FINRA SIE — Securities Industry Essentials — All Questions

A general partnership wants to open a cash account. Which document should the firm obtain to learn which partners are authorized to act for the account?

• a.A corporate resolution certified by the secretary, naming the officers authorized to trade
• b.The partnership agreement, or a certified statement naming the partners who may trade✓
• c.A power of attorney signed by one partner on behalf of all the other partners
• d.The trust agreement, which shows the trustees' powers and the beneficiaries

A partnership's authority comes from its partnership agreement, so the firm needs that agreement or a certification of which partners may trade and how orders must be authorized. A corporate resolution applies to corporations, which have officers and a board. A trust agreement applies to trusts. One partner's power of attorney does not prove that the other partners agreed or that the partnership permits that partner to delegate authority.

A registered representative's spouse opens a brokerage account at a different broker-dealer. Under FINRA Rule 3210, what is the representative's obligation?

• a.None, because the account is titled in the spouse's name alone, not the representative's
• b.Get the employer's written consent first and notify the other firm in writing of the association✓
• c.Notify the employer firm within 30 calendar days after the account has been opened
• d.Send FINRA written notice, and FINRA then informs the employer firm of the account

Rule 3210 presumes that an associated person has a beneficial interest in an account held by a spouse, so the account is covered. Before it is opened, the representative needs the employer firm's prior written consent and must notify the other firm in writing of the association. The 30-day period applies only to an account that existed before the person became associated. FINRA is not the party to be notified, and the spouse's sole title does not remove the presumption.FINRA Rule 3210

A nonresident alien who is neither a U.S. citizen nor a resident opens a cash account. Which IRS form does the firm collect to document the customer's foreign status for tax withholding?

• a.Form W-8BEN, certifying the foreign status of the beneficial owner✓
• b.Form W-4, setting the customer's withholding allowances for the year
• c.Form 1099-B, reporting the customer's proceeds from securities sales
• d.Form W-9, giving the customer's taxpayer identification number to the payer

A foreign individual who is the beneficial owner of income subject to U.S. withholding gives the firm Form W-8BEN. Form W-9 is for U.S. persons to supply a taxpayer identification number. Form 1099-B is a return the broker files and sends after sales, not a form the customer completes. Form W-4 is for employee wage withholding and has nothing to do with brokerage income.

A mother opens a UTMA custodial account for her 9-year-old son. Under the Customer Identification Program rule, who is the customer whose identity the firm must verify?

• a.Neither of them, because custodial accounts are exempt from the CIP rule
• b.The son, because he is the beneficial owner of the account's securities
• c.The son's school, which sponsors the account as the legal guardian
• d.The mother, because she opens the account for a person lacking legal capacity✓

For CIP purposes, a customer includes an individual who opens a new account for someone who lacks legal capacity, such as a minor. The custodian who opens the account is therefore the person the firm must identify and verify. The son is the beneficial owner but is not the one opening the account. Custodial accounts are not on the list of exclusions, which covers regulated financial institutions, certain government bodies and persons with an existing account the firm knows. A school has no role.31 CFR 1023.100(d)

A customer asks what it means that her shares are held in street name at her broker-dealer. Which statement is correct?

• a.The firm or its nominee is the record holder, and she remains the beneficial owner✓
• b.She is the record holder, and the firm keeps her certificate in its vault
• c.She gives up ownership and becomes an unsecured creditor of the firm
• d.The shares are registered in the name of the issuer's transfer agent

Street name means the securities are registered on the issuer's books in the name of the broker-dealer or its nominee for convenience in trading and settlement, while the customer stays the beneficial owner and receives the dividends and voting materials through the firm. She does not become a record holder, because the registration is the firm's. She does not give up ownership or become a creditor. The transfer agent only keeps the issuer's records.Exchange Act Rule 14b-1 (street-name proxy and shareholder communications)

A customer gives her brother limited trading authorization over her account. He then asks the firm to mail him a $5,000 check from the account. What should the firm do?

• a.Mail the check only if the representative's principal approves the request
• b.Mail the check after the brother signs a written withdrawal request
• c.Mail the check, because trading authority includes access to the funds
• d.Decline, because limited trading authority covers placing orders, not withdrawals✓

A limited trading authorization lets the agent buy and sell in the account but not take money or securities out of it; withdrawals need the customer's own instruction or a broader grant such as a full power of attorney. A written request from the brother, or approval by a principal, cannot create authority the customer never gave.

In 2026, a 52-year-old single filer has $5,000 of taxable compensation for the year and no other earned income. What is the most this person may contribute to IRAs for 2026?

• a.$8,600, the 2026 limit for savers who are age 50 or older
• b.$0, because pay below the annual limit bars any contribution
• c.$7,500, the 2026 base limit before any catch-up amount
• d.$5,000, since the cap cannot exceed taxable compensation✓

The IRA limit is the lesser of the dollar limit ($7,500, or $8,600 at age 50 or older, for 2026) or taxable compensation for the year. Compensation of $5,000 is the lesser amount, so $5,000 is the cap. The $8,600 and $7,500 figures are the dollar limits and ignore the compensation test. Having less pay than the dollar limit does not bar a contribution; it only lowers the cap to the amount of pay.IRC Section 219(b); IRS Retirement Topics - IRA Contribution Limits

In 2026 a 40-year-old with ample earned income contributes $9,000 to a traditional IRA and has no other IRA. The excess stays in the account through year-end. What is the 6% excise tax for that year?

• a.$150, ten percent of the $1,500 over the limit
• b.$90, six percent of the $1,500 over the limit✓
• c.$0, because excess amounts are only nondeductible
• d.$540, six percent of the whole $9,000 deposited

The 2026 limit at age 40 is $7,500, so the excess is $9,000 - $7,500 = $1,500. The 6% excise tax applies to the excess left in the IRA: 0.06 x $1,500 = $90 for the year, and again each year the excess remains. Taxing the whole $9,000 would apply the tax to amounts that were within the limit. Ten percent is the early-withdrawal rate, which applies to a different event. The excess is not merely nondeductible; leaving it in triggers the excise tax unless it is withdrawn with its earnings by the return due date.IRC Section 4973; IRS Retirement Topics - IRA Contribution Limits

A 76-year-old client owns a traditional IRA and a Roth IRA, both opened years ago, and has never worked for a plan sponsor. Which statement about required minimum distributions (RMDs) is correct?

• a.Neither IRA requires withdrawals, because the rule covers only employer plans such as a 401(k)
• b.Both IRAs require yearly withdrawals, because the rule applies to every individual retirement account
• c.Only the Roth IRA requires yearly withdrawals, since its earnings are never taxed again
• d.The traditional IRA requires yearly withdrawals; the Roth IRA requires none in the owner's life✓

RMDs start at age 73 for traditional IRAs, SEP IRAs and SIMPLE IRAs, and for employer plans. A Roth IRA owner has no lifetime RMD; only a beneficiary of a Roth IRA must take distributions. The rule is not limited to employer plans, and it does not run the other way: a Roth IRA's tax-free status is the reason it is excused, not a reason to require withdrawals.IRC Section 401(a)(9); Section 408A(c)(5)

Priya, age 56, left her employer this year. She rolled her 401(k) balance into a traditional IRA and then withdrew $20,000 from the IRA to cover living costs. No other exception applies. What additional early-distribution tax does she owe, apart from ordinary income tax?

• a.$0, because she separated from service after reaching age 55
• b.$4,000, which is the 20% mandatory withholding rate
• c.$2,000, which is 10% of the $20,000 she took out of it✓
• d.$5,000, which is the 25% tax on a missed required distribution

The 10% additional tax applies to a distribution taken before age 59 1/2 unless an exception applies. The separation-from-service exception for employees who leave during or after the year they reach 55 covers distributions from the employer's plan, not from an IRA. Once she moved the money into an IRA, the exception was lost: 0.10 x $20,000 = $2,000. The 20% figure is withholding on plan distributions, not a penalty, and the 25% rate is the tax on missed required minimum distributions.IRC Section 72(t)(1) and (t)(2)(A)(v)

Marcus, age 45, receives a $40,000 check after his 401(k) plan withholds 20% of a $50,000 distribution paid to him. He wants to roll over the full $50,000 within 60 days so none of it is taxed. How much of his own money must he add to the $40,000?

• a.$10,000, replacing the 20% that the plan withheld✓
• b.$0, since the withheld tax counts toward the rollover
• c.$8,000, which is 20% of the $40,000 he received
• d.$5,000, which is the 10% early-distribution tax

A plan distribution paid to the participant carries mandatory 20% withholding: 0.20 x $50,000 = $10,000. To roll over the entire $50,000, Marcus must deposit $50,000 within 60 days, and since he holds only $40,000 he must add $10,000 from other funds. Without it, the $10,000 is taxable and, at his age, may draw the 10% additional tax. The withheld amount is not credited to the rollover. Withholding is 20% of the gross, not of the check, and the 10% tax is a separate matter.IRC Section 3405(c); IRC Section 402(c)

In March, Dana took a 60-day rollover distribution from IRA One and deposited it in IRA Two. In September she wants to move more money. Which move would not violate the IRS limit of one IRA rollover per 12-month period?

• a.A 60-day rollover from IRA Three to a new IRA, since it is a different account
• b.A 60-day rollover from her Roth IRA to another Roth IRA, since Roth accounts count apart
• c.A 60-day rollover from IRA Two to another IRA, since it holds new money
• d.A trustee-to-trustee transfer from IRA Three to a new IRA at another firm✓

The one-per-12-months limit applies across all of a person's IRAs, traditional, Roth, SEP and SIMPLE alike, as if they were one IRA, and it also bars a second rollover out of the IRA that received the first. It covers 60-day rollovers only. A direct trustee-to-trustee transfer, where the money never passes through the owner's hands, is not a rollover for this purpose and has no frequency limit.IRC Section 408(d)(3)(B); IRS Announcement 2014-15

In 2026, Elena is age 62 and participates in her employer's traditional 401(k) plan, which permits catch-up contributions. What is the most she can defer from her own pay for 2026?

• a.$35,750, the $24,500 limit plus the $11,250 age 60-63 catch-up✓
• b.$43,750, the $24,500 limit plus both catch-up amounts added together
• c.$24,500, the base limit because catch-up needs a plan match
• d.$32,500, the $24,500 limit plus the standard $8,000 catch-up for 50+

For 2026 the elective deferral limit is $24,500. Participants aged 60 through 63 may add a higher catch-up of $11,250 instead of the standard $8,000 catch-up for age 50 and over: $24,500 + $11,250 = $35,750. The two catch-up amounts are alternatives, not cumulative, so $43,750 is wrong, and $32,500 uses the standard amount that the age 60 to 63 amount replaces. A catch-up is available if the plan permits it; no employer match is needed.IRC Section 402(g); Section 414(v); IRS 401(k) Plan Overview

A broker-dealer shares customers' nonpublic personal information with nonaffiliated companies only for purposes Regulation S-P exempts from opt-out, such as processing transactions the customers requested. It has not changed its sharing practices since its last privacy notice. Must it deliver an annual privacy notice this year?

• a.Yes, but only to customers who have not opted out of any of the sharing
• b.Yes, since the rule requires a notice each year for every customer relationship
• c.No, but only after each customer signs a waiver of the annual notice
• d.No, since it shares only under the exceptions and has made no changes✓

Regulation S-P excuses a firm from the annual notice when two conditions are both met: it discloses nonpublic personal information to nonaffiliated third parties only under the 248.13, 248.14 and 248.15 exceptions, and it has not changed the disclosure policies described in its most recent notice. Both are true here. The annual duty is the general rule, not a universal one. Opt-out status is irrelevant because the sharing needs no opt-out. No customer waiver is part of the exception.Regulation S-P, 17 CFR 248.5(e)

A firm mails a new customer its initial privacy notice and an opt-out notice, and it wants to give the customer's account data to a nonaffiliated marketing company. If the customer never responds, when may the firm disclose the data?

• a.After giving a reasonable opportunity to opt out, such as 30 days from the mailing✓
• b.Only after the customer returns a signed form agreeing to the sharing
• c.After 10 business days, the response period Regulation S-P prescribes
• d.As soon as the notices are mailed, since the customer may opt out of later disclosures

Regulation S-P is an opt-out regime. Before disclosing to a nonaffiliated third party, the firm must have given the initial and opt-out notices and a reasonable opportunity to opt out, and the consumer must not have opted out. Allowing 30 days after mailing is the rule's own example of a reasonable opportunity. Disclosing at once denies that opportunity. Signed consent is an opt-in standard the rule does not impose. The rule sets no 10-business-day period.Regulation S-P, 17 CFR 248.10(a)

On September 1, a broker-dealer becomes aware that sensitive customer information was accessed without authorization. After a reasonable investigation it cannot rule out substantial harm or inconvenience to the affected customers. By what date must it notify them at the latest?

• a.October 1, which is 30 days after it became aware of the incident✓
• b.November 30, which is 90 days after the firm first learned of the event
• c.October 31, which is 60 days after the firm discovered the compromise
• d.September 4, which is 72 hours after the incident came to its attention

Regulation S-P requires notice to affected individuals as soon as practicable, and not later than 30 days after the covered institution becomes aware that unauthorized access or use has occurred or is reasonably likely to have occurred. Counting 30 days from September 1 gives October 1. A 72-hour deadline, a 60-day deadline and a 90-day deadline are not the Regulation S-P customer-notice limit; longer delays are available only if the Attorney General determines that notice poses a substantial national-security or public-safety risk.Regulation S-P, 17 CFR 248.30(a)(4)

A compliance officer reviews four draft passages for an email to retail customers. Under the content standards of FINRA Rule 2210, which passage may stay in the email?

• a.A hypothetical illustration of compounding that predicts no investment's results✓
• b.A statement that the manager's strong recent gains are likely to be repeated next year
• c.The writer's opinion, labeled as such, that a named stock will double within a year
• d.A five-year forecast of the fund's returns based on its record over the past ten years

Rule 2210(d)(1)(F) bars communications that predict or project performance, imply that past performance will recur, or make an exaggerated or unwarranted claim, opinion or forecast. One carve-out allows a hypothetical illustration of mathematical principles, provided it does not predict or project the performance of an investment or strategy. The five-year forecast projects performance. The repeat-gains statement implies past results will recur. Labeling a doubling forecast as an opinion does not cure it.FINRA Rule 2210(d)(1)(F)

A firm's website says that earnings inside its deferred annuity grow "tax-free." Taxes on those earnings are payable when the owner withdraws money. What is wrong with the statement under FINRA Rule 2210?

• a.Nothing, because earnings do escape tax while they stay in the contract
• b.It calls income tax-free when the tax is only postponed until withdrawal✓
• c.It should say "tax-exempt," which is the approved term for deferred growth
• d.Nothing, if a footnote explains that taxes are due when money is withdrawn

Rule 2210(d)(4)(B) states that communications may not characterize income or investment returns as tax-free or exempt from income tax when tax liability is merely postponed or deferred, such as when taxes are payable upon redemption. A footnote does not cure it, because the headline claim itself is the problem. Earnings avoid current tax but not tax. "Tax-exempt" is also prohibited for this situation; the accurate word is tax-deferred.FINRA Rule 2210(d)(4)(B)

A broker-dealer's FINRA membership became effective five months ago. It plans to run a newspaper advertisement for its brokerage services. When must the ad be filed with FINRA's Advertising Regulation Department?

• a.Within 30 calendar days after the ad is first used
• b.Within 10 business days after the ad is first used
• c.At least 10 business days before the ad is first used✓
• d.Never, since principal approval is all that the rule requires

For one year from the date FINRA membership became effective, a member must file with the Department, at least 10 business days before first use, any retail communication published in public media such as a newspaper, magazine, radio, television or a generally accessible website. At five months this firm is still inside that year. After-the-fact filing is the treatment for a free writing prospectus already filed with the SEC, not for a newspaper ad. Principal approval is required too, but it does not replace the filing.FINRA Rule 2210(c)(1)(A)

A registered representative in Los Angeles cold-calls a prospect's home in New York at 6:15 p.m. Pacific time. The prospect has no account with the firm, has never asked for contact and is not on any do-not-call list. Is the call permitted under FINRA Rule 3230?

• a.Yes, because it is before 9 p.m. where the representative is located
• b.Yes, because calls to prospects off every do-not-call list have no time limit
• c.Yes, because the 9 p.m. limit is measured at the firm's main office
• d.No, because it is 9:15 p.m. where the prospect is, after the 9 p.m. limit✓

Rule 3230(a)(1) bars outbound calls to a residence before 8 a.m. or after 9 p.m., local time at the called party's location, unless the firm has an established business relationship with the person, has the person's prior express invitation or permission, or the person called is a broker or dealer. 6:15 p.m. Pacific is 9:15 p.m. Eastern, and none of the exceptions applies. The time is measured where the called party is, not where the caller or the firm is, and being off the do-not-call lists does not lift the time-of-day limit.FINRA Rule 3230(a)(1)

On June 3 a customer tells a representative never to call again, and the firm records the request on its do-not-call list. What is the latest date by which the firm must honor the request?

• a.July 18, since the rule gives 45 days for compliance
• b.August 2, since the rule gives 60 days for compliance
• c.July 3, the 30-day limit on honoring the request✓
• d.June 13, since the rule gives only 10 days to comply

Rule 3230(d)(3) requires a member to honor a do-not-call request within a reasonable time from the date of the request, and that period may not exceed 30 days. Counting 30 days from June 3 gives July 3. The 10-day, 45-day and 60-day periods are not in the rule; the 31-day figure in the rule is a different limit, on how old a copy of the national registry may be when a call is made.FINRA Rule 3230(d)(3)

A customer who holds an account with the firm asks to be placed on the firm's do-not-call list. The customer's number is also on the national registry. Two months later, between 10 a.m. and noon, a representative calls to pitch a new product. May the firm rely on its established business relationship?

• a.No, because the request ended that exception for this firm even with the account open✓
• b.Yes, because the call was made within the hours that the rule allows for residences
• c.Yes, because an open account permits calls to the customer from then on
• d.No, but only if the customer made the request in writing rather than by phone

Under Rule 3230(b)(1), an established business relationship excuses a call to a number on the national registry, but a person's request to be placed on the firm-specific do-not-call list terminates that exception for that member even if the person continues to do business with it. The call also violates the firm-specific list in 3230(a)(2). Calling within permitted hours is irrelevant to a do-not-call violation, and the rule does not require the request to be in writing.FINRA Rule 3230(a)(2)-(3) and (b)(1)

A non-U.S. individual with no taxpayer identification number applies to open a brokerage account. Which identification number may the firm's Customer Identification Program accept instead?

• a.A reference letter from a U.S. bank where the customer has an account
• b.The account number of the customer at a foreign brokerage firm
• c.A written statement from the customer that no number exists
• d.A passport number together with the country that issued it✓

For a non-U.S. person, the CIP rule allows one or more of these: a taxpayer identification number, a passport number and country of issuance, an alien identification card number, or the number and country of issuance of another government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard. A self-written statement, a bank's reference letter and another firm's account number are not government-issued identification, so none of them satisfies the requirement.31 CFR 1023.220(a)(2)(i)(A)(4)

A firm opens an account for an LLC owned by Ana (40%), Ben (30%), Cara (20%) and Dev (10%). Cara is the manager who runs the LLC day to day. Under the customer due diligence rule, which individuals must the firm identify as beneficial owners?

• a.All four members, since every owner of a legal entity is a beneficial owner
• b.Ana alone, since only the largest owner of an LLC is treated as its beneficial owner
• c.Ana, Ben and Cara, since each owns more than 10% of the LLC's equity
• d.Ana and Ben as 25% owners, plus Cara as the individual with significant control✓

The rule has two prongs. The ownership prong covers each individual who directly or indirectly owns 25% or more of the equity: Ana at 40% and Ben at 30%. The control prong covers a single individual with significant responsibility to control, manage or direct the entity, such as a manager; here that is Cara. Cara's 20% stake falls below the ownership threshold, and Dev's 10% matters not at all. A 10% cutoff does not exist, and the rule does not limit identification to the largest owner or extend it to every owner.31 CFR 1010.230(d)

On one business day a customer hands a broker-dealer $6,000 in currency at 10 a.m. and another $5,500 in currency at 3 p.m., both for deposit into the same account. Is a Currency Transaction Report required?

• a.No, because a report applies only if the customer intends to evade it
• b.Yes, but only if the customer is not a regular customer of the firm
• c.No, because neither deposit on its own is more than $10,000
• d.Yes, because they count as one $11,500 transaction that business day✓

Multiple currency transactions are treated as a single transaction when the institution knows they are by or on behalf of one person and total more than $10,000 in cash in or cash out during one business day. $6,000 + $5,500 = $11,500, so a CTR is required. Checking each deposit separately would let splitting avoid the report. Intent is not an element of the CTR duty; evasion intent is what makes splitting structuring, a separate offense. The customer's status as regular or new has no bearing.31 CFR 1010.313(b); 31 CFR 1010.311

On May 1, a broker-dealer's AML officer first detects facts that may justify a SAR on a $20,000 transaction, and no suspect has been identified. What is the latest date on which the firm may file the SAR?

• a.May 16, which is 15 days after the date the facts were first detected
• b.June 30, which is 60 days after the date the facts were detected✓
• c.May 31, which is 30 days after the date the facts were first detected
• d.July 30, which is 90 days after the date the facts were first detected

A SAR must be filed no later than 30 calendar days after the date of initial detection of facts that may constitute a basis for filing. If no suspect has been identified on that date, the firm may delay for another 30 days to identify one, but never beyond 60 calendar days after initial detection. May 1 plus 60 days is June 30. May 31 would be the deadline had a suspect been identified. The 15-day period belongs to CTR filing, and 90 days is not a SAR deadline.31 CFR 1023.320(b)(3)

A broker-dealer files a SAR on March 10, 2026. Through what date must it keep a copy of the SAR and the original or business-record equivalent of the supporting documentation under the Bank Secrecy Act rules?

• a.March 10, 2032, six years after the filing date
• b.March 10, 2033, seven years following filing of the SAR
• c.March 10, 2029, three years from the date of filing
• d.March 10, 2031, five years after the SAR was filed✓

31 CFR 1023.320(d) requires a broker-dealer to maintain a copy of any SAR filed, and the original or business record equivalent of any supporting documentation, for five years from the date of filing. March 10, 2026 plus five years is March 10, 2031. Three years is too short. Six years is the SEC Rule 17a-4 period for many other broker-dealer records, and seven years is not a retention period for SARs.31 CFR 1023.320(d)

FinCEN sends a broker-dealer a Section 314(a) request naming a suspect, with no special terms. The firm's records show that the named person closed an account there eight months ago and has no current account or recent transactions. What must the firm do?

• a.Report nothing, because the search reaches back only six months for any kind of account
• b.Report the match and tell the former customer so that the person can respond
• c.Report nothing, because the search covers only accounts that are currently open
• d.Report the match to FinCEN, since accounts held in the past 12 months are searched✓

Unless the request says otherwise, a firm must search for any current account of a named suspect, any account maintained for the suspect during the preceding twelve months, and certain transactions in the preceding six months. An account closed eight months ago falls within the twelve-month account lookback, so the firm must report the match to FinCEN as the request specifies. The six-month period applies to transactions, not accounts. Disclosing to anyone other than FinCEN or the named requester that FinCEN made or obtained information under the request is prohibited.31 CFR 1010.520(b)(3)

A broker-dealer that carries customer accounts is arranging the independent test of its AML program required by FINRA Rule 3310. Which person may conduct the test?

• a.The firm's designated AML compliance person, who knows the program best
• b.An outside consultant with a working knowledge of the Bank Secrecy Act✓
• c.The operations employee who performs the firm's customer identification procedures
• d.An analyst who reports directly to the firm's AML compliance person

Rule 3310 allows the test to be done by member personnel or a qualified outside party, but the tester must have a working knowledge of the Bank Secrecy Act requirements and must be independent. Under Supplementary Material .01 the tester may not be a person who performs the functions being tested, the designated AML compliance person, or anyone who reports to either. The compliance person, the employee who runs the identification procedures and the analyst who reports to the compliance person are each excluded.FINRA Rule 3310(c) and Supplementary Material .01

A broker-dealer trades only for its own account and does business only with other broker-dealers. Its AML program was independently tested in calendar year 2024. In what calendar year must the next independent test take place at the latest?

• a.2029, because the test is required every five years on a calendar-year basis
• b.2025, because the test is required every year for every broker-dealer
• c.2026, because the test is required every two years on a calendar-year basis✓
• d.2027, because the test is required every three years on a calendar-year basis

Rule 3310(c) requires annual independent testing on a calendar-year basis, but a member that does not execute transactions for customers, hold customer accounts or act as an introducing broker, such as a firm that engages solely in proprietary trading or deals only with other broker-dealers, tests every two years on a calendar-year basis. 2024 plus two is 2026. The annual cycle belongs to firms that serve customers. Neither a three-year nor a five-year interval appears in the rule.FINRA Rule 3310(c)

A broker-dealer recommends securities in a natural person's account and furnished the customer a copy of the account record on April 6, 2026. What is the latest date by which it must next furnish the customer a copy of the account record or an alternate document?

• a.April 6, 2029, which is 36 months after it was last furnished✓
• b.April 6, 2028, which is 24 months after it was furnished
• c.April 6, 2027, which is 12 months after it was furnished
• d.April 6, 2031, which is five years after it was furnished

Rule 17a-3(a)(17) requires the firm to furnish the account record, or an alternate document carrying the same information, within 30 days of account opening and thereafter at intervals no greater than 36 months. April 6, 2026 plus 36 months is April 6, 2029. A firm may send it sooner, but 12 and 24 months are not the deadline because the rule sets 36 months as the maximum interval. Five years is longer than the rule allows.SEA Rule 17a-3(a)(17)(i)(B)(1)

A broker-dealer recommends securities in a natural person's account. On June 1 it receives notice that the customer has moved and updates the address in the account record. What must the firm do about the change?

• a.Notify the new address only, because the customer has left the old one
• b.Notify the old address by July 1, the 30th day after notice✓
• c.Notify no one, because the customer already asked for the change
• d.Notify the old address by the end of the next calendar quarter

When an account record is updated for a change of name or address, Rule 17a-3(a)(17) requires the firm to send notification of the change to the customer's old address, and to the associated person responsible for the account, on or before the 30th day after it received notice. June 1 plus 30 days is July 1. The old address is used so that a customer who did not request the change would learn of it. The customer's own request does not remove the duty, and no calendar-quarter deadline exists.SEA Rule 17a-3(a)(17)(i)(B)(2)

A new retail customer opens an account and declines to name a trusted contact person. The firm made reasonable efforts to obtain one. What may the firm do?

• a.Open the account but freeze all withdrawals until a trusted contact is named
• b.Open the account, because lacking a trusted contact does not bar opening it✓
• c.Open the account only after a principal obtains a signed waiver from the customer
• d.Refuse to open the account until a trusted contact person is named

Rule 4512 requires the firm to make reasonable efforts to obtain the name of and contact information for a trusted contact person age 18 or older, but Supplementary Material .06(b) states that the absence of that information does not prevent the firm from opening or maintaining the account, provided those efforts were made. The rule does not require refusing the account, a signed waiver or a freeze on withdrawals.FINRA Rule 4512(a)(1)(F) and Supplementary Material .06(b)

A customer's residence address in a member's account records was updated on April 10, 2026, and the account was closed on September 15, 2030. Under FINRA Rule 4512, what is the earliest date the member may discard the record of the superseded address?

• a.September 15, 2033, which is three years after the closing
• b.September 15, 2036, which is six years after the closing
• c.April 10, 2029, which is three years after the update
• d.April 10, 2032, which is six years after it was updated✓

Supplementary Material .01 requires a member to preserve a record of any customer account information that is later updated for at least six years after the date of the update: April 10, 2026 plus six years is April 10, 2032. The six-years-after-closing period applies to the record of the last update, or the original information if none, not to a superseded entry. Three years is not the period for either record.FINRA Rule 4512, Supplementary Material .01

During the third calendar quarter, a customer's account at a general securities member had no security position, no money balance and no activity since the last statement was sent. Must the member send an account statement for that quarter?

• a.Yes, because only a DVP/RVP account may be left without a quarterly statement
• b.No, because the account had no position, balance or activity since the last statement✓
• c.No, but only if the customer has consented in writing to receiving no statement
• d.Yes, because a statement is due on every account each calendar quarter

Rule 2231(a) requires a statement at least once every calendar quarter to each customer whose account had a security position, money balance or account activity during the period since the last statement was sent. An account with none of those has nothing to report, so no statement is owed. The written-consent condition belongs to the separate DVP/RVP exception, and a request by the customer is not a condition of the rule.FINRA Rule 2231(a)

A customer's account is introduced by one general securities member and carried by another. The quarterly statement must advise the customer to report promptly any inaccuracy or discrepancy to which firm or firms?

• a.Only the introducing firm, which services the customer
• b.Both the introducing firm and the carrying firm✓
• c.Only the carrying firm, which prepares the statement
• d.The carrying firm and FINRA, which supervises both

Rule 2231(a) says the statement must advise the customer to report any inaccuracy or discrepancy promptly to his or her brokerage firm and, where the account is serviced by both an introducing and a carrying firm, the advisory must refer to reports being made to both firms. Naming only one firm leaves the customer without the required reference, and FINRA is not the addressee of the advisory.FINRA Rule 2231(a)

A broker-dealer executes a customer's market order in an NMS stock as agent and receives payment for order flow in connection with that trade. What must the written confirmation say about it?

• a.The name of the venue and the exact rebate per share, printed on the confirmation
• b.That order-flow payment was received, and details are given on written request✓
• c.Nothing, because payment for order flow is disclosed only in the firm's public reports
• d.Only a general statement that the firm may receive compensation from other sources

Rule 10b-10(a)(2)(i)(C) requires a confirmation for an agency trade in an NMS stock to state whether the firm receives payment for order flow and that the source and nature of the compensation for that trade will be furnished on written request. The public reports do not replace the confirmation statement, the rule does not require the venue's name or the rebate amount to be printed, and a vague reference to other compensation does not satisfy it.SEA Rule 10b-10(a)(2)(i)(C)

A customer gives written instructions asking a member to hold the customer's mail for five consecutive months and says only that this is more convenient. May the member hold the mail for the full period?

• a.Yes, if a principal approves the additional time beyond the first three months
• b.No, because holding beyond three months needs an acceptable reason, and convenience is not one✓
• c.Yes, because the customer's written instruction is all the rule requires to hold mail
• d.No, because a member may never hold a customer's mail for longer than 30 days

Under Rule 3150(a)(1), the member must receive written instructions that state the period. If the period exceeds three consecutive months, counting earlier requests, the instructions must give an acceptable reason such as safety or security concerns, and convenience is not acceptable. A principal's approval cannot substitute for the reason, and the rule sets no 30-day cap: holds of up to three months need only the written instructions, plus the rule's other conditions.FINRA Rule 3150(a)(1)

A retail customer who already holds a brokerage account at a firm is told by her representative that the firm recommends rolling her former employer's 401(k) into a new IRA at the firm. When must the firm deliver its current Form CRS to her?

• a.Not at all, because she received a Form CRS when she first opened her account
• b.Before or at the time the rollover is recommended, though she is already a customer✓
• c.Only when the new IRA is opened, since she already has a brokerage account
• d.Within 30 days after the IRA is opened, which is the deadline for existing customers

Rule 17a-14(c)(2) requires the firm to deliver its current Form CRS to an existing retail customer before or at the time it opens a new account different from her existing accounts, recommends that she roll over retirement assets into a new or existing account, or recommends a new service or investment. A rollover recommendation therefore triggers delivery at the time of the recommendation, which comes before the IRA is opened. An earlier delivery does not excuse the firm, and the 30-day period applies only to a customer's request for the form.SEA Rule 17a-14(c)(2)(ii)

A broker-dealer must amend its Form CRS, and the amendment was required to be made on July 15. By what date must the firm communicate the changes to its existing retail customers, without charge?

• a.August 14, which is 30 days after the amendment was required
• b.September 13, which is 60 days after the amendment was required✓
• c.November 12, which is 120 days after the required amendment
• d.July 15, the same day the amendment was required to be made

Rule 17a-14(c)(4) requires the firm to communicate any changes to Form CRS to each existing retail customer within 60 days after the amendments are required to be made, without charge, either by delivering the amended form or through another disclosure. July 15 plus 60 days is September 13 (16 days to July 31, 31 more to August 31, 13 more to September 13). Thirty days is the period for delivering the form on request, not for communicating changes. Same-day communication is not required, and 120 days is not a period in the rule.SEA Rule 17a-14(c)(4)

In one quarter a representative recommends eight sales and purchases in a retail customer's account, and each one is defensible when viewed alone. Under the Care Obligation of Regulation Best Interest, what must the representative have a reasonable basis to believe about the series?

• a.That total commissions on the series stay under 5% of the account value
• b.That every trade, when viewed in isolation, is in the customer's best interest
• c.That the customer approved every trade in writing before it was executed
• d.That the series as a whole is not excessive and is in the customer's best interest✓

The Care Obligation has a third element beyond a single recommendation: the broker-dealer must have a reasonable basis to believe that a series of recommended transactions, even if in the customer's best interest when viewed in isolation, is not excessive and is in the customer's best interest when taken together, in light of the customer's investment profile. Isolated defensibility is not enough. Written approval of each trade is not part of the obligation, and Regulation Best Interest sets no 5% commission cap.Regulation Best Interest, 17 CFR 240.15l-1(a)(2)(ii)(C)

A firm announces a quarterly bonus for the representatives who sell the most units of its own proprietary mutual fund. Under the Conflict of Interest Obligation of Regulation Best Interest, what must the firm do about this contest?

• a.Disclose it to retail customers in writing, which is enough to satisfy the obligation
• b.Identify and eliminate it, since disclosure alone does not cure this kind of incentive✓
• c.Keep it, but cap the bonus at 5% of each representative's total pay for the quarter
• d.Keep it, but have a principal review the winning representatives' recommendations

Regulation Best Interest requires written policies reasonably designed to identify and eliminate any sales contests, sales quotas, bonuses and non-cash compensation that are based on the sales of specific securities or specific types of securities within a limited period of time. Unlike other conflicts, which may be disclosed or mitigated, this category must be eliminated. Review of the winners' trades is mitigation, not elimination, and the rule contains no 5% allowance.Regulation Best Interest, 17 CFR 240.15l-1(a)(2)(iii)(D)

A caller tells a member firm that he holds a power of attorney for an elderly customer and wants to enter trades in her account, and the firm has no authority documents on file. Under FINRA Rule 2090, what must the firm do?

• a.Accept his orders, since he gave the right account number and the customer's name
• b.Accept his orders if a representative has previously met the customer in person
• c.Use reasonable diligence to confirm his authority, such as obtaining the power of attorney papers✓
• d.Accept his orders but only for sales, since those cannot add risk to the account

Rule 2090 requires reasonable diligence in the opening and maintenance of every account to know and retain the essential facts about every customer and about the authority of each person acting on the customer's behalf. Supplementary Material .01 includes understanding that authority among the essential facts. A caller's claim, a name and an account number, or an acquaintance with the customer does not establish authority, and sales can harm the customer as much as purchases.FINRA Rule 2090 and Supplementary Material .01

A member's research department is about to publish a downgrade of XYZ. The trading desk learns of it and today sells part of the firm's XYZ inventory ahead of publication. Which statement is correct?

• a.It violates Rule 5280, because it used non-public advance knowledge of the report✓
• b.It is permitted, because the report was going to be published within one trading day
• c.It is permitted, because the firm traded only for its own account and not for customers
• d.It violates Rule 5280 only if the desk sold short rather than from inventory

Rule 5280(a) prohibits a member from establishing, increasing, decreasing or liquidating an inventory position in a security, or in a derivative of it, based on non-public advance knowledge of the content or timing of a research report in that security. Trading for the firm's own account is the conduct the rule targets, no time window excuses it, and reducing an existing long position is covered as much as selling short. Rule 5280(b) also requires information-flow policies between research and trading.FINRA Rule 5280(a)

A firm's trader learns that a customer will sell 250,000 shares of ABC within the hour, which is likely to depress the price. Before that order is executed or reported, the trader buys put options on ABC for the firm's own account. Which statement is correct?

• a.It is permitted, because the order to be executed was placed by the firm and not by a customer
• b.It is permitted, because Rule 5270 reaches only orders in the common stock of the issuer itself
• c.It is permitted if the trader sells the puts again before the block trade is publicly reported
• d.It violates Rule 5270, because the rule covers related financial instruments such as options✓

Rule 5270 bars a member or associated person from executing an order in a security, or in a related financial instrument such as an option or other derivative, while holding material non-public information about an imminent block transaction, until that information is public or stale. A 250,000-share order is well above the 10,000-share level generally treated as a block. The rule applies to accounts in which the member has an interest, so a proprietary order is covered, and later unwinding the position does not cure the violation.FINRA Rule 5270(a) and (c)

A member accepts a retail customer's order to buy 300 shares of DEF at a $20.00 limit and holds it without executing it. The member then buys 1,000 shares of DEF for its own account at $19.95. Under Rule 5320, what must the member do immediately afterward?

• a.Execute the customer's 300 shares at the $20.00 limit price
• b.Execute the customer's 300 shares at $19.95 or a better price✓
• c.Execute all 1,000 shares for the customer at a $19.95 price
• d.Nothing, because the member bought below the customer's limit price

Rule 5320(a) bars a member holding a customer order from trading the same side for its own account at a price that would satisfy the order unless it immediately executes the customer order, up to the size and at the same or a better price than its own trade. The proprietary price of $19.95 would satisfy the $20.00 limit, so the customer's 300 shares must be filled at $19.95 or better. Filling at $20.00 gives the customer a worse price than the firm obtained, the size is capped at the customer's 300 shares, and buying below the limit is what triggers the duty.FINRA Rule 5320(a)

A trader buys a thinly traded stock in a series of purchases timed to push its price higher so that other investors will be drawn into buying, and then sells her own shares into the rise. Under Section 9(a)(2) of the Exchange Act, what element makes the series of transactions unlawful?

• a.That she sold her own shares at a profit after the price rose
• b.Her purpose of inducing other investors to buy the stock✓
• c.That she used non-public information about the issuer's earnings
• d.That the stock she bought was thinly traded on its primary market

Section 9(a)(2) makes it unlawful to effect, alone or with others, a series of transactions in a security that creates actual or apparent active trading or raises or depresses the price, for the purpose of inducing the purchase or sale of the security by others. The inducement purpose is the element that separates manipulation from ordinary trading. Profit is not an element, a thin market is only the setting, and inside information is a different offense under Section 10(b).Securities Exchange Act Section 9(a)(2)

A member could execute a customer's market order in a listed stock directly at the best market. It instead routes the order through a broker's broker that provides the member with free services. Does this satisfy the member's best-execution duty?

• a.No, because service reciprocation is no excuse for interposing a third party✓
• b.Yes, because the customer's order was still filled at a price within the quotes
• c.Yes, because routing through a broker's broker is acceptable for a market order
• d.No, because the member did not obtain the customer's consent to the routing

Rule 5310(a)(2) forbids interjecting a third party between the member and the best market in a manner inconsistent with the duty to use reasonable diligence to obtain the most favorable price. Using a broker's broker is not routinely acceptable for a market order: under Rule 5310(b) the member must show circumstances in which it could not execute directly and needed the third party to secure an execution advantageous to the customer. Rule 5310(c) adds that channeling orders through a third party as reciprocation for service or business does not relieve the member of its obligations. A fill inside the quotes does not satisfy the duty, which is to seek the most favorable price reasonably available, and the customer's consent does not turn a reciprocal arrangement into best execution.FINRA Rule 5310(a)(2), (b) and (c)

The SEC finds that an employee of a broker-dealer traded on material nonpublic information in a personal account. It seeks a civil penalty from the firm only because the firm employed him. The firm had no reason to expect the misconduct and had kept the policies the law requires. Is the firm subject to the penalty?

• a.No, because employing the trader alone does not make the firm liable for the penalty✓
• b.Yes, because an employer is automatically liable for its employees' trades
• c.Yes, because the firm carried the account the employee used to trade
• d.No, because the penalty can be imposed only on the person who traded

Section 21A(b)(2) says no one is subject to the penalty solely by reason of employing the violator. A firm can be penalized as a controlling person only if the SEC shows it knew or recklessly disregarded that the employee was likely to commit the violation and failed to take appropriate steps, or that it knowingly or recklessly failed to maintain the policies the law requires and that failure substantially contributed to the violation. Liability is therefore not automatic, and carrying the account adds nothing. The penalty is not limited to the trader, because a controlling person can be reached when those conditions are met.Exchange Act Section 21A(a)(1)(B) and (b)

An employee buys 2,000 shares of GHI at $30 while knowing of an unannounced buyout. After the news is released, GHI trades at $41 for a few minutes, then at $36 a reasonable period after the release, and at $34 a month later. Using the Section 21A measure of profit gained, what is the most the SEC can seek as a civil penalty from the employee?

• a.$24,000, three times the $8,000 profit at the $34 price
• b.$36,000, three times the $12,000 profit at $36✓
• c.$66,000, three times the $22,000 profit at the $41 spike
• d.$12,000, the profit itself, with no multiple, at $36

Section 21A(e) measures profit gained as the difference between the purchase price and the trading price a reasonable period after the information becomes public. That is $36 minus $30, or $6 per share, and 2,000 shares gives $12,000. Section 21A(a)(2) caps the penalty at three times that profit, which is 3 x $12,000 = $36,000. The brief $41 spike and the later $34 price are not the measuring point, and the penalty is not limited to the profit itself.Exchange Act Section 21A(a)(2) and (e)