Exam (elaborations)
SERIES 10 FINRA QUESTIONS AND ANSWERS WITH SOLUTIONS 2025
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SERIES 10 FINRA QUESTIONS AND ANSWERS WITH SOLUTIONS 2025
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SERIES 10 FINRA QUESTIONS AND ANSWERSWITH SOLUTIONS 2025
According,to,MSRB,rules,,to,be,considered,to,be,"regular,way",settlement,-
,ANSWER,Settlement,date,is,trade,date,plus,three,business,days.,Regular,way,settlement,for,mu
nicipal,bond,transactions,is,Trade,date,plus,3,business,days,(T+3).
Muni,Firm,has,a,control,relationship,with,an,issuer,for,which,it,is,distributing,a,new,issue.,RR,wa
nts,to,sell,some,of,the,securities,to,a,discretionary,client,but,the,client,cannot,be,reached.,What,
can,the,RR,do,with,regard,to,executing,the,transaction,-
,ANSWER,The,RR,may,not,execute,the,transaction,until,the,customer,can,be,contacted
When,there,is,a,control,relationship,between,an,issuer,and,a,broker/dealer,,the,customer,must:,
-
,ANSWER,the,customer,must,be,made,aware,of,the,relationship,and,approve,the,trade,prior,to,e
xecuting,a,transaction
A,broker-dealer,is,inspected,by,FINRA,on,a,4-
year,cycle.,Which,records,must,be,retained,covering,this,entire,period,-
,ANSWER,Articles,of,Incorporation
Articles,of,incorporation,must,be,retained,for,the,life,of,the,firm.,-,ANSWER,
In,a,principal,transaction,,the,MSRB,requires,that,the,price,given,to,the,customer,consider,the,d
ealer's,-
,ANSWER,best,judgment,of,the,security's,fair,market,value;,the,fact,that,the,dealer,is,entitled,to,
a,profit;,the,expenses,associated,with,handling,the,transaction;,and,the,total,dollar,amount,of,th
e,transaction.
For,agency,transaction,,the,MSRB,requires,that,the,availability,of,the,security,be,considered,(a,"
hard,to,find",security,justifies,a,higher,commission);,-
,ANSWER,as,well,as,the,expense,of,executing,the,order,,the,value,of,services,rendered,by,the,bro
ker;,and,the,amount,of,any,other,compensation,received,by,the,broker,in,that,transaction.
,A,General,Sales,Supervisor,has,worked,for,a,broker-
dealer,for,11,years.,He,becomes,subject,to,statutory,disqualification.,Which,statement,is,TRUE,-
,ANSWER,This,individual,may,be,permitted,to,continue,working,provided,the,employer,member,
files,a,written,application,to,FINRA,in,an,Eligibility,Proceeding
The,Securities,Exchange,Act,of,1934,lists,the,reasons,why,an,individual,associated,with,a,firm,,or
,the,firm,itself,,may,be,subject,to,"statutory,disqualification",-
,meaning,that,they,cannot,be,involved,in,the,securities,business.,These,include,situations,where,
the,individual,or,member,firm:,-
,ANSWER,has,been,suspended,or,expelled,from,any,other,Self,Regulatory,Organization,,either,d
omestic,or,foreign;
is,the,subject,of,an,SEC,order,suspending,or,revoking,registration,or,by,his,conduct,while,associa
ted,with,a,firm,has,caused,that,firm's,suspension,or,expulsion;
willfully,filed,a,false,or,misleading,application,or,has,omitted,to,state,material,facts,in,the,applica
tion;
willfully,violated,federal,securities,or,commodities,laws,,willfully,aided,,abetted,,counseled,,com
manded,or,procured,such,violations,,or,failed,to,supervise,those,who,commit,such,law,violation
s;
has,been,convicted,of,any,securities,or,"money",related,offense,(such,as,embezzlement),within,t
he,past,10,years;,or
has,been,temporarily,or,permanently,enjoined,from,engaging,in,the,securities,business.
Generally,speaking,,a,person,subject,to,statutory,disqualification,may,not,be,associated,with,a,m
ember,in,any,capacity.,However,,FINRA,permits,a,disqualified,person,to,request,permission,to,en
ter,into,,or,remain,in,,the,securities,industry.,To,do,so,,the,member,firm,must,file,an,application,
seeking,approval,of,a,new,or,continued,registration,in,an,"Eligibility,Proceeding.",
The,application,is,a,package,of,all,relevant,information,surrounding,the,disqualification.,FINRA,lo
oks,at,the,nature,and,gravity,of,the,event;,the,length,of,time,since,the,event,occurred;,any,mitig
ating,or,aggravating,circumstances;,and,the,disciplinary,history,of,the,member,firm,and,associat
ed,person.,If,FINRA,approves,an,application,,the,SEC,is,also,required,to,review,and,approve,that,
decision;,and,if,FINRA,denies,an,application,,an,appeal,may,be,filed,with,the,SEC.
Confirmation,contents,are,regulated,by,MSRB,Rule,G15,and,therefore,,-
,ANSWER,cannot,be,changed,by,an,agreement,between,Municipal,Dealers.
,A,MFP,was,associated,with,Dealer,A,at,the,time,he,made,a,political,contribution,which,resulted,i
n,the,dealer,being,prohibited,from,engaging,in,muni,securities,business,with,the,issuer,for,2,yea
rs.,Then,,less,than,2,years,after,making,the,contribution,,the,MFP,becomes,associated,with,Deal
er,B.,Which,dealer(s),is,subject,to,the,prohibition,on,engaging,in,muni,business?,-
,ANSWER,Dealer,A,and,Dealer,B.,Both,dealers,are,subject,to,the,prohibition,for,two,years,from,t
he,date,of,the,contribution.,Dealer,B's,probation,only,begins,when,the,MFP,joins,Dealer,B.
All,monies,due,as,the,result,of,a,buy-in,are,due,-
,ANSWER,All,monies,are,due,as,a,result,of,a,buy,in,within,10,business,days,of,execution
Which,of,the,following,branch,functions,can,be,outsourced,to,a,third,party,provider,-
,ANSWER,New,account,processing,&,New,account,customer,I.D.,verification.,Customer,account,
processing,&,verification,of,customer,identity,are,functions,that,can,be,outsourced,-
,there,is,no,requirement,for,these,to,be,performed,by,a,registered,person.
FINRA,does,NOT,allow,functions,that,must,be,performed,by,a,registered,person,to,be,outsource
d,unless,-
,ANSWER,Unless,the,third,party,firm,to,whom,the,functions,are,outsourced,is,itself,a,registered,
broker-dealer
New,account,approval,must,be,performed,by,a,registered,principal,and,suitability,determination
s,can,only,be,made,by,registered,representatives,(or,registered,principals).,-,ANSWER,
A,customer,has,a,NMFBA,at,your,firm,with,$400,000,in,assets.,For,the,past,2,years,,there,has,be
en,no,activity,in,the,account,and,the,customer,has,been,charged,a,$6,000,annual,flat,fee,during,
each,of,those,years,for,account,maintenance.,As,the,BOM,,you,should,-,ANSWER,Non-
Managed,Fee,Based,Accounts,(NMFBAs),are,typically,only,suitable,for,active,traders.,This,custo
mer,is,paying,a,very,high,annual,fee,for,very,little,trading.,The,best,answer,is,that,the,BOM,shoul
d,have,the,representative,discuss,the,situation,with,the,customer,and,explain,the,differences,be
tween,maintaining,the,account,as,a,NMFBA,or,converting,it,back,to,a,per-
trade,commission,charge,account.,Also,note,that,FINRA,permits,the,account,to,be,maintained,as
,a,NMFBA,,even,if,this,is,more,expensive,,if,the,customer,places,a,high,value,on,aligning,his,or,he
r,interests,with,those,of,the,broker,(e.g.,,he,knows,with,the,NMFBA,that,the,broker,will,not,mak
e,recommendations,just,to,induce,trades,for,commissions).
, A,broker-
dealer,making,a,PIPE,offering,under,Rule,506,of,Regulation,D,is,required,to,complete,a,-
,ANSWER,"reasonable,basis",suitability,determination,that,determines,that,the,offering,is,suitabl
e,for,at,least,some,investors,&,customer,level,suitability,for,both,the,accredited,and,non-
accredited,investors
A,"PIPE",offering,is,a,Private,Investment,in,Public,Equity,conducted,under,Regulation,D.,FINRA,vi
ews,private,placements,as,-,ANSWER,as,"non-
standard",offerings,and,applies,2,levels,of,suitability,-,both,product,level,and,customer,level.
As,with,any,"non-
standard",investment,,when,offering,a,private,placement,,FINRA,requires,the,broker-
dealer,first,to,conduct,a,"reasonable,basis",suitability,determination,that,the,investment,will,be,
suitable,for,at,least,some,clients.,This,investigation,must,look,at,the:,-
,ANSWER,issuer,and,its,management;,business,prospects,of,the,issuer;,assets,held,or,to,be,acqui
red,by,the,issuer;
claims,being,made;,&,intended,use,of,the,proceeds,of,the,offering.,Once,a,reasonable,basis,suita
bility,determination,has,been,completed,&,documented,,demonstrating,that,the,investment,is,s
uitable,for,at,least,some,customers,,then,a,second,level,of,suitability,is,required
second,level,of,suitability,is,required.,This,is,"customer,level",suitability,,which,applies,to,both,ac
credited,(wealthy),and,non-
accredited,investors,in,the,offering.,Just,because,an,investor,is,accredited,does,not,obviate,this,r
equirement.,-
,ANSWER,This,is,"customer,level",suitability,,which,applies,to,both,accredited,(wealthy),and,non-
accredited,investors,in,the,offering.,Just,because,an,investor,is,accredited,does,not,obviate,this,r
equirement.
To,complete,customer,level,suitability,,the,broker-dealer,must,-
,ANSWER,must,gather,&,analyze,information,about,the,customer's,other,holdings,,financial,situa
tion,&,needs,,tax,status,,risk,tolerance,,investment,objectives,,&,any,other,information,that,woul
d,enable,the,firm,to,make,its,suitability,determination.,(Also,note,that,effective,July,2012,,FINRA,
extended,the,2-
level,suitability,requirement,to,all,recommendations,,except,to,those,made,to,institutional,inves
tors.)
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