Answers
- 1. Answer: A. Rationale: Getting his customer the better price might have put the broker within the rules if he had executed the customer’s market order immediately after his own transaction. Informing the customer before trading ahead and allowing him the opportunity to refuse the broker’s proposed action only works for institutional customers. No doubt about it. Our broker violated FINRA rules.
- 2. Answer: A. Rationale: Once a letter goes to more than 25 people, FINRA considers it sales literature, and it needs to be approved.
- 3. Answer: B. Rationale: A member that offers or intends to offer an investment analysis tool must, within 10 days of first use, (1) provide FINRA’s Advertising Regulation Department access to the investment analysis tool and, (2) file with the Department any template for written reports produced by the tool, or advertisements and sales literature concerning the tool.
- 4. Answer: A. Rationale: Advertisements must disclose that an endorsement has been bought, but not the amount of payment. Disclosures may be footnoted, but only if a footnote will not inhibit understanding of the communication. Comparisons between investments or services must disclose material differences, including investment objectives, costs and expenses, and the liquidity and volatility of the investment products.
- 5. Answer: A. Rationale: Sales literature requires prior principal approval. Group correspondence sent to fewer than 25 prospective or existing clients does not need principal approval. Neither does instant messaging or dynamic social media content that does not contain a solicitation to buy or sell securities.
- 6. Answer: B. Rationale: A firm’s representatives that engage in telemarketing must compare their list of prospects against the FTC’s Do Not Call List. Additionally, they must be prepared to identify themselves, the purpose of their call, and how they may be reached.
- 7. Answer: D. Rationale: If