Chapter 3 Practice Question Answers
- 1. Answer: B. An office must register as an OSJ if any of the following activities take place: order execution, market making, structuring of public offerings or private placements, maintaining custody of customers’ funds, approval of new accounts, and approval of advertising.
- 2. Answer: D. 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, and validation of changes in customer account information.
- 3. Answer: D. Principals of an OSJ must give approval for all orders within their jurisdiction. They are also responsible for giving final approval of new accounts and supervising persons at branch offices. While a principal is required to periodically review correspondence and give prior approval for correspondence that contains a recommendation, it does not have to be a principal located at an OSJ.
- 4. Answer: C. After receiving the information necessary to prepare a complete and correct application package for a deferred variable annuity, the person who recommended the annuity must promptly transmit the information to the OSJ. Once the information arrives at the OSJ, a registered principal has up to seven business days to review the application and, if approved, submit the application to the insurance company.
- 5. Answer: A. Members must conduct inspections at least annually for OSJs (offices of supervisory jurisdiction) and branch offices that have supervisory responsibility over one or more non-branch offices. Branch offices that don’t supervise any non-branch offices must be inspected at least once every three years.
- 6. Answer: B. Each member firm must adopt special supervisor