Chapter 5 Practice Question Answers
1. Answer: D. Any location where order execution takes place requires proper supervision by a principal and is considered an Office of Supervisory Jurisdiction (OSJ).
2. Answer: B. A member firm’s written supervisory procedures must be kept at each office of supervisory jurisdiction.
3. Answer: D. Under FINRA Rule 3110, a written inspection report must include testing and verification of the following: safeguarding of customer funds and securities, maintaining books and records, supervision of supervisory personnel (which would include supervision of customer accounts serviced by branch office managers), validation of customer address changes, and validation of changes in customer account information. The report must also include an investigation of the transmittal of funds between customers and registered representatives and between customers and third parties; however, the transmittal of funds or securities to a customer’s primary residence does not need to be inspected.
4. Answer: A. FINRA Rule 3110 lists the requirements for a supervisory system. Answer choices B, C, and D all describe requirements under that rule. The rule requires designation of offices where certain securities-related activities take place as offices of supervisory jurisdiction. The rule requires multiple offices (where appropriate), not a single office. Therefore answer choice A does not describe a requirement of a supervisory system.
5. Answer: B. Monitoring reports must be submitted within 30 days of the end of each calendar quarter.
6. Answer: A. FINRA requires each member firm to have a supervisory system in place. That system must define which member offices are designated as OSJs. Note that more than one office can be defined as an OSJ. FINRA also requires the system to describe how each OSJ will be managed; however, this requirement is not in place for branch offices. Additionally, the system must establish a managerial c