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46 Cards in this Set
- Front
- Back
What is the flow of an order through a brokerage firm
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Other People Might Care. O=Order department; P=purchases and sales; M= margin or credit department; C =cashiering department cage
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What does the purchase and sales department do
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Recorded all transactions in a client account and handles all billing
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What does the cage or cashiering department do
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Receive and deliver securities and money. It issues payment only if the margin department instructs it to do so. Send certificates to transfer agents.
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When is a customer order most susceptible to error
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At two points Communication of the order between customer and broker and transmission of the order from the Broker to wire operator
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If there is a mistake on the order, who corrects it
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If a mistake is made, no change to the order can be made without the approval of a principal or branch manager
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When must order tickets be approved
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Order tickets must be approved by a principal promptly after execution, but orders are not required to be approved before they are entered
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What happens if an order is executed outside the customer's instructions
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The trade is not binding
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If an error is made what do FINRA rules require
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A record of any errors made must be reported to the person designated to receive such error reports by the firm.
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What is the minimum amount of time to send a statement to a customer
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Although most firms send customers monthly statements, the minimum time is quarterly
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Is a customer of a broker-dealer request a copy of the firm's most recent income statement in writing, must the broker dealer comply
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No the customer is entitled to the most recent balance sheet only
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What is regular way settlement
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The third business day following the trade a known as T+3
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What security settle T+1
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Money market
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When are securities delivered and payment remitted in a cash settlement or same day settlement
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Requires delivery of securities from the seller and payment from the buyer on the same day a trade is executed. Stocks or bonds sold for cash settlement must be available on the spot for delivery to the buyer
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When can an option contract be settled
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On any day from the fourth business day through the contract date, provided the buyer is given a one day written notice
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What must a when issued transaction confirmation include
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A description of the security, with the contract price yield and trade day
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Under Regulation T when is payment due
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Payment is due two business days after regular way settlement
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What happens if a buyer cannot pay for a trade within 5 business days from the trade date
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The broker dealer may request an extension from is designated examining authority DEA before the fifth business day. In the case of introducing broker dealers, those that do not clear their own trade, the extension request is made by the clearing firm. A broker dealer has the option of ignoring amount of $1000 or less without violating regulations T requirements
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What securities are settled next business day
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Equity options, index options, t bills, t note, & T bond
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What is NOT included in a when issued confirmation
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SAT. S =settlement date, A= accrued interest, T =total dollar amount due at settlement
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Is there a difference between customer confirmations and broker to broker confirmation
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Yes. Customer confirmations must be sent no later than the settlement date. Broker to broker confirmations must be sent no later than the business day following the trade date, T+1
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Member firms that are nominal owners of record must vote street name stock in accordance with the wishes of the beneficial owners. If a customer fails to indicate how those shares are to be voted what is the member firm do
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Vote shares as recommended by management
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If the matters to be voted on are of major importance such as mergers or issuance of additional shares, what must the member firm do
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The member may never vote the shares as it sees fit. In this case if the proxy is not returned, the shares are not voted
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What is a DK or don't know trade
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Dk are used in inter dealer trades for which one party to the transaction does not recognize the trade or if it does, disagrees with the terms of the trade as submitted by the other party.
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What is that good delivery clearing rules
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100 share uniform unit
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What is good delivery for bonds
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Delivery of bonds in coupon or bear form should be made in denominations of $1000 or $5000. Fully registered bonds are delivered in denominations of $1,000 but in no case larger than $100,000
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What is the time frame to send back reclamation securities with the reclamation form
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For minor irregularities, the time frame for reclamation is 15 days from delivery date. If the certificates delivered are refused by the transfer agent for whatever reason or if the certificates are stolen or counterfeit, the time frame is 30 months from delivery date. If the certificates (bonds are subject to partial call, there is no time limit for reclamation.
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What are the two types of on deliveries that are never subject to reclamation
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Bond certificates subject to an in-whole call (redemption of entire issue) and bonds where the issuer goes into default after trade date
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A customer sales $5000 worth of a security in a cash account and on the same day purchases eight thousand dollars worth of a different security in the same account. At the close of the fifth business days following these transactions, no payment has been received from the customer and no extension has been obtained. What must the firm do
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Liquidate $3K of securities and freeze the account for 90 days . When an investor buys and sells different securities in the same account on the same day, the two transactions can be netted against each other to determine whether money is due to the client or the client old money to the firm.
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How are dealer to dealer transactions in US government securities settled and in what funds
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Settlement occurs on the business day following trade date. in dealer to dealer trade settlement is made in federal funds through the Federal Reserve wire system
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Regular way settlement for US government bonds is
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Occurs on that next business day
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Introducing broker dealers who did not clear their own trade may request extensions for their customers directly from
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The DEA, designated examining authority
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If a beneficial owner of a street named stock returns a signed proxy statement but fails to indicate how the shares are to be voted, the member firm must vote the shares how
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As recommended by management of the issuer
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Who bears the expense of shipping proxy
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The issuer must bear the expense of shipping the proxy
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What would be good reasons for a dealer who sold municipal securities to another dealer to fail to deliver the bonds
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mutilated coupons, lack of legal opinion, lack of proper endorsement on a registered bond
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What would NOT be good reasons for a dealer who sold municipal securities to another dealer to fail to deliver the bonds
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Change in the market price of the bonds. The MSRP requires delivery regardless of subsequent price changes.
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What should a registered representative do if a customer has sold 300 shares of ABC and has sent you 3 100-share certificates one of which has not been endorsed
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Rather than risk sending in an unendorsed stock certificate back through the mail, the stock power is sent to the customer for the signature that will allow ownership transfer
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When are ordered tickets written
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Upon receipt of the order
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May a member firm charge a customer for safekeeping of security and collection of dividends and interest
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Yes. Members are permitted to charge reasonable fees to their customers for a variety of services. Included are collection of interest and dividends, finding a buyer for a client who wishes to sell a relatively illiquid investments, and holding customer securities in safekeeping. Members may also charge interest on loans made to customers.
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In order to transfer certificate held jointly they must be signed by
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Both parties
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Can a certificate with an assignment of a power of substitution executed by someone who has died be good delivery as long as these signature was witnessed
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Never
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Under FINRA rules, delivery on a seller's account can be made to no sooner than the
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Fourth business day following the transaction.
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What information about the firm must appear on all confirmations.
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The capacity of the firm, principal or agent, must be disclosed on all confirmation.
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What is a Due bill
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An assignment of a forthcoming distribution from the seller to the new owners
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Every transaction made by a registered representative for a customer's account must be
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Reviewed by a principal of a FINRA member firm
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In an interdealer trade, what happens if the seller delivers before the settlement date
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The buyer may accept the stock or may refuse it without prejudice
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What is the settlement for various Bond transactions and closed end funds
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Regular way settlement for US government bond occurs on the business day after the trade date. Corporate bonds and closed end funds fall under the SEC settlement rule, and MSRP rules require three day settlement of municipal bond secondary transactions
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