Answers

1. 1. ANSWER: D. Rationale: Any location where order execution takes place requires proper supervision by a principal and is considered an Office of Supervisory Jurisdiction (OSJ).
2. 2. ANSWER: C. Rationale: The taping rule requires firms with more than twenty employees to keep fewer than 20% from previously disciplined firms, if it wants to avoid having to tape record all phone conversations between registered employees and customers. Swatham must fire six of its ten suspect employees to get below the 20% threshold; it cannot hire new employees to get below the threshold. If Swatham only fired five employees, that would result in 5/25 employees recently associated with disciplined firms, or 20%. Firing six employees results in 4/24 employees recently associated with disciplined firms, or 16.7%.
3. 3. ANSWER: B. Rationale: A member firm’s written supervisory procedures must be kept at each office of supervisory jurisdiction.
4. 4. ANSWER: D. Rationale: Under FINRA/NASD Rule 3010, a written inspection report must include testing and verification of the following: safeguarding of customer funds and securities; maintaining books and records; supervision of customer accounts serviced by branch office managers; transmittal of funds between customers and registered representatives and between customers and third parties; validation of customer address changes; validation of changes in customer account information.
5. 5. ANSWER: B. Rationale: Monitoring reports must be submitted within 30 days of the end of each calendar quarter.
6. 6. ANSWER: A. Rationale: All of the above are possible sanctions. Moreover, FINRA can censure or impose a fine upon a member, but it cannot impose prison sentences.
7. 7. ANSWER: C. Rationale: Each respondent named in a complaint shall provide FINRA with a written reply within 25 days of receiving it. The reply must admit or deny the allegation or claim that the complaint contains insufficient information to make a plea.