Regulation of Broker-Dealers practice questions

Answer: B) An issuer selling its own securities

• AIncorrect. That's a broker-dealer.
• BCorrect. Issuers aren't broker-dealers.
• CIncorrect. That's a dealer.
• DIncorrect. That's a broker-dealer.

Answer: B) The registration expires, and the firm can't transact business there from January 1

Under the Uniform Securities Act, a registration expires December 31 unless renewed. Without renewal, the firm can't do business in the state from January 1 until it registers again.

• AIncorrect. The Act provides no automatic grace period. A registration that isn't renewed expires at year-end.
• BCorrect. Registrations expire December 31 unless renewed. A firm that doesn't renew loses the ability to do business in that state as of January 1.
• CIncorrect. Expiration happens on its own when a registration isn't renewed. No cancellation order or hearing is needed.
• DIncorrect. Failing to renew doesn't give a firm an exemption. It must register again before doing business in the state.

Answer: A) Its financial condition as shown in its most recent balance sheet

A broker-dealer must make information on its financial condition (from its most recent balance sheet, or statement of financial condition) available to a bona fide regular customer on request. Internal procedures, agent pay and exam findings aren't covered.

• ACorrect. FINRA Rule 2261 requires a member to make information on its financial condition, as disclosed in its most recent balance sheet, available to any bona fide regular customer on request.
• BIncorrect. A firm must keep written supervisory procedures, but it doesn't have to give them to customers on request.
• CIncorrect. A firm doesn't have to disclose its agents' individual pay arrangements to customers on request.
• DIncorrect. No rule requires a firm to give customers its examination findings on request. The customer disclosure right covers the firm's financial condition.

Answer: B) Must still register

• AIncorrect. The firm must register.
• BCorrect. Exempt securities don't exempt the firm.
• CIncorrect. It isn't the issuer.
• DIncorrect. That term applies to advisers and securities.

Answer: D) Register with the state and pay its fees

• AIncorrect. The firm registers too.
• BIncorrect. State registration is still required.
• CIncorrect. Notice filing applies to covered advisers and securities.
• DCorrect. Federal registration doesn't replace state registration.

Answer: C) Needn't register there

• AIncorrect. It may operate.
• BIncorrect. The exclusion applies.
• CCorrect. Dealing only with other broker-dealers is excluded.
• DIncorrect. That doesn't apply.

Answer: B) Effect or attempt to effect sales there for the firm

• AIncorrect. Residence alone isn't the test.
• BCorrect. Registration follows the business.
• CIncorrect. No offers, no registration.
• DIncorrect. Existing clients temporarily present are an exception.

Answer: B) Noon on the 30th day after the application is complete

• AIncorrect. A review period applies.
• BCorrect. The Administrator may set an earlier date.
• CIncorrect. It's based on the filing.
• DIncorrect. It's effective on the 30th day.

Answer: C) Must register as a broker-dealer

• AIncorrect. That's for securities.
• BIncorrect. BD registration still applies.
• CCorrect. The type of security doesn't remove the requirement.
• DIncorrect. It's a broker-dealer.

Answer: C) No later than 30 days after learning of the facts requiring the amendment

A principal office move must be reported on a Form BD amendment through CRD no later than 30 days after the firm learns of it (FINRA By-Laws Art. IV, Sec. 1(c)).

• AIncorrect. Form BD must be kept current at all times, so the firm can't save the change for year-end renewal.
• BIncorrect. That window resembles annual financial reporting deadlines, not the deadline for a registration amendment.
• CCorrect. FINRA By-Laws Article IV, Section 1(c) requires a Form BD amendment no later than 30 days after the firm learns of the facts requiring it. The SEC has said a filing more than 30 days late isn't 'prompt' under Rule 15b3-1.
• DIncorrect. Telling customers doesn't replace the regulatory filing. The amendment goes through CRD, which serves FINRA and the state Administrators.