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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
Obtain approval from FINRA directly
Wait until she has been employed for three years
Resign her registration with the firm
Provide prior written notice of the outside business activity to her firm
2.
Which arrangement would fall OUTSIDE the Section 28(e) soft dollar safe harbor?
1
Paying a portion of the manager’s office lease with client commission credits
Paying for execution and clearance services on managed account trades
Obtaining third party research reports on portfolio companies
Paying for analytical software that aids investment decisions
3.
Before engaging a technology vendor to process customer transactions, a firm’s due diligence should focus primarily on
1
The vendor’s controls and financial stability and its ability to meet the firm’s regulatory obligations
Whether the vendor offers the lowest price available
The vendor’s willingness to indemnify the firm against all losses
How quickly the vendor can begin work without a contract
4.
Under Regulation S-P a firm must give customers an initial privacy notice
1
Only when the firm decides to share information with affiliates
Only after the customer requests one in writing
When the customer relationship is established and annually thereafter unless an exception applies
Once every five years regardless of circumstances
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
Retain every such record permanently rather than dispose of it
Place the records in ordinary recycling bins
Take reasonable measures such as shredding to protect against unauthorized access
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 because both work at the same firm
Provide the details if the banker signs a confidentiality form
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
A customer increasing regular monthly contributions
A customer selling a position at a loss for tax purposes
An address change request followed immediately by a request for a new debit card
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 routine service inquiry needing no record
A matter that may be settled privately with the customer
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
A reference letter from any other customer of the firm
The customer’s signature on a trade confirmation
Documentary methods such as a government identification or nondocumentary methods such as database checks
10.
An operations associate believes a supervisor is ignoring a red flag she reported. Under a well-designed escalation framework she should
1
Post her concerns on a public internet message board
Drop the matter because she already reported it once
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
Publish the results on its public website
Send a summary of the results to every customer
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 reconciliation of the general ledger
A reclamation of improperly delivered securities
A periodic security count of certificates
Entitlement review supporting least privilege access
13.
Which written supervisory procedures practice is required rather than optional?
1
Rewriting the entire manual every calendar month
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
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
Accept the delivery and charge the customer a fee
Report the certificate as counterfeit
Send a don’t know notice to the transfer agent
16.
How does a performance report differ from a customer account statement?
1
A performance report replaces the statement for institutional customers
A performance report is required quarterly while statements are optional
A performance report must be delivered before each transaction settles
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
The 140 percent hypothecation limit
A daily reserve computation for that account
A permanent freeze on all account activity
Backup withholding on reportable payments to the account
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 short sale requiring a locate
A residual credit from the prior custodian
A reclamation against the contra firm
A wash sale with the loss disallowed for tax purposes
19.
Under FINRA Rule 4311 a carrying agreement between an introducing firm and a clearing firm must
1
Be renewed by the customer every twelve months
Give the introducing firm custody of all customer funds
Allocate the responsibilities of each party in writing and be approved by FINRA
Eliminate the clearing firm’s books and records obligations
20.
In the customer reserve formula computation under Rule 15c3-3, free credit balances owed to customers are
1
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
Netted against the firm’s proprietary trading gains
21.
Under SEC Rule 17a-3 entries to a firm’s blotters recording purchases and sales must be made
1
No later than the business day following the transaction
Within thirty calendar days of the transaction
Only when a reconciliation difference appears
At the end of each calendar quarter
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
Research and document the item and escalate it under the firm’s procedures
Move the item into a customer account until it clears
Wait for the annual audit to resolve it
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
An institutional communication
A retail 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
A permissible short-term financing technique
Acceptable if the accounts are eventually made whole
A standard method of processing residual credits
Check kiting which is a prohibited and fraudulent practice
25.
FINRA Rule 2140 prohibits a member or its associated persons from
1
Accepting an account from a competing broker-dealer
Transferring an account without the customer’s signature
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
26.
Which record must a firm maintain showing all checks received and disbursed on a daily basis?
1
The check blotter
The FOCUS report
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
Safekeeping which requires the firm to return the specific certificates deposited
Segregation which permits the firm to return any like certificates
Hypothecation which pledges the certificates as collateral
Rehypothecation which lends the certificates to another firm
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
Violates the rule because counts must be performed every business day
Satisfies the rule because two counts a year is the minimum
Violates the periodic security count rule because counts must occur no less often than quarterly
Satisfies the rule because counts are required only when a regulator asks
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 residual credit to be forwarded to the customer
A don’t know item to be returned to the contra firm
A short difference that must be researched and recorded promptly
Evidence that the position was journaled correctly
30.
Which of the following would generally NOT be depository eligible at DTC?
1
A listed common stock of a large domestic issuer
A physical certificate for a privately held company with transfer restrictions
A widely traded corporate bond
An exchange traded fund share class
31.
The DWAC service is used to
1
Net a member’s daily settlement obligations in each security
Move eligible book-entry shares electronically between the transfer agent and a depository participant
Report lost or stolen certificates to a central database
Guarantee the authenticity of an endorsing signature
32.
A confirmation for a principal transaction in an equity security must disclose
1
The customer’s cumulative gain or loss for the year
The identity of the contra party on every trade
That the firm acted as principal and the markup or markdown where required
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 prevailing market price at the time of the transaction
The price the firm originally paid for its inventory position
The customer’s stated investment objective
A flat five percent that may never be exceeded
34.
A representative places a firm proprietary order ahead of a customer order that is executable at the same price. This violates
1
FINRA Rule 5320 which prohibits trading ahead of customer orders
The requirement to maintain a check blotter
The FINRA rule on breakpoint sales
Regulation S-ID
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 permissible way to preserve the customer’s liquidity
A prohibited breakpoint sale
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 copy of the firm’s most recent audited financial statements
A prospectus for every security to be purchased
The firm’s business continuity plan in full
A margin disclosure statement describing the risks of borrowing
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
Escheatment of the customer’s position
A short sale requiring a locate
A journal entry between customer accounts
Rehypothecation of customer securities by the firm
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
An advisory fee based on assets under management
A fixed commission set by FINRA
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
Delivery versus payment settlement
A repurchase agreement
A when-issued transaction
Continuous net settlement
41.
In a repurchase agreement the dealer
1
Permanently transfers ownership with no obligation to repurchase
Guarantees the buyer a fixed rate of dividend income
Sells securities and agrees to buy them back later at a higher price
Borrows securities against a rebate on cash collateral
42.
A customer sold securities and failed to deliver them. Under the FINRA close-out procedures the buying firm may protect itself by
1
Cancelling the customer’s original purchase
Issuing a buy-in notice to the selling firm
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 carrying agreement
A discretionary authorization
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
A copy of the firm’s written supervisory procedures
The options disclosure document
The firm’s most recent FOCUS report
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
Wait until she has been registered for at least two years
Limit the account to mutual funds and money market shares
Obtain prior written consent from the employing member firm
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
Restricted securities subject to a resale legend
Excess margin securities requiring segregation
Directly held shares that appear on the fund’s records rather than in street name
Bearer instruments transferable by delivery alone
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
An automated clearing house debit
A residual credit
A reclamation
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
Income permanently retained by the delivering firm
A reclamation against the receiving firm
A don’t know item returned to the paying agent
A residual credit forwarded to the receiving firm
