (21 days) | 75% deducted from net capital |
| Short Securities Difference Net Capital (28 days) | 100% deducted from net capital |
| FOCUS Part I (Monthly) Deadline | Within 10 business days of month-end |
| FOCUS Part II Quarterly Deadline | Within 17 business days of quarter-end |
| FOCUS Part IIA Quarterly Deadline | Within 17 business days of quarter-end |
| Annual Report Filing Deadline | By 60 days after financial statement date |
| Balance Sheets to Customers | Every 6 months |
| Audited Annual Statements to Customers | Within 45 days after SEC filing |
| BCTR (Currency Transaction Report) Filing | Within 15 business days (transactions exceeding $10,000) |
| SAR (Suspicious Activity Report) Filing | Within 30 business days (transactions $5,000 or more) |
| Account Statements Frequency | At least quarterly (monthly if active) |
| Customer Mail Hold (Under 3 Months) | Requires written customer instructions |
| Customer Mail Hold (Over 3 Months) | Requires valid reason documented |
| Options Account - Options Disclosure Document | At or before account opening |
| Penny Stock Account Approval | Must approve before purchase |
| Options Account Statement Delivery | At least monthly |
| After-Market Prospectus (Non-Listed IPO) | 90 days |
| After-Market Prospectus (Non-Listed Follow-On) | 40 days |
| After-Market Prospectus (Exchange-Listed IPO) | 25 days |
| After-Market Prospectus (Exchange-Listed Follow-On) | No requirement |
| Office of Supervisory Jurisdiction (OSJ) Inspection | Annually |
| Non-OSJ Branch (Supervises Other Locations) Inspection | Annually |
| Non-OSJ Branch (No Supervisory Functions) Inspection | Every 3 years |
| Non-Branch Location Inspection | Periodically |
| Associated Person Primary Residence Inspection | Periodically |
| Electronic Storage Media Notification to SRO | 90 days advance notice (if not CD-ROM) |
| IRA Maximum Annual Contribution | $7,500 or 100% of earned income (whichever is less) |
| IRA Age 50+ Catch-Up Contribution | Additional $1,100 (total $8,600) |
| IRA Rollover Frequency | Once per rolling 12 months |
| IRA Rollover Completion Timeline | Within 60 days |
| IRA RMD Age Requirement | April 1 following year person reaches age 73 |
| IRA Early Withdrawal Penalty | 10% before age 59½ (with exceptions) |
| Roth IRA Withdrawal Rule (Earnings) | Tax-free after 5 years + one qualifying condition |
| IRA Spousal Contribution Limit | Maximum $15,000 annually into two separate IRAs |
| Payment Date in Trading | By 2 business days of settlement (S + 2) OR 3 days from trade (T + 3) |
| Freeriding Violation | Buying stock and selling without meeting Reg T payment requirement |
| Short-Swing Profit Restriction Period | 6 months from acquisition |
| Short-Swing Profit Penalty | Disgorgement of profit + up to treble damages |
| Insider Short Sale Prohibition | Insiders cannot sell short their company stock |
| Insider Covered Call Writing | Permitted (selling calls on stock they own) |
| Insider Uncovered Call Writing | Prohibited (selling calls without owning stock) |
| Corporate Call Writing | Corporations may not sell calls on their own stock under any circumstances |
| A repurchase agreement is usually initiated by which of the following? | Repurchase agreements are typically initiated by commercial banks or the Federal Reserve Board. They enable banks to meet reserve requirements through the sale of securities (often overnight) with an agreement to buy them back at an agreed-on price. |
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