Finra Series-7 Exam Topics
Finra Series-7 Exam Overview :
| Exam Name: | General Securities Representative ination (GS) |
| Exam Code: | Series-7 |
| Certifications: | Finra General Securities Representative Certification |
| Actual Exam Duration: | 360 minutes |
| Expected no. of Questions in Actual Exam: | 249 |
| See Expected Questions: | Finra Series-7 Expected Questions in Actual Exam |
Finra Series-7 Exam Objectives :
| Section | Objectives |
|---|---|
| Function 1: Seeks Business for the Broker-Dealer from Customers and Potential Customers | 1.1 Contacts current and potential customers in person and by telephone, mail, and electronic means; develop promotional and advertising materials and seek appropriate approvals to distribute marketing materials. Knowledge of: • Standards and required approvals of public communications • Types of communications (e.g., retail, institutional, correspondence) • Seminars, lectures, and other group forum requirements • Product-specific advertisements and disclosures?
2210 – Communications with the Public 2211 – Communications with the Public about Variable Life Insurance and Variable Annuities 2212 – Use of Investment Companies Rankings in Retail Communications 2213 – Requirements for the Use of Bond Mutual Fund Volatility Ratings 2216 – Communications with the Public about Collateralized Mortgage Obligations (CMOs) 2220 – Options Communications 2330 – Members’ Responsibilities Regarding Deferred Variable Annuities 2360 – Options SEC Rules and Regulations Securities Act of 1933 Section 5 – Prohibitions Relating to Interstate Commerce and the Mails 156 – Investment Company Sales Literature 482 – Advertising by an Investment Company as Satisfying Requirements of Section 10 498 – Summary Prospectuses for Open-End Management Investment Companies Securities Exchange Act of 1934 15c2-12 – Municipal Securities Disclosure 15c3-3 – Customer Protection — Reserves and Custody of Securities Cboe Rules 9.8 – Addressing of Communications to Customers 9.9 – Delivery of Current Options Disclosure Documents 9.15 – Options Communications MSRB Rule G-21 – Advertising 1.2 Describes investment products and services to current and potential customers with the intent of soliciting business Knowledge of: • Process for bringing new issues to market (e.g., due diligence, registration statement, preliminary prospectus, final prospectus, underwriting agreement, selling group agreement, blue-sky laws and procedures) • Regulatory requirements for initial public offerings (IPOs) (e.g., restrictions on prospecting or soliciting, allowable communications with the public) • Primary financing for municipal securities (e.g., competitive sale, negotiated sale, private offering, advance refunding) • Syndicate formation and operational procedures (e.g., the purpose of syndicate bid, roles and responsibilities of underwriters, selling group concession and reallowance) • Pricing practices and components of underwriters’ spread and determination of underwriters’ compensation and selling practices • Prospectus requirements (e.g., timeliness of information, preliminary prospectus (red herring), final prospectus) • Information required in a registration statement and offering material on the new issue (e.g., in pre-filing period, in the cooling-off period, in the post-registration period) • Official statements, preliminary official statements, notice of sale for municipal securities • Qualified institutional buyer (QIB) and accredited investor • Qualification requirements for Regulation A offerings (e.g., filing of abbreviated registration statement and offering circular • Regulation D offerings (e.g., exemption from SEC registration, access to capital markets, accredited investors) • Securities and transactions exempted from registration, including Section 3(a)(11) of the Securities Act of 1933 and Rule 147 thereunder (i.e., intrastate offering) • Regulatory requirements for private placements or resales • Nonregistered foreign securities sold to institutions qualified in the U.S. • Foreign securities prohibited from being sold to U.S. investors FINRA Rules 3160 – Networking Arrangements Between Members and Financial Institutions 3170 – Tape Recording of Registered Persons by Certain Firms 5110 – Corporate Financing Rule — Underwriting Terms and Arrangements 5121 – Public Offerings of Securities with Conflicts of Interest 5130 – Restrictions on the Purchase and Sale of Initial Equity Public Offerings 5131 – New Issue Allocations and Distributions 5141 – Sale of Securities in a Fixed Price Offering 5160 – Disclosure of Price and Concessions in Selling Agreements 5190 – Notification Requirements for Offering Participants SEC Rules and Regulations Securities Act of 1933 Section 3 – Exempted Securities Section 4 – Exempted Transactions 134 – Communications Not Deemed a Prospectus 134a – Options Material Not Deemed a Prospectus 144 – Persons Deemed Not To Be Engaged in a Distribution and Therefore Not Underwriters 144A – Private Resales of Securities to Institutions 145 – Reclassification of Securities, Mergers, Consolidations and Acquisitions of Assets 147 – Intrastate Offers and Sales 164 – Post-filing Free Writing Prospectuses in Connection with Certain Registered Offerings Securities Exchange Act of 1934 10b-1 – Prohibition of Use of Manipulative or Deceptive Devices or Contrivances concerning Certain Securities Exempted from Registration 10b-3 – Employment of Manipulative and Deceptive Devices by Brokers or Dealers 10b-18 – Purchases of Certain Equity Securities by the Issuer and Others 15c2-8 – Delivery of Prospectus 17a-3 – Records To Be Made by Certain Exchange Members, Brokers and Dealers Regulation A – Conditional Small Issues Exemption Regulation C – Registration 415 – Delayed or Continuous Offering and Sale of Securities 427 – Contents of Prospectus Used After Nine Months 430 – Prospectus for Use Before Effective Date 430A – Prospectus in a Registration Statement at the Time of Effectiveness 430B – Prospectus in a Registration Statement After Effective Date 433 – Conditions to Permissible Post-filing Free Writing Prospectuses Regulation D – Rules Governing the Limited Offer and Sale of Securities Without Registration Under the Securities Act of 1933 500 – Use of Regulation D 501 – Definitions and Terms Used in Regulation D 502 – General Conditions to be Met 503 – Filing of Notice of Sale 504 – Exemption for Limited Offerings and Sales of Securities Not Exceeding $5,000,000 506 – Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering 507 – Disqualifying Provision Relating to Exemptions under Rules 504 and 506 508 – Insignificant Deviations from a Term, Condition or Requirement of Regulation D Regulation M Regulation S – Rules Governing Offers and Sales Made Outside the United States Without Registration Under the Securities Act of 1933 Trust Indenture Act of 1939 MSRB Rules G-11 – Primary Offering Practices G-28 – Transactions with Employees and Partners of Other Municipal Securities Professionals G-32 – Disclosures in Connection with Primary Offerings G-34 – CUSIP Numbers, New Issue, and Market Information Requirements G-38 – Solicitation of Municipal Securities Business |
| Function 2: Opens Accounts After Obtaining and Evaluating Customers Financial Profile and Investment Objectives | 2.1 Informs customers of the types of accounts and provides disclosures regarding various account types and restrictions Knowledge of: • Types of accounts (e.g., pattern day trading, prime brokerage, delivery versus payment/receive versus payment (DVP/RVP), advisory or fee-based) • Account registration types (e.g., tenants in common (TIC), community property, sole proprietorship, partnership, unincorporated associations) • Requirements for opening customer accounts • Retirement plans and other tax-advantaged accounts Transfers, rollovers, eligibility, distribution strategies, and taxation (e.g., types of allowable contributions, distribution options, taxation of distribution at retirement, age restrictions for distributions, permissible investments) Employer-sponsored plans and ERISA (e.g., 457, defined benefit, profit-sharing, stock options and stock purchase, non-qualified deferred compensation programs) • Wealth events (e.g., inheritance) • Account registration changes and internal transfers FINRA Rules 2270 – Day-trading Risk Disclosure Statement 2130 – Approval Procedures for Day-trading Accounts 4512 – Customer Account Information 4514 – Authorization Records for Negotiable Instruments Drawn from a Customer’s Account 4515 – Approval and Documentation of Changes in Account Name or Designation Cboe Rule 9.1 – Opening of Accounts Internal Revenue Code 219 – Retirement Savings 415 – Limitations on Benefits and Contributions Under Qualified Plans 529 – Qualified Tuition Programs 530 – Coverdell Education Savings Accounts Employee Retirement Income Security Act of 1974 (ERISA) 2.2 Obtains and updates customer information and documentation, including required legal documents and identifies and escalates suspicious activity Knowledge of: • Customer screening (e.g., customer identification program (CIP), know-your-customer (KYC), domestic or foreign residency and/or citizenship, corporate insiders, employees of broker-dealers or self-regulatory organizations (SROs)) • Information security and privacy regulations (e.g., initial privacy disclosures to customers, opt-out notices, disclosure limitations, exceptions) • Account authorizations (e.g., power of attorney (POA), trust documents, corporate resolutions, trading authority, discretionary account documents) FINRA Rule 408T – Discretionary Power in Customers’ Accounts 2090 – Know Your Customer 3260 – Discretionary Accounts SEC Rules and Regulations Securities Exchange Act of 1934 Section 3(a)(35) – Definitions and Application of Title – “Investment Discretion” Regulation S-P – Privacy of Consumer Financial Information and Safeguarding Personal Information Cboe Rule 9.4 – Discretionary Accounts 2.3 Makes reasonable efforts to obtain customer investment profile information including, but not limited to, the customer's other security holdings, financial situation and needs, tax status and investment objectives Knowledge of: • Essential facts regarding customers and customer relationships • Financial factors relevant to assessing a customer’s investment profile Security holdings, other assets and liabilities, annual income, net worth, tax considerations Other considerations (e.g., age, marital status, dependents, employment, investment experience, home ownership and financing, employee stock options, insurance, liquidity needs) • Investment objectives (e.g., preservation of capital, income, growth, speculation) • Reasonable-basis, customer-specific, and quantitative care obligations • Investment strategies and recommendations to hold • Verification of investor accreditation and sophistication FINRA Rules 2111 – Suitability 2214 – Requirements for the Use of Investment Analysis Tools SEC Rules and Regulations Securities Act of 1934 15l-1 – Regulation Best Interest MSRB Rule G-19 – Suitability of Recommendations and Transactions 2.4 Obtains supervisory approvals required to open accounts Knowledge of: • Required review, approvals, and documentation for account opening and maintenance • Physical receipt, delivery, and safeguarding of cash or cash equivalents, checks, and securities • Circumstances for refusing or restricting activity in an account or closing accounts FINRA Rules 3110 – Supervision 3120 – Supervisory Control System Cboe Rule 9.2 – Supervision of Accounts MSRB Rule G-27 – Supervision |
| Function 3: Provides Customers with Information AboutInvestments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records | Recommendations, Transfers Assets, and Maintains Appropriate Records 3.1 Provides customers with information about investment strategies, risks and rewards, and communicates relevant market, investment,t and research data to customers Knowledge of: • Customer-specific factors that generally affect the selection of securities (i.e., customer’s investment profile, including the customer’s risk tolerance, investment time horizon, and investment objectives, and liquidity needs) • Portfolio or account analysis and its application to security selection (e.g., diversification, asset allocation principles, concentration, volatility, and potential tax ramifications) • Portfolio theory (e.g., alpha and beta considerations, Capital Asset Pricing Model (CAPM)) • Delivery of annual reports and notices of corporate actions (e.g., dividends, splits, odd lot tenders) • Fundamental analysis of financial statements and types of financial statements included in an annual report, importance of footnotes, material risk disclosures, and key terms (e.g., assets, liabilities, capital, cash flow, income, earnings per share (EPS), book value, shareholders' equity, depreciation, depletion, goodwill) • Balance sheet and methods of inventory valuation: last-in, first-out (LIFO), first-in, first-out (FIFO) and methods of depreciation • Income statement and calculations derived from an income statement: earnings before interest and taxes (EBIT); earnings before taxes (EBT); net profit; and earnings before interest, taxes, depreciation and amortization (EBITDA) • Principal tools to measure financial health Liquidity: working capital, current ratio, quick assets, acid test ratio Risk of bankruptcy: bond ratio, debt-to-equity ratio Efficient use of assets: inventory turnover ratio, cash flow Profitability: margin-of-profit ratio, net profit ratio, asset coverage, and safety of income (i.e., net asset value (NAV) per bond, bond interest coverage, book value per share) EPS: fully diluted EPS, price-earnings (P/E) ratio, dividend payout ratio, current yield Competitiveness (comparative performance): return on common equity SEC Rules and Regulations Securities Exchange Act of 1934 14e-3 – Transactions in Securities on the Basis of Material, Nonpublic Information in the Context of Tender Offers 14e-4 – Prohibited Transactions in Connection with Partial Tender Offers Cboe Rule 9.3 – Suitability of Recommendations 3.2 Reviews and analyzes customers' investment profiles and product options to determine that investment recommendations meet applicable standards Knowledge of: Equity securities • Types of stock (e.g., authorized, issued, outstanding, Treasury stock, stated value) • Characteristics of common stock Rights of common stockholders (e.g., pre-emptive right, pro rata share of dividends, access to corporate books, voting power (statutory, cumulative, nonvoting), residual claims on corporate assets) Spinoffs Stock acquired through a consolidation or transfer Penny stocks and rules associated with penny stock transactions • Characteristics of preferred stock Types of preferred stock (e.g., cumulative, non-cumulative, participating, nonparticipating, convertible, callable, adjustable rate, and variable rate) Rights of preferred stockholders (e.g., preference upon corporate dissolution, dividend payment, conversions, sinking fund provisions) • Rights and warrants: origination, exercise terms, the relationship of the subscription price to the market price of underlying stock, anti-dilution agreement • Electronic exchanges or auction markets (e.g., electronic communications networks (ECNs), over-the counter (OTC), dark pools of liquidity) • Types and characteristics of non-U.S. market securities (e.g., American Depositary Receipts (ADRs), corporate equity) • Tax treatment of equity securities transactions Capital gains and losses, dividend distributions (qualified and non-qualified), wash sales, holding periods Determination of net long-term and short-term gains or losses When-issued securities, securities acquired through conversion Calculation of cost basis per share on: purchases, exchange of convertibles for common shares, stock dividends and stock rights, inherited or gifted securities Cost valuation: FIFO, LIFO, identified shares Packaged products • Investment companies, exchange-traded funds (ETFs), unit investment trusts (UITs) Types of mutual funds: equity, fixed income, money market, interval Structure of investment companies (e.g., open-end and closed-end funds) Fund objectives (e.g., value, growth, income, balanced, international, sector, life cycle) Characteristics of: − Open-end funds: e.g., NAV, forward pricing, offering price, exchange privileges within families of funds, fees, and expenses: no load, load (front-end, back-end), distribution fees, management fees, nature of 12b-1 fees − Closed-end funds: distributed in the primary market at the IPO price, traded in the secondary market Sales practices (e.g., dollar-cost averaging (DCA), computing sales charges, breakpoints) Redemption (e.g., redemption price, payout or withdrawal plans, conversion privilege, restrictions, contingent deferred sales charge, tenders) Tax treatment of mutual funds Reinvestment of dividends and capital gain distributions Charges and expenses • Variable life insurance/annuity contracts Characteristics and insurance features (e.g., minimum guarantees, death benefits, living benefits, riders) Separate accounts (e.g., purpose, management of portfolio, investment policies, performance of account) Valuation of a variable annuity contract (e.g., accumulation units, surrender value, annuitization units) Purchasing or exchanging variable annuities (e.g., immediate annuity, charges, fees, penalties, right of accumulation (ROA), waiver of premium) Annuitization: types of election, variable payout, assumed interest rate, the relationship between assumed interest rate and actual rate of return Tax treatment of variable annuity contracts during the accumulation period and annuity period and taxation at the surrender of the contract • Real estate investment trusts (REITs) Structure (e.g., finite number of shares, distributed in the primary market at the IPO price, traded in secondary market, premiums, and discounts to NAV) Types and characteristics (e.g., equity REIT, mortgage REIT, hybrid REIT) Tax treatment (e.g., dividends, capital gains, distributions) • Direct participation programs (DPPs) General characteristics − Structures (e.g., limited partnerships (e.g., roles and duties of general partners vs. limited partners), limited liability companies, corporations that have tax pass-through exemption from the IRS) − Tax treatment (e.g., flow-through of income, expenses and tax liability, real estate depreciation, oil and gas tax advantages) Types of DPPs (e.g., real estate, oil and gas, small-cap debt and equity, business development companies (BDCs), equipment leasing) and their investment advantages, risks, and tax implications Types of DPP offerings (i.e., private placements and public offerings) Evaluation of DPPs (e.g., economic soundness of the program, expertise of the general partner, basic objectives of the program; start-up costs, leverage,e and other revenue considerations) Options • Listed options and their characteristics (e.g., contract specifications and adjustments, dividends, exercise/assignment, settlement date, opening and closing transactions, values (premium, intrinsic and time), volume, open interest, position limits, exercise limits) The Options Clearing Corporation (OCC) American-style and European-style Long-term Equity AnticiPation Securities (LEAPS) • Basic strategies (e.g., covered writing and hedging for equity, index, foreign currency, and yield-based options) Protective put for equity and index options Covered call and put writing for equity options • Advanced strategies (e.g., spreads, straddles, combinations, uncovered writing) Long (debit) and short (credit) spreads Straddle/combination for equity and index options Uncovered (naked) call or put writing for equity, index, and yield-based options • Profit and loss calculations, break-even points, economics of positions • Tax treatment of options transactions (equity, index, foreign currency, yield-based) Debt Securities • Types of debt securities and money market instruments (e.g., corporate commercial paper, brokered CDs, Eurodollar bond, variable-rate preferreds) • Characteristics: structure, risks and rewards, call provisions • Structured products (e.g., equity-linked securities, exchange-traded notes (ETNs)) • Types and characteristics of non-U.S. market securities (e.g., sovereign and corporate debt) • Types of yields (e.g., coupon (nominal), current, yield to maturity (YTM), yield to call (YTC), yield to worst and discount yield, calculations, and relationship to price) • Bond ratings • Tax implications of taxable debt securities, including original issue discount (OID) rules, interest, principal, premiums, discounts, and capital gains and losses Corporate bonds • Types of corporate bonds (e.g., mortgage bonds, equipment trust certificates, debentures, step coupon bonds, zero-coupon bonds, convertible bonds, high-yield bonds, income bonds) and their characteristics • Convertible bonds: general characteristics, (e.g., conversion privilege, fixed versus variable, conversion ratio or price, calculation of parity price of the underlying security, arbitrage, factors influencing conversion) Municipal Securities • General characteristics of municipal fund securities, method of quotations (e.g., yield/basis price, dollar price), interest rate, payment periods, denominations, diversity of maturities (e.g., serial, term), and legal opinion (purpose and contents) • Analysis and diversification of municipal investments: geographical, type and rating • Analysis of general obligation (GO) bonds, including characteristics of the issuer, nature of the issuer’s debt, factors affecting the issuer’s ability to pay, municipal debt ratios • Analysis of revenue bonds, including feasibility studies, sources of revenue, security (protective covenants of bond indenture), financial reports and outside audits, restrictions on the issuance of additional bonds, flow of funds, earnings coverage, sources of credit information, rating services, credit enhancements • Purpose and characteristics of specific types of municipal securities: Types of municipal bonds (e.g., GO bonds, limited tax GO bonds and notes, revenue bonds, short-term municipal obligations (e.g., tax anticipation notes (TANs), bond anticipation notes (BANs), revenue anticipation notes (RANs), tax-exempt commercial paper, grant anticipation notes (GANs), tax and revenue anticipation notes (TRANs))) Special tax, special assessment, moral obligation, advance or pre-refunded, double-barreled, taxable (e.g., Build America bonds), OIDs, zero-coupon (capital appreciation) bonds, certificates of participation (COPs), alternative minimum tax (AMT), lease revenue, variable rate securities, auction rate securities Municipal fund securities including 529 college savings plans, local government investment pools (LGIPs), ABLE accounts (e.g., change in beneficiary, rollovers, ownership, tax consequences of unqualified withdrawals) Call features (e.g., par or premium, optional, mandatory, partial call, sinking fund, extraordinary calls, make whole calls), advantages/disadvantages to issuers and investors Put or tender options Refunding methods: direct exchange versus sale of new issue, advance refunding, refunding at call dates/current refunding escrowed to maturity, crossover refunding • Factors affecting the marketability of municipal bonds: rating, maturity, call features, interest (coupon) rate, block size, liquidity (ability to sell the bond in the secondary market), dollar/yield price, issuer name (local or national reputation), credit enhancement, credit and liquidity support, denominations • Pricing of municipal securities and other mathematical calculations: dollar price, accrued interest (regular coupon, odd first coupon), computations of accrued interest (30/360), amortization of premium, accretion of discount, relationship of bond prices to changes in maturity, coupon, various yield calculations (taxable equivalent yield, net yield after capital gains tax, current yield, YTC on premium bonds) value of basis point, in default, • Tax treatment of municipal securities: securities bought at a discount or premium in the secondary market, OID, federal income tax status, state and local tax status, computation of taxable equivalent yield, accrued interest, AMT, bonds, taxable bonds, bank-qualified bonds Registered hedge funds and fund of funds • Structure (e.g., private placements, registered, exemption from registration under the Investment Company Act of 1940, blind pool/ blank check) • Characteristics (e.g., limited or no liquidity, limited available information, lock-up provisions, charges and expenses, tangible assets, a wide array of investment styles, models, and vehicles) • Tax treatment of distributions Asset-backed securities • Collateralized mortgage obligations (CMOs) • Collateralized debt obligations (CDOs) • Characteristics (e.g., indenture, maturities, form of ownership, interest payment periods, call and put features, calculation of accrued interest, and specific characteristics (e.g., maturity, type of collateral, priority of claim, call provisions)) U.S. Treasury securities • Treasury bills, notes, bonds • Treasury receipts (Separate Trading of Registered Interest and Principal Securities (STRIPS)/zero-coupon) • Treasury Inflation Protected Securities (TIPS) • Characteristics (e.g., types, maturities, denominations, payment of interest) U.S. government agency securities • Government National Mortgage Association (Ginnie Mae) • Federal National Mortgage Association (Fannie Mae) • Federal Home Loan Mortgage Corporation (Freddie Mac) • SLM Corporation (Sallie Mae) • Characteristics: types, maturities, denominations, primary dealers, distribution, issue form, quotations, passthrough, calculating a spread, pricing, payment of interest, and principal FINRA Rules 2114 – Recommendations to Customers in OTC Equity Securities 2121 – Fair Prices and Commissions 2122 – Charges for Services Performed 2124 – Net Transactions with Customers 2310 – Direct Participation Programs 2320 – Variable Contracts of an Insurance Company 2341 – Investment Company Securities 2350 Series – Trading in Index Warrants, Currency Index Warrants, and Currency Warrants 4210(f)(2) – Definitions Related to Options, Currency Warrants, Currency Index Warrants and Stock Index Warrant Transactions SEC Rules and Regulations Securities Exchange Act of 1934 Section 9(a) – Prohibition Against Manipulation of Security Prices (Transactions Relating to Purchase or Sale of Security) Exemption of Certain Issuers from Section 15(D) of the Act 3a51-1 – Definition of "Penny Stock" 15g-1 – Exemptions for Certain Transactions 15g-2 – Penny Stock Disclosure Document Relating to the Penny Stock Market 15g-5 – Disclosure of Compensation of Associated Persons in Connection with Penny Stock Transactions 15g-9 – Sales Practice Requirements for Certain Low-priced Securities Investment Company Act of 1940 Section 2(a) – General Definitions Section 10 – Affiliations or Interests of Directors, Officer,s and Employees Section 12(a) – Functions and Activities of Investment Companies (Purchase of Securities on Margin; Joint Trading Accounts; Short Sales of Securities; Exceptions) Section 13(a) – Changes in Investment Policy (Prohibited Actions for Registered Investment Companies) Section 15(a) – Investment Advisory and Underwriting Contracts (Written Contract to Serve or Act as Investment Adviser; Contents) Section 16(a) – Changes in Board of Directors; Provisions Relative to Strict Trusts (Election of Directors) Section 17(a) – Transactions of Certain Affiliated Persons and Underwriters (Prohibited Transactions) Section 18 – Capital Structure Section 19 – Dividends Section 22 – Distribution, Redemption, and Repurchase of Redeemable Securities Section 23 – Distribution and Repurchase of Securities: Closed-end Companies Section 30 – Periodic and Other Reports; Reports of Affiliated Persons Section 35 – Unlawful Representations and Names Section 36 – Breach of Fiduciary Duty Section 37 – Larceny and Embezzlement 12b-1 – Distribution of Shares by Registered Open-end Management Investment Company Cboe Rules 1.1 – Definitions 4.5 (f) – Long-term Equity Options Series (LEAPS®) 4.6 – Adjustments 6.20 (e) – Exercise of American-style Index Options 6.21 – Allocation of Exercise Notices 8.1 – Just and Equitable Principles of Trade 8.3 – Position Limits 8.31 – Position Limits for Broad-based Index Options 8.32 – Position Limits for Industry Index Options 8.41– Position Limits — Interest Rate Options 8.42 (b) – Exercise Limits — Index Options 8.42 (f) – Exercise Limits — Interest Rate Options 11.1 – Exercise of Option Contracts MSRB Rules D-12 – Definition of Municipal Fund Securities G-13 – Quotations Related to Municipal Securities G-17 – Conduct of Municipal Securities Activities G-30 – Prices and Commissions G-45 – Reporting of Information on Municipal Fund Securities Real Estate Investment Trusts (REITs) REIT Modernization Act of 1999 Internal Revenue Code 301 – Distributions of Property 316 – Dividend Defined 856 – Definition of Real Estate Investment Trust 858 – Dividends Paid by Real Estate Investment Trust After Close of Tax Year 1035 – Certain exchanges of Insurance Policies 1091 – Loss from Wash Sales of Stock or Securities 1233 – Gains and Losses from Short Sales 1256 – Contracts Marked to Market 3.3 Provides required disclosures regarding investment products and their characteristics, risks, services, and expenses Knowledge of: • Required disclosures on specific transactions (e.g., material aspects of investments, statement of additional information, material events, control relationships) • Types of investment risk (e.g., call, systematic and nonsystematic, reinvestment, timing) • Types of investment returns (e.g., tax-exempt interest, return of capital) • Costs and fees associated with investments (e.g., markups, commissions, net transactions, share classes, non-discretionary fee-based accounts, surrender charges, 12b-1 fees, mortality and expense charges in variable products, soft dollar arrangements) • Tax considerations (e.g., unification of gift and estate taxes, lifetime exclusion, annual gift limit, taxation of securities received as a gift, inheritance of securities) • Market analysis considerations (e.g., market sentiment, market indexes, options volatility, put/call ratio, market momentum, available funds, trading volume, short interest, index futures) • Market analysis considerations for municipal securities, including Bond Buyer indexes (e.g., 11 GO Bonds Index, Municipal Bond Index (40 Bond), 20 GO Bonds Index) • Technical analysis of basic chart patterns and key terms (e.g., trend lines, saucer/inverted saucer, headand-shoulders/inverted head-and-shoulders, breakouts, resistance/support levels, moving averages, consolidation, stabilization, overbought and oversold) • Disclosure of material events affecting retail sales of municipal bonds FINRA Rule 2165 – Financial Exploitation of Specified Adults SEC Rules and Regulations Securities Exchange Act of 1934 Section 28(e) – Effect on Existing Law (Exchange, Broker, and Dealer Commissions; Brokerage and Research Services) Internal Revenue Code 2503 – Taxable Gifts 3.4 Communicates with customers about account information, processes requests, and retains documentation Knowledge of: • Customer confirmations and statements, including components, timing, mailings to third parties, and exceptions • Account value, profits,and losses realized and unrealized • Withdrawals and tenders • Customer account records (e.g., updating for change of address, sending required notifications, investment objectives) • Transferring accounts between broker-dealers (e.g., Automated Customer Account Transfer Service (ACATS), transfer agent and procedures) • Books and records retention requirements • Account closure procedures FINRA Rules 409T – Statements of Accounts to Customers 2231 – Customer Account Statements 2232 – Customer Confirmations 2273 – Educational Communication Related to Recruitment Practices and Account Transfers 4510 – Books and Records Requirements 11870 – Customer Account Transfer Contracts SEC Rules and Regulations Securities Exchange Act of 1934 10b-10 – Confirmation of Transactions 15g-6 – Account Statements for Penny Stock Customers 17a-4 – Records To Be Preserved by Certain Exchange Members, Brokers and Dealers Regulation FD – Disclosure Requirements Cboe Rules 6.1 – Reporting duties 7.1 – Maintenance, Retention and Furnishing of Books, Records and Other Information 7.2 – Reports of Uncovered Short Positions 7.3 – Financial Reports 7.4 – Audits 7.5 – Automated Submission of Trading Data 7.7 – Risk Analysis of Market-maker Accounts 7.8 – Risk Analysis of Portfolio Margin Accounts 7.9 – Regulatory Cooperation 9.5 – Confirmation to Customers 9.6 – Statements of Accounts to Customers 9.14 – Transfer of Accounts MSRB Rules G-8 – Books and Records To Be Made by Brokers, Dealers, and Municipal Securities Dealers and Municipal Advisors G-9 – Preservation of Records G-15 – Confirmation, Clearance, Settlement, and Other Uniform Practice Requirements to Transactions with Customers G-26 – Customer Account Transfers |
| Function 4: Obtains and Verifies Customers Purchase and Sales Instructions and Agreements; Processes, Completes and Confirms Transactions | 4.1 Provides current quotes Knowledge of: • Orders, offerings, and transactions in customer accounts (e.g., at advertised yield) • Trade execution activities • Types of securities quotes (e.g., firm, subject) • Types of orders (e.g., all-or-none (AON), fill-or-kill (FOK), immediate-or-cancel (IOC), not-held, market-onclose (MOC), spread, straddle) • Short sale requirements and strategies (e.g., order marking, locate, borrow and delivery, speculation, hedging, arbitrage) • Securities lending (e.g., hard to borrow, fail to deliver) • Best execution obligations FINRA Rules 4320 – Short Sale Delivery Requirements 4551 – Requirements for Alternative Trading Systems to Record and Transmit Orders and Execution Information for Security Futures 5210 – Publication of Transactions and Quotations 5220 – Offers and Stated Prices 5260 – Prohibition on Transactions, Publication of Quotations, or Publication of Indications of Interest During Trading Halts 5290 – Order Entry and Execution Practices 5310 – Best Execution and Interpositioning 6100 Series – Quoting and Trading in NMS stocks 6110 – Trading Otherwise than on an Exchange 6120 – Trading Halts 6121 – Trading Halts Due to Extraordinary Market Volatility 6130 – Transactions Related to Initial Public Offerings 6400 Series – Quoting and Trading in OTC Equity Securities 6600 Series – OTC Reporting Facility 11860 – COD Orders SEC Rules and Regulations Securities Exchange Act of 1934 15c2-7 – Identification of Quotations 15c2-11 – Initiation or Resumption of Quotations Without Specified Information 15g-3 – Broker or Dealer Disclosure of Quotations and Other Information Relating to the Penny Stock Market 15g-4 – Disclosure of Compensation to Brokers or Dealers Regulation ATS – Alternative Trading Systems Regulation SHO – Regulation of Short Sales Cboe Rules 5.33 – Certain Types of Orders Defined 5.7 – Required Order Information NYSE Rules 7.12 – Trading Halts Due to Extraordinary Market Volatility 7.31 – Orders and Modifiers 7.35 Series – Auctions 7.37 – Order Execution and Routing 54 – Dealings on the Floor-persons 64 -- Bonds, Rights and 100-Share-Unit Stocks 71 – Precedence of Highest Bid and Lowest Offer 72(d) – Priority of Cross Transactions and Supplemental Material .10 – Definition of a Block 74 – Publicity of Bids and Offers 75 – Disputes as to Bids and Offers 76 – “Crossing” Orders 77 – Prohibited Dealings and Activities 104 – Dealings and Responsibilities of DMMs 123A – Miscellaneous Requirements 123D(d) – Initial Listing Regulatory Halt 127 – Block Crosses Outside of the Prevailing NYSE Quotation 1000 – Automatic Executions 1001 – Execution of Automatically Executing Orders 1002 – Availability of Automatic Execution Feature 1004 – Election of Buy Minus Zero Plus Orders 4.2 Processes and confirms customers’ transactions pursuant to regulatory requirements and informs customers of delivery obligations and settlement procedures Knowledge of: • Information required on an order ticket (e.g., symbol, account number, price) • Market-making activities: role and functions of the designated market maker, listing requirements, limitations on trading during significant market declines, principal transactions, agency transactions, quotations (e.g., firm, subject or otherwise qualified, bid wanted, offer wanted, size obligations), SEC order handling rules, transaction reporting • Use of automated execution systems • Regulatory reporting requirements (e.g., Trade Reporting and Compliance Engine (TRACE), Electronic Municipal Market Access (EMMA), trade reporting facility (TRF), Real-Time Transaction Reporting System (RTRS)) • Delivery requirements • Good delivery (e.g., certificates in possession of the seller, certificates in the name of two persons, deceased owner, stock or bond powers, mutilated certificates, due bills, DVP/RVP, book-entry securities, stock certificate, endorsements, denominations, bearer, registrar, registered, Direct Registration System (DRS)) • Settlement of transactions (e.g., security-specific requirements, when-, as- and if-issued, ex-rights, ex-dividends, due bill checks, negotiated settlements, option exercise/assignment, don’t know (DK), extensions) FINRA Rules 5330 – Adjustment of Orders 6000 Series – Quotation, Order, and Transaction Reporting Facilities 6140 – Other Trading Practices 6700 Series – Trade Reporting and Compliance Engine 7000 Series – Clearing, Transactions, and Order Data Requirements, and Facility Charges 11000 Series – Uniform Practice Code SEC Rules and Regulations Securities Exchange Act of 1934 15c6-1 – Settlement Cycle Cboe Rules 6.20 – Exercise of Options Contracts 6.21 – Allocation of Exercise Notices 6.22 – Delivery and Payment MSRB Rules G-12 – Uniform Practice G-14 – Reports of Sales or Purchases Nasdaq Stock Market Rules 4600 Series – Requirements for Nasdaq Market Makers and Other Nasdaq Market Center Participants 4750 Series – Nasdaq Market Center-Execution Services NYSE Rules 63 – “When Issued”— “When Distributed” 130 Series – Comparison and Exchange of Contracts 133 – Comparison—Non-cleared Transactions 135 – Differences and Omissions—Cleared Transactions (“DK’s”) 136 – Comparison—Transactions Excluded from a Clearance 4.3 Informs the appropriate supervisor and assists in the resolution of discrepancies, disputes, errors and complaints Knowledge of: • Erroneous reports, errors, cancels, and rebills • Requirements for addressing customer complaints and consequences of improper handling of complaints • Methods of formal resolution (e.g., arbitration, mediation, litigation) • Form U4 reporting requirements FINRA Rules 4513 – Records of Written Customer Complaints 4530 – Reporting Requirements 8000 Series – Investigations and Sanctions 11892 – Clearly Erroneous Transactions in Exchange-listed Securities 11893 – Clearly Erroneous Transactions in OTC Equity Securities 12000 Series – Code of Arbitration Procedure for Customer Disputes 13000 Series – Code of Arbitration Procedure for Industry Disputes 14000 Series – Code of Mediation Procedure Cboe Rules 5.11 – Price Binding Despite Erroneous Report 9.17 – Customer Complaints 4.4 Addresses margin issues Knowledge of: • Requirements and characteristics of margin accounts (e.g., minimums, approvals, ineligible accounts, eligible/ineligible securities), and required disclosures (e.g., interest rate disclosure and hypothecation) • Product or strategy-specific requirements (e.g., Treasury securities, mutual funds) • Calculations in margin accounts (e.g., long and/or short positions) • Initial margin: long market value, short market value, debit balance, credit balance, initial Regulation T margin requirement on long or short positions, Regulation T requirement for established accounts, loan value, excess equity, buying power of deposited securities • Maintenance: additional purchases, sales (long or short), cash withdrawals, stock withdrawals, simultaneous purchases and sales, restrictions, liquidation to meet a margin/maintenance call, deposit of cash or securities required to meet a margin or maintenance call • Special memorandum account (SMA): balance, buying power, prohibited use of SMA, effect of excess equity, deposit of marginable securities, receipt of cash dividends and earned interest, liquidation of securities in the account, cash or securities withdrawals, new margin securities purchased or sold short • Other margin accounts (e.g., portfolio margin, day trading) FINRA Rules 2264 – Margin Disclosure Statement 4210 – Margin Requirements Cboe Rules 10.1 – General Rules 10.2 – Time Margin Must Be Obtained 10.3 – Margin Requirements 10.4 – Portfolio Margin 10.5 – Determination of Value for Margin Purposes 10.6 – "When Issued" and "When Distributed" Securities 10.7 – Guaranteed Accounts 10.8 – Meeting Margin Calls by Liquidation Prohibited 10.9 – Margin Required Is Minimum 10.10 – Compliance with Margin Requirements of the New York Stock Exchange 10.11 – Daily Margin Record Federal Reserve Regulation T – Credit by Brokers and Dealers |
| Official Information | https://www.finra.org/registration-exams-ce/qualification-exams/series7 |
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