Chapter 11 Practice Question Answers
1. Answer: C. Retail communications and correspondence must disclose that an endorsement has been bought, but not the amount of payment. Comparisons between investments or services must disclose material differences, including investment objectives, costs and expenses, and the liquidity and volatility of the investment products. Disclosures may be footnoted, but only if a footnote will not inhibit understanding of the communication.
2. Answer: A. A member firm must preserve records of customer complaints for at least four years from the date of the complaint. The records may be kept at the Office of Supervisory Jurisdiction (OSJ) that supervises the particular office out of which the complaint came. If the OSJ does not wish to keep the records onsite, it may keep the records in a place that allows the records to become promptly available to FINRA upon request.
3. Answer: B. A networking arrangement is a written agreement between a member and a financial institution under which the member offers broker-dealer services on or off the premises of the financial institution. The financial institution cannot insure accounts held by the broker-dealer, as this would present a potential conflict of interest for both entities.
4. Answer: C. A firm may hold a customer’s mail if these conditions are met:
• The customer requests it in writing. The written request must specify how long the mail is to be held.
• Mail can be held for a maximum of three months (total, not per request) unless the customer’s written request specifies a legitimate reason why the mail needs to be held longer (such as safety or security).
• The firm gives the customer written notice of any other methods that the customer may use to view account information (such as the firm’s website) and obtains confirmation from the customer that this notice was received.
• The firm is still able to contact the customer in a timely manner