- Before submitting a Form U4 to hire a new registered representative, a member firm is required to
Answer: verify the accuracy and completeness of the information provided on the form.
FINRA rules require a member firm to perform due diligence to verify the accuracy and completeness of the information provided on the Form U4 before filing it. While firms will conduct background checks, the core regulatory requirement is to ensure the application itself is accurate to the best of the firm's knowledge.
- A client calls their registered representative's office. The representative is unavailable, and the client speaks with an unregistered sales assistant. Which of the following requests can the assistant fulfill for the client?
Answer: "Could you please send me a prospectus for the new tech mutual fund?"
Sending a prospectus is a clerical function that does not require registration. Providing a quote (A), entering an order (B), and giving an opinion (D) are all activities that require a securities registration.
- A college student passes the Securities Industry Essentials (SIE) exam but is not yet associated with a member firm. This individual is
Answer: not a registered person and cannot engage in securities business.
Passing the SIE exam is only the first step and does not confer any registration status or rights. To become registered and engage in securities business, an individual must also pass a top-off qualification exam (e.g., Series 7) and be associated with and sponsored by a member firm through a Form U4 filing.
- A registered representative is licensed in State A and has a client who is temporarily residing in State B for the winter. To continue conducting securities business with this client, the representative must
Answer: register in State B.
Under state blue-sky laws, a representative generally must be registered in any state where they conduct securities business with clients physically located in that state. While some states may have limited exemptions for existing clients temporarily in the state, the general rule requires registration in State B to continue servicing the client there.
- To maintain an active securities registration, an associated person must be
Answer: sponsored by a FINRA member firm.
A securities registration is only valid while an individual is associated with (employed by) and sponsored by a FINRA member firm. If they leave the firm, their registration is terminated via a Form U5 filing. Employment by another type of financial company without FINRA membership is not sufficient.
- Which statement correctly describes the relationship between an "associated person" and a "registered person" at a broker-dealer?
Answer: All registered persons are associated persons, but not all associated persons are registered.
An "associated person" is anyone employed by or affiliated with a member firm. A "registered person" is a subset of associated persons who has passed the required qualification exams and is registered with FINRA to conduct securities business. Therefore, the category of associated persons includes both registered and non-registered employees.
- An individual must become a registered representative if their duties include which of the following?
Answer: Accepting unsolicited orders from existing customers.
Accepting customer orders, whether solicited or unsolicited, is a primary function of a registered representative and requires registration with FINRA. The other activities listed are considered administrative or clerical and can be performed by non-registered personnel.
- A non-registered employee of a broker-dealer may be compensated in which of the following ways?
Answer: A fixed salary that is not tied to sales production.
Non-registered persons can be paid a fixed salary or an hourly wage. Their compensation cannot be tied directly or indirectly to securities transactions or sales production. All other answer choices represent transaction-based compensation, which is prohibited for non-registered individuals.
- An individual would be statutorily disqualified from registering with a FINRA member firm if they have been convicted within the last 10 years of
Answer: a misdemeanor involving the misappropriation of funds.
Statutory disqualification is triggered by any felony conviction or a conviction for a specific type of misdemeanor within the last 10 years. These misdemeanors must involve financial matters such as embezzlement, misappropriation of funds, bribery, or other crimes of dishonesty related to the securities business. Other misdemeanors, like reckless driving, do not automatically trigger disqualification.
- An unregistered assistant is asked by a client, "My stock is down today. Do you think I should sell it?" Which of the following is an appropriate response for the assistant?
Answer: "I can't offer an opinion, but I can put you through to your representative to discuss it."
An unregistered person cannot provide investment advice, opinions, or enter orders. The only appropriate action is to refer the client to a registered individual. Choice A is giving advice. Choice C is offering to enter an order. Choice D is providing potentially influential market information, which could be construed as a recommendation.
- A registered representative fails to complete the Regulatory Element of their Continuing Education requirement within the prescribed time frame. This individual is
Answer: designated as CE inactive and cannot function as a registered person.
Failure to complete the Regulatory Element results in the person's registration becoming inactive (CE Inactive). In this status, the individual cannot perform any duties that require registration, including receiving transaction-based compensation, until the requirement is satisfied.
- Which of the following events would subject an individual to a statutory disqualification from registering with a FINRA member firm?
Answer: A felony conviction for tax evasion that occurred 5 years ago.
A statutory disqualification is triggered by any felony conviction or a conviction for an investment-related misdemeanor within the last 10 years. Tax evasion is a felony, and the conviction occurred within the 10-year lookback period. The felony in choice A is outside the 10-year window. A charge in choice B is not a conviction. The misdemeanor in choice C, while theft-related, would need to be specifically investment-related (such as embezzlement from a customer account) to cause disqualification.
- A client wishes to drop off a check payable to the firm at a branch office to deposit into their brokerage account. The only person available is a non-registered administrative assistant. The assistant may
Answer: accept the check and issue a receipt to the client.
Accepting checks payable to the firm and providing receipts are considered clerical functions that non-registered persons may perform. The assistant is not making recommendations, accepting trade orders, or handling customer funds in a discretionary manner. These administrative tasks do not require registration under FINRA rules.
- Which of the following activities requires an individual to hold an appropriate principal-level registration?
Answer: Approving new customer accounts.
Supervisory activities, such as approving new customer accounts, reviewing correspondence, and overseeing the activities of registered representatives, require a principal's registration (e.g., Series 24). The other choices are activities performed by a registered representative (agent).
- A person located outside the United States who is conducting securities business exclusively with non-U.S. residents
Answer: is generally not required to be registered with FINRA.
FINRA registration requirements are primarily intended to cover the activities of individuals conducting securities business with U.S.-based persons. An individual working for a member firm (or its affiliate) in a foreign office and dealing exclusively with non-U.S. persons is generally exempt from FINRA registration.
- Under SEC Rule 17f-2, most employees of a broker-dealer are required to be fingerprinted. The primary purpose of this requirement is to
Answer: identify individuals who may have a criminal history.
Fingerprints are submitted to the U.S. Attorney General (typically via the FBI) for processing and checking against criminal databases. This helps firms identify individuals with a criminal history that might disqualify them from being registered or handling customer funds and securities.
- Which of the following pieces of information is an applicant required to disclose on their Form U4?
Answer: 5-year residency history.
Form U4 requires extensive background information including 5-year employment history and 5-year residency history with no gaps. Political affiliation, old bankruptcy filings beyond the disclosure period, and investment preferences are not required disclosures on Form U4.
- The Firm Element of the Continuing Education program requires member firms to
Answer: prepare a written training plan and provide annual training to all registered persons.
The Firm Element requires each member firm to evaluate its own training needs and create a written training plan. The firm must then deliver this training annually to its registered persons who have direct contact with the public. The content is specific to the firm's business and products, not standardized by FINRA.
- The primary purpose of filing a Form U4 with FINRA is to
Answer: register an individual with a self-regulatory organization (SRO).
The Form U4 (Uniform Application for Securities Industry Registration or Transfer) is the standard form used to register an individual with the appropriate SROs (like FINRA) and state jurisdictions. Form U5 is used for termination, and while complaints are disclosed on the U4, its main purpose is registration.
- The Regulatory Element of the Continuing Education requirement must be completed by registered persons
Answer: within 120 days of their second registration anniversary and every three years thereafter.
FINRA rules require registered individuals to complete the Regulatory Element on the second anniversary of their initial registration and every three years after that. They are given a 120-day window to complete the training.
