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Free FINRA Series 99 Practice Exams
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Free FINRA Series 99 Practice Exam 2 (50 Questions) with Answers Quiz
1.
An operations employee wants to take a paid weekend job at an unaffiliated accounting practice. Before beginning the work she must
1
Provide prior written notice of the outside business activity to her firm
Obtain approval from FINRA directly
Wait until she has been employed for three years
Resign her registration with the firm
2.
Which arrangement would fall OUTSIDE the Section 28(e) soft dollar safe harbor?
1
Paying for execution and clearance services on managed account trades
Paying for analytical software that aids investment decisions
Paying a portion of the manager’s office lease with client commission credits
Obtaining third party research reports on portfolio companies
3.
Before engaging a technology vendor to process customer transactions, a firm’s due diligence should focus primarily on
1
Whether the vendor offers the lowest price available
How quickly the vendor can begin work without a contract
The vendor’s willingness to indemnify the firm against all losses
The vendor’s controls and financial stability and its ability to meet the firm’s regulatory obligations
4.
Under Regulation S-P a firm must give customers an initial privacy notice
1
Once every five years regardless of circumstances
When the customer relationship is established and annually thereafter unless an exception applies
Only after the customer requests one in writing
Only when the firm decides to share information with affiliates
5.
A firm disposes of paper records containing customer account numbers and identifying information. Under the Regulation S-P disposal requirements the firm must
1
Deliver the records to the customer before disposal
Place the records in ordinary recycling bins
Take reasonable measures such as shredding to protect against unauthorized access
Retain every such record permanently rather than dispose of it
6.
An investment banking employee asks a colleague in operations for details of a customer’s recent trading in a company the bank is advising. The correct handling is to
1
Provide the details if the banker signs a confidentiality form
Provide the details because both work at the same firm
Provide the details only after the deal is announced publicly
Decline and route the request through the firm’s information barrier procedures
7.
Which situation would a firm’s identity theft prevention program most likely treat as a red flag?
1
A customer requesting a duplicate copy of a prospectus
An address change request followed immediately by a request for a new debit card
A customer increasing regular monthly contributions
A customer selling a position at a loss for tax purposes
8.
A customer sends an email to the operations department stating that a fee was charged without authorization and demanding its return. The associate should treat this as
1
A written customer complaint requiring escalation and recordkeeping
A matter that may be settled privately with the customer
A routine service inquiry needing no record
A request that must be reported directly to the SEC by the associate
9.
Under Section 326 of the USA PATRIOT Act a firm may verify a customer’s identity through
1
The customer’s verbal assurance alone
Documentary methods such as a government identification or nondocumentary methods such as database checks
A reference letter from any other customer of the firm
The customer’s signature on a trade confirmation
10.
An operations associate believes a supervisor is ignoring a red flag she reported. Under a well-designed escalation framework she should
1
Drop the matter because she already reported it once
Post her concerns on a public internet message board
Contact the customer directly to warn them
Use the firm’s alternate reporting channel such as compliance or a whistleblower hotline
11.
Under FINRA Rule 3120 a firm must test and verify its supervisory procedures and then
1
File the test results with the SEC each quarter
Send a summary of the results to every customer
Publish the results on its public website
Submit a report on the system of supervisory controls to senior management at least annually
12.
A firm reviews which employees have access to which internal systems and removes rights no longer needed for their roles. This practice is best described as
1
A reclamation of improperly delivered securities
Entitlement review supporting least privilege access
A periodic security count of certificates
A reconciliation of the general ledger
13.
Which written supervisory procedures practice is required rather than optional?
1
Limiting the procedures to registered representatives only
Updating the procedures promptly when rules or the firm’s business change
Keeping the procedures confidential from firm employees
Rewriting the entire manual every calendar month
14.
Under FINRA Rule 4370 a firm’s business continuity plan must address
1
The investment performance of customer accounts during a disruption
The elimination of all third-party vendor relationships
Data backup and recovery and prompt customer access to funds and securities
A guarantee that no disruption will ever affect the firm
15.
A delivering firm sends securities that are not good delivery because the certificate is improperly endorsed. The receiving firm’s remedy is to
1
Return the securities to the delivering firm as a reclamation
Report the certificate as counterfeit
Send a don’t know notice to the transfer agent
Accept the delivery and charge the customer a fee
16.
How does a performance report differ from a customer account statement?
1
A performance report is required quarterly while statements are optional
A performance report must be delivered before each transaction settles
A performance report replaces the statement for institutional customers
A performance report presents rates of return while the statement is the official record of positions and activity
17.
A customer opens an account but does not provide a certified taxpayer identification number. The firm must apply
1
A permanent freeze on all account activity
A daily reserve computation for that account
Backup withholding on reportable payments to the account
The 140 percent hypothecation limit
18.
A customer sells a stock at a loss and repurchases the same stock eleven days later. On the firm’s tax reporting this is flagged as
1
A wash sale with the loss disallowed for tax purposes
A reclamation against the contra firm
A short sale requiring a locate
A residual credit from the prior custodian
19.
Under FINRA Rule 4311 a carrying agreement between an introducing firm and a clearing firm must
1
Eliminate the clearing firm’s books and records obligations
Give the introducing firm custody of all customer funds
Allocate the responsibilities of each party in writing and be approved by FINRA
Be renewed by the customer every twelve months
20.
In the customer reserve formula computation under Rule 15c3-3, free credit balances owed to customers are
1
Netted against the firm’s proprietary trading gains
Credits which increase the amount the firm must deposit in the special reserve account
Excluded from the computation entirely
Debits which reduce the required deposit
21.
Under SEC Rule 17a-3 entries to a firm’s blotters recording purchases and sales must be made
1
Only when a reconciliation difference appears
At the end of each calendar quarter
Within thirty calendar days of the transaction
No later than the business day following the transaction
22.
An operations department reconciles the firm’s bank statements against the general ledger and finds a difference that has been open for two months. The proper response is to
1
Write off the difference without any record
Wait for the annual audit to resolve it
Research and document the item and escalate it under the firm’s procedures
Move the item into a customer account until it clears
23.
A firm posts a message about its services on a public social media page that any visitor may view. Under FINRA Rule 2210 this is categorized as
1
A private placement memorandum
A retail communication
An institutional communication
Correspondence
24.
An associated person deposits checks between two accounts at different banks to draw against funds that do not exist, exploiting the time it takes each check to clear. This scheme is
1
Check kiting which is a prohibited and fraudulent practice
Acceptable if the accounts are eventually made whole
A permissible short-term financing technique
A standard method of processing residual credits
25.
FINRA Rule 2140 prohibits a member or its associated persons from
1
Accepting an account from a competing broker-dealer
Interfering with a customer’s request to transfer an account in the context of an employment dispute
Charging any fee at all for transferring an account
Transferring an account without the customer’s signature
26.
Which record must a firm maintain showing all checks received and disbursed on a daily basis?
1
The FOCUS report
The check blotter
The options disclosure document
The stock record
27.
A customer asks the firm to hold certificates registered in the customer’s own name and return those identical certificates on request. This service is
1
Rehypothecation which lends the certificates to another firm
Hypothecation which pledges the certificates as collateral
Segregation which permits the firm to return any like certificates
Safekeeping which requires the firm to return the specific certificates deposited
28.
A carrying firm completed a physical count of the securities in its possession in February and scheduled the next count for the following November. This schedule
1
Satisfies the rule because two counts a year is the minimum
Violates the rule because counts must be performed every business day
Satisfies the rule because counts are required only when a regulator asks
Violates the periodic security count rule because counts must occur no less often than quarterly
29.
The firm’s stock record shows 800 shares of a security in a control location, but the count finds 700. This condition is
1
A don’t know item to be returned to the contra firm
Evidence that the position was journaled correctly
A residual credit to be forwarded to the customer
A short difference that must be researched and recorded promptly
30.
Which of the following would generally NOT be depository eligible at DTC?
1
A widely traded corporate bond
An exchange traded fund share class
A listed common stock of a large domestic issuer
A physical certificate for a privately held company with transfer restrictions
31.
The DWAC service is used to
1
Report lost or stolen certificates to a central database
Guarantee the authenticity of an endorsing signature
Move eligible book-entry shares electronically between the transfer agent and a depository participant
Net a member’s daily settlement obligations in each security
32.
A confirmation for a principal transaction in an equity security must disclose
1
The customer’s cumulative gain or loss for the year
That the firm acted as principal and the markup or markdown where required
The identity of the contra party on every trade
The firm’s net capital as of the trade date
33.
Under FINRA Rule 2121 the fairness of a markup is judged primarily by reference to
1
The price the firm originally paid for its inventory position
A flat five percent that may never be exceeded
The customer’s stated investment objective
The prevailing market price at the time of the transaction
34.
A representative places a firm proprietary order ahead of a customer order that is executable at the same price. This violates
1
The requirement to maintain a check blotter
FINRA Rule 5320 which prohibits trading ahead of customer orders
Regulation S-ID
The FINRA rule on breakpoint sales
35.
A customer investing in a mutual fund places an order just below a level where the sales charge drops. Executing the order without informing the customer is
1
Acceptable because breakpoints are optional
Required by the forward pricing rule
A prohibited breakpoint sale
A permissible way to preserve the customer’s liquidity
36.
Which account may generally NOT be opened as a margin account?
1
An individual cash-and-margin brokerage account
An individual retirement account using traditional borrowing to purchase securities
A joint account with rights of survivorship
A corporate account whose charter permits borrowing
37.
Before the first transaction in a margin account, the customer must receive
1
A margin disclosure statement describing the risks of borrowing
A copy of the firm’s most recent audited financial statements
The firm’s business continuity plan in full
A prospectus for every security to be purchased
38.
A margin customer buys securities and the firm pledges those securities to a bank as collateral for the loan financing them. This is
1
A journal entry between customer accounts
Rehypothecation of customer securities by the firm
A short sale requiring a locate
Escheatment of the customer’s position
39.
When a broker-dealer lends securities from its inventory to another firm, the borrower typically compensates the lender through
1
A negotiated rebate rate on the cash collateral
A fixed commission set by FINRA
An advisory fee based on assets under management
A share of the borrower’s trading profits
40.
An institutional customer’s arrangement in which the custodian pays for securities only upon delivery is known as
1
A repurchase agreement
Delivery versus payment settlement
Continuous net settlement
A when-issued transaction
41.
In a repurchase agreement the dealer
1
Permanently transfers ownership with no obligation to repurchase
Borrows securities against a rebate on cash collateral
Guarantees the buyer a fixed rate of dividend income
Sells securities and agrees to buy them back later at a higher price
42.
A customer sold securities and failed to deliver them. Under the FINRA close-out procedures the buying firm may protect itself by
1
Issuing a buy-in notice to the selling firm
Cancelling the customer’s original purchase
Reporting the failure to the Securities Information Center
Filing a currency transaction report
43.
An institutional customer instructs the firm to deliver all of its municipal bond purchases to the same custodian bank account each time. Recording that arrangement so it applies automatically to future trades is known as establishing
1
Standing settlement instructions
A control location designation
A discretionary authorization
A carrying agreement
44.
FINRA Rule 2090 obligates a firm to use reasonable diligence to know the essential facts about
1
Only customers whose accounts exceed one million dollars
Every customer and the authority of each person acting on the customer’s behalf
Only customers who trade options or securities futures
The financial condition of every issuer the customer buys
45.
An operations associate receives a written request to open a new options account. Before the first options transaction is effected, the customer must be sent
1
The firm’s most recent FOCUS report
A copy of the firm’s written supervisory procedures
The options disclosure document
A medallion signature guarantee form
46.
A firm learns that a longtime customer has died. Pending receipt of the required documentation, the firm should
1
Transfer the assets to the firm’s error account
Continue accepting orders from the surviving family
Freeze the account and cancel any open orders
Liquidate all positions to cash immediately
47.
An employee of another broker-dealer wants to open a brokerage account at the firm. Under FINRA Rule 3210 the employee must
1
Obtain prior written consent from the employing member firm
Wait until she has been registered for at least two years
Limit the account to mutual funds and money market shares
Have the account titled in the employing firm’s name
48.
A customer’s mutual fund shares are held directly on the books of the fund’s transfer agent rather than at the broker-dealer. These positions are commonly described as
1
Directly held shares that appear on the fund’s records rather than in street name
Restricted securities subject to a resale legend
Bearer instruments transferable by delivery alone
Excess margin securities requiring segregation
49.
A customer wants to move cash between her individual account and a joint account she holds with her spouse at the same firm. The internal bookkeeping entry that accomplishes this is called
1
A journal entry
A reclamation
A residual credit
An automated clearing house debit
50.
After an account transfer through ACATS is completed, a dividend arrives at the delivering firm for a security that has already moved. This payment is handled as
1
A don’t know item returned to the paying agent
A reclamation against the receiving firm
A residual credit forwarded to the receiving firm
Income permanently retained by the delivering firm
