Series 24 Study Guide with Complete
Solutions
If a Broker/Dealer receives currency over $10,000 from a customer, which of the
following is true?
[A] The currency must be deposited into a bank account within one business day.
[B] A Currency Transaction Report (CTR) must be filed by the Broker/Dealer.
[C] A Suspicious Activity Report must be filed by the Broker/Dealer.
[D] None of the above. - ANS-[A] Currency Transaction Report (CTR) must be filed by
the Broker/Dealer. When a broker/dealer receives currency, which exceeds $10,000 in
value a Currency Transaction Report (CTR), must be filed by the Broker/Dealer.
If an underwriter were to peg the market price of a security to the public offering price,
he would be:
I.Violating the anti-fraud provisions of the Securities Act of 1933.
II. Violating the anti-fraud provisions of the Securities Exchange Act of 1934.
III. "Stabilizing" the issue - a bona fide practice. - ANS-[B] III
"Pegging" is another term used to describe Stabilization, which is allowed during the
underwriting period of a new issue.
When a market maker is going to display a quote, the market maker must have any of
the following on file EXCEPT
[A] Current SEC filings
[B] Prospectus
[C] Form F-6 ADR
[D] Reg A offering circular for such offering - ANS-[C] Form F-6 ADR
From F-6 is used for the registration of American Depository Receipts and market
makers are not required to maintain copies of the form.
All of the following would be considered an investment "recommendation" under FINRA
Rule 2111 on Suitability EXCEPT:
[A] An explicit "hold" recommendation
[B] An implicit "hold" recommendation by remaining silent about existing positions
[C] The use or distribution of marketing or offering materials with explicit
recommendations
,[D] Brokers who execute trades on behalf of a customer without informing the customer
- ANS-[B] An implicit "hold" recommendation by remaining silent about existing positions
A "recommendation" generally involves a "call to action". A "hold" recommendation must
be explicit (not implied) to be considered a "recommendation".
A FINRA member firm accepts a limit order from a customer to buy 100 shares of ABC
at 27. A trade is reported on the Consolidated Tape at 27. Which of the following can
the member firm do before executing the customer's order?
[A] Buy 100 shares of ABC at 27 for its inventory account.
[B] Buy 100 shares of ABC at 27 for its investment account
[C] Buy 100 shares of ABC at 27 for another customer
[D] None of the above - ANS-[C] Buy 100 shares of ABC at 27 for another customer
A member cannot execute orders for its own account ahead of customer orders.
However, orders for other customers can be executed.
FINRA Rules on the distribution of a new issue must be observed by all of the following
EXCEPT:
[A] the managing underwriter
[B] a member of the underwriting syndicate other than the managing underwriter.
[C] a member of the underwriting group
[D] the issuer - ANS-[D] the issuer
FINRA rules apply to all FINRA member firms participating in a securities offering.
Managing underwriters, syndicate members and selling group members all must be
members of FINRA. An issuer is not a broker dealer and is not a member of FINRA.
Recordkeeping of a member firm's written supervisory procedures that have been
terminated or revised must be maintained
[A] at least six years since last use.
[B] for the life of the member firm.
[C] at least three years since last use.
[D] at least two years since last use. - ANS-[C] at least three years since last use.
FINRA rules require that WSPs that have been updated or terminated must be
maintained for at least three years since their last use.
Under SEC Rule 144, Form 144 Notice of Sale is effective for
[A] 2 business days
[B] 4 business days
, [C] 30 calendar days
[D] 90 calendar days - ANS-[D] 90 calendar days
Form 144 Notice of Sale is effective for 90 calendar days.
A company announces a tender offer and wants to buy back some of its own stock. An
investor feels that the tender offer price has been set too high and that once completed
the market price of the stock will decline. He tells his RR to short the stock now and
then he will buy to cover the short when the tender is completed. What action should the
RR tell the customer?
[A] This transaction must be done in a margin account and a deposit will be required on
the short sale.
[B] This transaction cannot be completed since you cannot borrow stock in order to
participate in a tender offer.
[C] This transaction can only be completed after the stock has been borrowed due to
the SHO regulations.
[D] This transaction is allowed and may be executed immediately. - ANS-[C] This
transaction can only be completed after the stock has been borrowed due to the SHO
regulations.
Since the customer is not using the borrowed stock to participate in the tender, they
would able to short. Many people choose "B" because you understand the concept of
only being able to participate in a tender if you have a net long position and that is true
BUT in this question the customer is NOT going to participate, but simply feels the stock
price will go down due to the tender and wants to take advantage of that in the market
place!
When must a BD provide a customer with a copy of the customer's account record
information?
[A] Within 30 days of opening a new account and no less than every 12 months
thereafter
[B] Within 30 days of opening a new account and no less than every 36 months
thereafter
[C] Within 45 days of opening a new account
[D] Within 45 days of opening a new account and no less than every 36 months
thereafter - ANS-[B] Within 30 days of opening a new account and no less than every
36 months thereafter
The SEC Regulation on Books and Records (17a-3(a)(17) specifies what records must
be retained by BDs and when the customer account record information must be
provided to customers. The BD must provide the account record information within 30
days of opening a new account and no less than every 36 months thereafter.
Solutions
If a Broker/Dealer receives currency over $10,000 from a customer, which of the
following is true?
[A] The currency must be deposited into a bank account within one business day.
[B] A Currency Transaction Report (CTR) must be filed by the Broker/Dealer.
[C] A Suspicious Activity Report must be filed by the Broker/Dealer.
[D] None of the above. - ANS-[A] Currency Transaction Report (CTR) must be filed by
the Broker/Dealer. When a broker/dealer receives currency, which exceeds $10,000 in
value a Currency Transaction Report (CTR), must be filed by the Broker/Dealer.
If an underwriter were to peg the market price of a security to the public offering price,
he would be:
I.Violating the anti-fraud provisions of the Securities Act of 1933.
II. Violating the anti-fraud provisions of the Securities Exchange Act of 1934.
III. "Stabilizing" the issue - a bona fide practice. - ANS-[B] III
"Pegging" is another term used to describe Stabilization, which is allowed during the
underwriting period of a new issue.
When a market maker is going to display a quote, the market maker must have any of
the following on file EXCEPT
[A] Current SEC filings
[B] Prospectus
[C] Form F-6 ADR
[D] Reg A offering circular for such offering - ANS-[C] Form F-6 ADR
From F-6 is used for the registration of American Depository Receipts and market
makers are not required to maintain copies of the form.
All of the following would be considered an investment "recommendation" under FINRA
Rule 2111 on Suitability EXCEPT:
[A] An explicit "hold" recommendation
[B] An implicit "hold" recommendation by remaining silent about existing positions
[C] The use or distribution of marketing or offering materials with explicit
recommendations
,[D] Brokers who execute trades on behalf of a customer without informing the customer
- ANS-[B] An implicit "hold" recommendation by remaining silent about existing positions
A "recommendation" generally involves a "call to action". A "hold" recommendation must
be explicit (not implied) to be considered a "recommendation".
A FINRA member firm accepts a limit order from a customer to buy 100 shares of ABC
at 27. A trade is reported on the Consolidated Tape at 27. Which of the following can
the member firm do before executing the customer's order?
[A] Buy 100 shares of ABC at 27 for its inventory account.
[B] Buy 100 shares of ABC at 27 for its investment account
[C] Buy 100 shares of ABC at 27 for another customer
[D] None of the above - ANS-[C] Buy 100 shares of ABC at 27 for another customer
A member cannot execute orders for its own account ahead of customer orders.
However, orders for other customers can be executed.
FINRA Rules on the distribution of a new issue must be observed by all of the following
EXCEPT:
[A] the managing underwriter
[B] a member of the underwriting syndicate other than the managing underwriter.
[C] a member of the underwriting group
[D] the issuer - ANS-[D] the issuer
FINRA rules apply to all FINRA member firms participating in a securities offering.
Managing underwriters, syndicate members and selling group members all must be
members of FINRA. An issuer is not a broker dealer and is not a member of FINRA.
Recordkeeping of a member firm's written supervisory procedures that have been
terminated or revised must be maintained
[A] at least six years since last use.
[B] for the life of the member firm.
[C] at least three years since last use.
[D] at least two years since last use. - ANS-[C] at least three years since last use.
FINRA rules require that WSPs that have been updated or terminated must be
maintained for at least three years since their last use.
Under SEC Rule 144, Form 144 Notice of Sale is effective for
[A] 2 business days
[B] 4 business days
, [C] 30 calendar days
[D] 90 calendar days - ANS-[D] 90 calendar days
Form 144 Notice of Sale is effective for 90 calendar days.
A company announces a tender offer and wants to buy back some of its own stock. An
investor feels that the tender offer price has been set too high and that once completed
the market price of the stock will decline. He tells his RR to short the stock now and
then he will buy to cover the short when the tender is completed. What action should the
RR tell the customer?
[A] This transaction must be done in a margin account and a deposit will be required on
the short sale.
[B] This transaction cannot be completed since you cannot borrow stock in order to
participate in a tender offer.
[C] This transaction can only be completed after the stock has been borrowed due to
the SHO regulations.
[D] This transaction is allowed and may be executed immediately. - ANS-[C] This
transaction can only be completed after the stock has been borrowed due to the SHO
regulations.
Since the customer is not using the borrowed stock to participate in the tender, they
would able to short. Many people choose "B" because you understand the concept of
only being able to participate in a tender if you have a net long position and that is true
BUT in this question the customer is NOT going to participate, but simply feels the stock
price will go down due to the tender and wants to take advantage of that in the market
place!
When must a BD provide a customer with a copy of the customer's account record
information?
[A] Within 30 days of opening a new account and no less than every 12 months
thereafter
[B] Within 30 days of opening a new account and no less than every 36 months
thereafter
[C] Within 45 days of opening a new account
[D] Within 45 days of opening a new account and no less than every 36 months
thereafter - ANS-[B] Within 30 days of opening a new account and no less than every
36 months thereafter
The SEC Regulation on Books and Records (17a-3(a)(17) specifies what records must
be retained by BDs and when the customer account record information must be
provided to customers. The BD must provide the account record information within 30
days of opening a new account and no less than every 36 months thereafter.
