FINRA SIE — Securities Industry Essentials — All Questions

A grandparent wants to make an irrevocable gift of securities to a 10-year-old grandchild, with an adult managing the assets until the child comes of age. Which account best fits?

• a.A 529 plan owned by the grandparent
• b.A tenants-in-common account with the child
• c.A Roth IRA in the grandparent's name
• d.An UGMA/UTMA custodial account✓

An UGMA/UTMA custodial account is designed for an irrevocable gift to a minor, managed by a custodian until the minor reaches the age of majority. A 529 plan is for education savings only, and the grandparent as owner keeps control and can change the beneficiary, so it is not an irrevocable gift managed until the child comes of age. A tenants-in-common account would give the 10-year-old an ownership interest he or she cannot manage, and the child cannot open a Roth IRA without earned income.Uniform Transfers to Minors Act

Why must discretionary accounts be reviewed frequently by a principal?

• a.To increase the number of trades and the commissions they generate
• b.To detect excessive trading (churning) and unsuitable activity✓
• c.To avoid the need to keep order tickets and written account records
• d.To guarantee the customer a refund of any loss the trades produce

Frequent principal review of discretionary accounts helps detect and prevent churning and other abuses, since the representative controls trading. Supervision is a core investor-protection safeguard for accounts where the firm exercises discretion.FINRA Rule 3260

A trustee opens an account for a trust that requires conservative, income-oriented investing. The representative recommends a highly speculative penny stock. What is the core problem?

• a.A trustee cannot open a brokerage account at a broker-dealer without a prior court order
• b.Penny stocks are barred from all trust accounts by SEC rule, regardless of the objectives
• c.There is no problem, because the trustee's approval removes the firm's suitability duty
• d.The recommendation conflicts with the trust's stated objectives and the trustee's fiduciary duty✓

A trustee has a fiduciary duty to invest according to the trust's terms and the beneficiaries' interests. Recommending a speculative security to a conservative, income-focused trust is unsuitable and inconsistent with that duty, even if the trustee could technically authorize it.17 CFR 240.15l-1 (Regulation Best Interest)

During account opening, a firm cannot verify a new customer's identity using the information provided and has no reasonable belief it knows the customer's true identity. Under CIP, what should the firm generally do?

• a.Open the account and verify identity only if margin is later requested
• b.Ask the customer to self-verify identity by emailing a signed statement
• c.Open the account immediately and skip verification until the first trade settles
• d.Decline to open the account (or close it) and consider whether to file a SAR✓

If a firm cannot form a reasonable belief that it knows a customer's true identity, its CIP procedures must address when not to open the account, the terms under which the customer may transact while the firm tries to verify, when to close the account if verification fails, and when to file a SAR (31 CFR 1023.220(a)(2)(iii)). Verifying only for margin accounts leaves cash accounts unchecked, although CIP applies to every new account. Asking the customer to vouch for himself or herself is not a verification method, and postponing verification until after the first settlement ignores that the firm must resolve the identity question under its procedures, with only limited transactions permitted while it does so.31 CFR 1023.220(a)(2)(iii)

Broker-dealers are required to establish, maintain, and enforce written policies to prevent the misuse of material nonpublic information. These are commonly called:

• a.Best-execution and order-routing standards
• b.Information barriers (or 'Chinese Walls')✓
• c.Prospectus delivery and access rules
• d.Registered representative payout grids

Firms must maintain information barriers (historically called 'Chinese Walls') to prevent MNPI from flowing between departments (for example, from investment banking to trading). This is required to control insider trading risk under federal law.Insider Trading and Securities Fraud Enforcement Act of 1988

A representative, worried about losing a client, promises in writing to personally reimburse any losses in the client's account. This is:

• a.Required under FINRA rules whenever a customer complains in writing about any of the losses suffered in the account
• b.Allowed, because a written promise to cover any losses protects the customer from harm
• c.Allowed if the branch office manager verbally agrees to the reimbursement arrangement first
• d.Prohibited, because a representative may not guarantee a customer against loss or share in losses improperly✓

Guaranteeing a customer against loss, or improperly sharing in a customer's account, is prohibited. Representatives may not promise to cover losses; doing so misrepresents the nature of investing and violates FINRA rules.FINRA Rule 2150

Under FINRA rules, a registered representative may generally share in the profits or losses of a customer's account only if:

• a.The representative gives the customer a signed guarantee to reimburse any account losses from personal funds
• b.The firm gives prior written approval and sharing is proportionate to the representative's own financial contribution✓
• c.The customer is an immediate family member, which FINRA says removes the need for the firm's written approval
• d.The account is discretionary and the customer's net worth exceeds $1 million, an automatic FINRA exemption

Sharing in a customer account is permitted only with prior written approval from the firm and generally only in proportion to the representative's own capital contributed to the account. Guaranteeing against loss is never allowed.FINRA Rule 2150(c)(1)(A)

A representative asks a wealthy client for a personal loan to cover his own expenses. Under FINRA rules, this is:

• a.Required to be reported to the SEC in advance through an amended Form U4 filed before the loan
• b.Allowed whenever the client's net worth exceeds the Regulation D accredited-investor threshold
• c.Generally prohibited unless it meets narrow conditions and the firm's written procedures permit and approve it✓
• d.Allowed without any firm approval, as long as the loan amount stays under $100 in total

Borrowing from (or lending to) customers is generally prohibited unless the arrangement fits narrow exceptions (such as an immediate family member or a lending-business relationship) and the firm's written procedures permit it, usually with notice and approval. It presents a serious conflict of interest.FINRA Rule 3240

A customer asks to open an account identified only by a number to keep the account owner's identity secret from the firm. Is this permissible?

• a.Yes, a numbered account is permitted whenever the customer pays for every purchase entirely in cash
• b.No; the firm may use a number for confidentiality, but must still know and document the true account owner's identity✓
• c.Yes, a numbered account is designed to conceal the owner's identity from the firm itself as well
• d.No; FINRA requires every account to be titled with the owner's full legal name on statements

A firm may use account numbers or symbols for confidentiality, but it must still obtain a signed statement of the customer's ownership and know the true identity of the account owner. Hiding the owner's identity from the firm would violate CIP and recordkeeping rules.

Compared with a basic cash account, what added document must a customer sign to open and use a margin account?

• a.A signed copy of the issuer's Form 10-K annual report for each position held
• b.A margin (credit) agreement, and typically a hypothecation agreement✓
• c.Nothing further, because the new account form already authorizes margin trading
• d.A notarized dividend reinvestment election for every position held

Unlike a basic cash account, a margin account requires the customer to sign a margin (credit) agreement, and typically a hypothecation agreement and loan consent. These document the borrowing relationship and the firm's rights, and are a prerequisite to margin trading.

Two traders repeatedly buy and sell the same security to each other, with no change in beneficial ownership, to create the false appearance of active trading volume. This manipulation is known as:

• a.Front-running a customer's order
• b.Churning a retail customer's account
• c.Insider trading on material news
• d.Wash trading (matched orders)✓

Wash trading and matched orders involve transactions that create the illusion of activity without any real change in beneficial ownership, misleading other investors about supply, demand, or liquidity. Front-running is trading ahead of a known pending customer order to profit from it, and churning is excessive trading in a customer's account to generate commissions; neither requires a trade with no change in ownership. Insider trading is trading on material nonpublic information, which is a different offense from faking volume.Securities Exchange Act of 1934

Which of the following is most clearly an AML red flag when opening or servicing an account?

• a.A customer who asks detailed questions about a fund's expense ratio and its breakpoint discount schedule
• b.A customer who provides a valid government ID and documents a clear, verifiable source of the funds
• c.A retiree making regular, modest contributions to an IRA through an automatic monthly payroll deduction
• d.A customer who is reluctant to provide identifying information and wants to move funds quickly with no clear business purpose✓

Reluctance to provide identification, secrecy about the source of funds, and transactions with no apparent business or lawful purpose are classic AML red flags. Providing valid ID and a clear source of funds is normal, expected behavior.Bank Secrecy Act

Under FINRA Rule 2210, 'correspondence' generally refers to a written communication distributed to how many retail investors within a 30-day period?

• a.25 or fewer✓
• b.Over 25
• c.Up to 100
• d.Only institutional investors

Under FINRA Rule 2210(a)(2), correspondence is a written communication distributed to 25 or fewer retail investors within any 30 calendar-day period. Distribution to more than 25 retail investors makes it a retail communication, which carries principal approval and filing requirements that correspondence does not. A communication limited to institutional investors is an institutional communication. There is no 100-recipient threshold in the definition.FINRA Rule 2210(a)(2)

Which statement about institutional communications is generally correct under FINRA rules?

• a.They must be pre-approved by a registered principal and filed with FINRA's Advertising Regulation Department within 10 business days
• b.They are exempt from all FINRA content and supervision rules once the recipient qualifies as an institutional investor
• c.The content standards apply to them only if a retail investor ends up receiving a copy
• d.They are not subject to the same pre-use principal approval requirement as retail communications, but must still be supervised and cannot be misleading✓

Under FINRA Rule 2210(b)(3), institutional communications do not require principal approval before use, but the firm must establish written procedures for their review and supervision. They are not filed with FINRA the way certain retail communications are, and the content standards in Rule 2210(d) still apply to them, so they must be fair, balanced and not misleading whoever receives them. Qualifying the recipient as an institutional investor does not exempt the firm from the content or supervision rules, and the content standards do not depend on whether a retail investor later sees a copy. Firms also must make sure an institutional communication is not forwarded to retail investors.FINRA Rule 2210(b)(3)

Generally, a withdrawal of earnings from a traditional IRA before age 59 1/2, without an exception, is subject to ordinary income tax plus an additional penalty of:

• a.10%✓
• b.20%
• c.15%
• d.50%

Early distributions from a traditional IRA before age 59 1/2 are generally subject to a 10% additional tax on top of ordinary income tax, unless an exception applies (such as certain medical expenses, a first-home purchase up to limits, or disability).Internal Revenue Code

A representative deposits a customer's check into the representative's own personal bank account 'temporarily' before moving it to the brokerage account. This is an example of:

• a.A permissible practice if the customer later confirms it in writing
• b.Improper commingling of customer funds with the representative's own funds✓
• c.A permissible convenience, since the funds reach the brokerage account the same day
• d.A permitted check-handling exception, as long as a supervisor later approves it

Placing a customer's funds into the representative's personal account, even briefly, improperly commingles the customer's money with the representative's own and violates the rule against improper use of a customer's funds (FINRA Rule 2150(a)). The customer's later written confirmation, a supervisor's later approval, and the fact that the money reaches the brokerage account the same day do not cure the violation, because the funds should have been handled through proper firm channels from the start.FINRA Rule 2150(a)

A representative learns that a customer with an individual account has died. What is the appropriate immediate action?

• a.Continue trading the account based on the customer's last verbal instructions
• b.Cancel open orders, freeze the account, and await proper legal documents before releasing assets✓
• c.Sell all positions immediately to lock in gains for the estate's beneficiaries
• d.Immediately transfer all assets to the customer's surviving spouse as next of kin

On learning of a customer's death, the firm should cancel open orders, mark the account deceased, and not permit further trading until it receives the required legal documents (such as letters testamentary or a death certificate) identifying who is entitled to the assets.

Two unrelated investors each want their portion of a joint account to pass to their own heirs, not to each other, upon death. Which registration should they choose?

• a.A single individual account
• b.Tenants in common (TIC)✓
• c.JTWROS
• d.Transfer on Death in one owner's name

Tenants in common lets each owner hold a distinct fractional interest that passes to their own estate/heirs at death, which suits unrelated co-owners. JTWROS, by contrast, passes the deceased's share to the surviving owner.

When gathering information to make suitable recommendations for a new customer, which of the following is LEAST relevant to the customer's investment profile?

• a.Risk tolerance and time horizon
• b.Financial situation and needs
• c.The customer's favorite sports team✓
• d.Investment objectives and experience

Suitability requires understanding the customer's investment profile: age, financial situation, tax status, objectives, experience, time horizon, liquidity needs, and risk tolerance. Personal trivia unrelated to finances, like a favorite sports team, is not part of the profile.FINRA Rule 2111

Which situation is generally NOT illegal insider trading?

• a.An investor trades based on his own analysis of publicly available earnings reports✓
• b.An employee buys shares knowing of an unannounced FDA approval
• c.A lawyer trades using confidential merger details from a client before the deal is public
• d.A director tips a friend about undisclosed quarterly losses

Trading on public information or one's own lawful research is legal. Insider trading requires trading on material nonpublic information in breach of a duty. The other choices all involve MNPI obtained or used improperly.Securities Exchange Act of 1934

What is the key difference between a CTR and a SAR?

• a.A SAR may be filed only with the customer's written consent, while a CTR is kept secret from the customer
• b.Both reports go to FinCEN only when the customer specifically requests that the firm file them for the account
• c.A CTR is voluntary for the firm to file, and a SAR is optional even when the activity clearly looks suspicious
• d.A CTR is filed for cash transactions above a dollar threshold; a SAR is filed for suspicious activity regardless of amount thresholds✓

A CTR is triggered by cash transactions exceeding $10,000 in a business day, based purely on amount. A SAR is triggered by activity that appears suspicious (such as possible money laundering), and firms must not tip off the customer that a SAR was filed.Bank Secrecy Act

A representative has valid written discretionary authority accepted by the firm. She buys a suitable stock in the client's account without calling first. Is this a violation?

• a.No, but discretion like this is permitted only when the customer is an immediate family member of the representative
• b.Yes, because the representative must telephone the customer for approval before each and every order is entered
• c.No, because valid discretionary authority permits trading without prior consultation for each order, if the trade is suitable and properly recorded✓
• d.Yes, because FINRA forbids discretionary authority in any retail brokerage account, whether it is written or oral

With valid, firm-accepted written discretionary authority, the representative may enter suitable orders without contacting the customer for each trade, provided orders are marked discretionary and the account is properly supervised. Without such authority, the same trade would be unauthorized.FINRA Rule 3260

The prohibition on 'selling away' exists primarily to ensure that:

• a.Customers can avoid paying any commissions on outside investment offerings
• b.Representatives earn higher commissions on transactions done outside the firm
• c.A firm can supervise its representatives' securities transactions to protect customers✓
• d.Only institutional investors are allowed to buy private placement securities

Selling away is prohibited because private securities transactions conducted outside the firm's knowledge escape its supervision, exposing customers to unvetted, potentially fraudulent investments. Requiring prior notice and approval lets the firm supervise and protect customers.FINRA Rule 3280

A representative wants to include the phrase 'this fund is guaranteed to double your money in one year' in a brochure sent to retail clients. Under FINRA communication standards, this is:

• a.Required disclosure language that FINRA Rule 2210 mandates in every retail fund brochure a member firm sends to clients
• b.Prohibited, because communications must be fair and balanced and may not be false, exaggerated, or promise specific results✓
• c.Acceptable, because a registered principal's prior written approval cures an exaggerated performance claim
• d.Acceptable as long as the guarantee appears in a small-font footnote among the brochure's disclosures

FINRA communication rules require content that is fair, balanced, and not misleading. Promising guaranteed or specific investment results, or making exaggerated or unwarranted claims, is prohibited regardless of principal approval.FINRA Rule 2210

A market order is characterized by:

• a.Execution only at a specified price or better
• b.Remaining dormant until a trigger price is reached
• c.A guarantee of a specific execution price
• d.Immediate execution at the best available price✓

A market order executes immediately at the best available price, prioritizing speed over price. Price-specific execution describes a limit order; dormant-until-triggered describes a stop order; no order guarantees a price.

A customer places a buy limit order at $50. The order will:

• a.Fill only at $50 or lower, and may not fill at all✓
• b.Fill immediately at the best price currently available
• c.Convert into a market order as soon as it is entered
• d.Fill at $50 or higher, tracking the offer upward

A buy limit at $50 fills only at $50 or lower and may never fill if the market stays above it. It does not fill immediately, become a market order, or fill above the limit.

Under current rules, regular-way settlement for most securities occurs:

• a.On the same day as the trade
• b.Two business days after the trade date (T+2)
• c.One business day after the trade date (T+1)✓
• d.Three business days after the trade date (T+3)

Regular-way settlement is now T+1 — one business day after the trade (SEC Rule 15c6-1, since May 28, 2024). Same day is a cash settlement; T+2 and T+3 are outdated.

When a firm arranges a trade between a customer and a third party without taking the security into its own inventory, it is acting as a(n):

• a.Principal earning a markup
• b.Market maker on both sides
• c.Underwriter of a new issue
• d.Agent earning a commission✓

Arranging a trade with a third party without holding inventory makes the firm an agent earning a commission. A principal uses its own inventory and earns a markup; this is neither a market-making nor an underwriting role here.

A firm that sells a customer securities out of its own inventory is acting as a principal and is compensated through:

• a.A separate, disclosed commission
• b.A markup built into the price✓
• c.An annual 12b-1 fee
• d.An advisory wrap fee

Selling from its own inventory, the firm is a principal compensated by a markup in the price. A commission is agency compensation; 12b-1 and wrap fees are unrelated.

A trade confirmation must disclose:

• a.The customer's personal income tax bracket for the year
• b.The firm's total quarterly revenue
• c.The names of the firm's other customers
• d.Whether the firm acted as agent or principal✓

A confirmation must disclose whether the firm acted as agent or principal (Rule 10b-10), so the customer knows how the firm was paid. The other items are not confirmation disclosures.

To be entitled to a declared cash dividend, an investor must own the stock:

• a.Before the ex-dividend date✓
• b.On the payable date
• c.On the declaration date only
• d.Any time after the record date

To receive a dividend, an investor must own the shares before the ex-dividend date. Owning on the payable date, the declaration date only, or after the record date is too late.

In a joint account held as tenants with right of survivorship (JTWROS), when one owner dies, that owner's share:

• a.Passes to the deceased owner's estate under the will
• b.Is forfeited to the brokerage firm holding it
• c.Must be liquidated by the firm within thirty days
• d.Passes automatically to the surviving owner(s)✓

In JTWROS, a deceased owner's share passes automatically to the surviving owner(s). Passing to the estate describes tenants in common; the firm does not take it, and no forced sale occurs.

In a tenants-in-common (TIC) account, a deceased owner's share passes to:

• a.The deceased owner's estate✓
• b.The surviving co-owners automatically
• c.The brokerage firm
• d.The SEC

In tenants in common, a deceased owner's share passes to that owner's estate, not to the co-owners. That automatic transfer to survivors is the JTWROS feature.

A custodial account under UGMA/UTMA:

• a.May name several minors as beneficiaries at once
• b.Has one custodian and one minor beneficiary✓
• c.Is controlled by the minor from the day it opens
• d.Reverts to the donor once the minor is 18

A UGMA/UTMA account has one custodian and one minor beneficiary, and the assets become the minor's at the age of majority. It cannot name multiple minors, the minor does not control it initially, and it does transfer at majority.

Before a representative may exercise discretion over which security to buy in a customer's account, the firm must have:

• a.Verbal authorization from the customer
• b.Written approval from the branch manager alone
• c.Prior written discretionary authorization from the customer✓
• d.Customer authorization signed after the first trade

FINRA Rule 3260(b) says no member or registered representative may exercise discretionary power in a customer's account unless the customer has given prior written authorization to a stated individual and the member has accepted the account in writing. A verbal instruction is not enough, a manager's approval cannot replace the customer's own authorization, and authorization signed after the first trade comes too late.FINRA Rule 3260(b)

Under the Federal Reserve's Regulation T, the initial margin requirement for a purchase of marginable securities is currently:

• a.50% of the purchase price✓
• b.25% of the purchase price
• c.30% of the purchase price
• d.100% of the purchase price

Regulation T sets the initial margin requirement at 50% of the purchase price. The 25% figure resembles a maintenance minimum; 100% would be a cash purchase.

Excessive trading in a customer's account primarily to generate commissions is called:

• a.Front running
• b.Churning✓
• c.Selling away
• d.Backing away

Excessive trading to generate commissions is churning, a suitability/fair-dealing violation. Front running, selling away, and backing away are different violations.

A representative who arranges a private securities transaction outside the firm without giving the firm prior written notice has engaged in:

• a.Churning
• b.Front running
• c.Unauthorized trading
• d.Selling away✓

Participating in a private securities transaction without first giving the firm written notice is selling away (FINRA Rule 3280 requires prior written notice). Churning is excessive trading to generate commissions, front running is trading ahead of a customer's order, and unauthorized trading is trading in a customer's account without the customer's authority.FINRA Rule 3280

Which of the following violates the prohibition on insider trading?

• a.Buying a stock the day after reading its published annual report
• b.Tipping material nonpublic information to a friend who then trades on it✓
• c.Selling a stock based on a widely published wire-service news article
• d.Placing a limit order below the current market price to average in

Tipping material nonpublic information to someone who then trades violates the insider-trading prohibition — you need not trade yourself. Trading on public information or placing a routine limit order is lawful.

A Currency Transaction Report (CTR) is generally required for cash transactions:

• a.Of $10,000 or more in a single day
• b.Exceeding $5,000 in a single day
• c.Exceeding $10,000 in a single day✓
• d.Exceeding $3,000 in a single day

A CTR is required when currency transactions by or for one person total more than $10,000 in a single business day (31 CFR 1010.311 and the aggregation rule in 1010.313). Exactly $10,000 does not trigger it, because the rule says 'more than $10,000'. The $5,000 and $3,000 figures belong to other rules (suspicious activity reporting and certain funds-transfer and monetary-instrument recordkeeping). Splitting cash to stay under the threshold is structuring, which is itself a federal offense.31 CFR 1010.311

When a firm files a Suspicious Activity Report (SAR):

• a.It may not disclose the filing to the customer involved✓
• b.It must notify the customer in writing within 30 days of the filing
• c.It may tell the customer once the account involved has been closed
• d.It may tell the customer if the customer asks whether a report was filed

A SAR, and any information that would reveal its existence, is confidential, so a firm and its personnel may not disclose the filing to the customer involved. The prohibition has no exception for a closed account or a direct question from the customer, and there is no customer-notification requirement at all.31 CFR 1023.320(e)

The Customer Identification Program (CIP) requires a firm at account opening to collect and verify a customer's:

• a.Annual salary and current employer only
• b.Name, date of birth, physical address, and taxpayer identification number✓
• c.Personal credit score
• d.A complete list of every brokerage firm where the customer previously held accounts

The CIP requires collecting and verifying a customer's name, date of birth, physical address, and taxpayer identification number at account opening. Salary, credit score, and prior-firm lists are not the CIP's four required elements.

An investor who sells stock short faces:

• a.Risk capped at the original investment
• b.No real risk if the stock is widely held
• c.Theoretically unlimited risk if the price rises✓
• d.A guaranteed profit in efficient markets

A short seller faces theoretically unlimited risk if the price rises, because there is no ceiling on how high a stock can go. The risk is not capped, is not eliminated by wide ownership, and is never a guaranteed profit.

A very narrow bid-ask spread on a security generally indicates that the security is:

• a.Highly liquid and heavily traded✓
• b.Thinly traded and hard to sell quickly
• c.About to be delisted by the exchange
• d.Exempt from SEC registration rules

A narrow bid-ask spread signals a highly liquid, heavily traded security. Wide spreads indicate thin markets; the spread does not by itself signal delisting or an exemption.

A stop order:

• a.Executes immediately at the best price then available in the market
• b.Remains dormant until the market reaches a trigger price, then activates✓
• c.Guarantees the customer execution at one specific price regardless of market conditions
• d.Can be entered only as a buy order under FINRA's order-entry rules

A stop order stays dormant until the market hits its trigger price, then activates (becoming a market order). It does not execute immediately, guarantee a price, or work only for buys.

A market maker in a security:

• a.Posts a bid only, leaving the offer side to the exchange floor
• b.Charges its customers a separate advisory fee on each trade
• c.Is prohibited by FINRA from trading securities for its own account
• d.Continuously quotes both a bid and an ask, providing liquidity✓

A market maker continuously quotes both a bid and an ask, supplying liquidity and profiting from the spread. It both buys and sells, charges no separate advisory fee, and does trade for its own account.

A firm's obligation to use reasonable diligence to know the essential facts about each customer is established by:

• a.Regulation T
• b.The Bank Secrecy Act and the USA PATRIOT Act
• c.The Investment Company Act of 1940
• d.FINRA Rule 2090 (Know Your Customer)✓

The know-your-customer duty is set by FINRA Rule 2090. Regulation T governs margin, the BSA governs anti-money-laundering, and the 1940 Act governs investment companies.

A trade is executed for 'cash' settlement on a Monday morning. Under FINRA Rule 11320, when is delivery of the securities due?

• a.Wednesday, two business days later, the cycle in effect before May 28, 2024
• b.Tuesday, the next business day, the same as a regular way trade
• c.The same Monday (trade date)✓
• d.The day the seller chooses, as in a seller's option trade

Under FINRA Rule 11320(a), delivery on a 'cash' trade is due at the purchaser's office on the day of the transaction, so a Monday cash trade is due Monday. Regular way delivery under Rule 11320(b) is the first business day after the trade date, which has been T+1 since May 28, 2024, so a regular way trade done Monday would be due Tuesday. Wednesday was the regular way date under the former T+2 cycle. A seller's option lets the seller pick a later delivery date, which is a different settlement type from cash.FINRA Rule 11320(a)

Under FINRA Rule 4512, whose signature must appear on a new customer account record to show the account was accepted under the firm's policies?

• a.The customer opening the account, who must sign every new account form
• b.A partner, officer or manager of the member firm✓
• c.The registered representative who introduced the account to the firm
• d.The trusted contact person the customer names on the account

FINRA Rule 4512(a)(1)(D) requires the signature of a partner, officer or manager showing that the account was accepted in accordance with the firm's account-acceptance policies and procedures. The rule does not make the customer's signature a requirement of every new account record, although other account types such as margin or options accounts carry their own signed-agreement requirements under other rules. The representative responsible for the account must be identified by name, but the rule does not call for that person's signature as acceptance. The trusted contact person is someone the firm may reach about the customer's account and does not sign anything.FINRA Rule 4512(a)(1)(D)

Under FINRA Rule 3280, a representative's duty to give the firm written notice before taking part in an outside securities transaction ('selling away') exists primarily to ensure that:

• a.Representatives must register each outside offering with the SEC before selling it
• b.Firms can share in the commissions representatives earn on outside products
• c.A firm can supervise its representatives' securities transactions to protect customers✓
• d.Only institutional investors are allowed to buy private placement securities

The notice requirement exists so the firm can supervise its representatives' securities transactions to protect customers. Private securities transactions conducted outside the firm's knowledge escape its supervision and can expose customers to unvetted or fraudulent offerings. Rule 3280 is a notice-and-approval rule for the firm, not an SEC registration step for the representative, and it does not set up a way for the firm to share in outside commissions. Private placements are not limited to institutions. The SEC approved new FINRA Rule 3290 on September 15, 2026; it will replace Rules 3270 and 3280 once FINRA announces an effective date, so Rule 3280 still applies until then.FINRA Rule 3280