ABOUT THE SERIES 10 EXAM xi
ABOUT THIS BOOK xv
ABOUT THE TEST BANK xvii
ABOUT THE SECURITIES INSTITUTE OF AMERICA xix
CHAPTER 1
SUPERVISION OF BROKERAGE OFFICE PERSONNEL AND PROCEDURES 1
Hiring New Employees 1
Resignation of a Registered Representative 2
Registration Exemptions 4
Retiring Representatives/Continuing Commissions 4
Persons Ineligible to Register 5
Disciplinary Actions Against a Registered Representative 5
Termination for Cause 6
Outside Employment 6
Private Securities Transactions 6
Gift Rule 7
Communications with the Public 8
FINRA Rule 2210 Communications with the Public 9
Broker Dealer Websites 12
Sharing in a Customer’s Account 13
Borrowing and Lending Money 13
Order Tickets 13
Executing an Order 14
Becoming a Stockholder 15
Accrued Interest 19
Close Outs 20
Customer Confirmations 20
Rules for Good Delivery 22
Rejection of Delivery 22
Reclamation 23
Marking to the Market 23
Customer Account Statements 24
Carrying of Customer Accounts 24
Dividend Distribution 25
Proxies 27
Box Counts 28
Missing and Lost Securities 28
The Customer Protection Rule 29
Broker Dealer Books and Records 31
Pretest 35
CHAPTER 2
GENERAL SUPERVISION AND CUSTOMER RECOMMENDATIONS 39
The Role of the Principal 39
Supervisor Qualifications and Prerequisites 40
Continuing Education 41
Tape Recording Employees 43
Information Obtained from an Issuer 43
Customer Complaints 44
Mediation 44
Code of Arbitration 45
Investor Information 47
Member Offices 47
Recommendations to Customers 50
Research Reports 55
Regulation FD (Fair Disclosure) 58
The Insider Trading & Securities Fraud Enforcement Act of 1988 59
Firewall 60
Pretest 61
CHAPTER 3
SUPERVISION OF CUSTOMER ACCOUNTS 63
Opening a New Account 63
Holding Securities 65
The Depository Trust Company (DTC) 66
Mailing Instructions 67
Types of Accounts 67
Trading Authorization 70
Retirement Plans 74
Accounts for Employees of Other Broker Dealers 87
Numbered Accounts 88
Prime Brokerage Accounts 88
Account Transfers 89
Margin Accounts 90
Special Memorandum Account (SMA) for a Long Margin Account 97
Wrap Accounts 107
Regulation S-P 107
Currency Transactions 108
The Patriot Act 108
Isolated Sales Account 110
Securities Investor Protection Corporation Act of 1970 (SIPC) 110
The Penny Stock Cold Call Rule 111
Pretest 113
CHAPTER 4
SALES SUPERVISION OF NEW ISSUES 117
The Securities Act of 1933 117
Freeriding and Withholding/FINRA Rule 5130 120
Underwriting Corporate Securities 121
Exempt Securities 125
Exempt Transactions 126
Rule 137 Nonparticipants 131
Rule 138 Nonequivalent Securities 132
Rule 139 Issuing Research Reports 132
Rule 415 Shelf Registration 133
Regulation M, Rule 104 133
Underwriting Direct Participation Programs 135
Investment Company Registration 135
Mutual Fund Distribution 137
Pretest 143
CHAPTER 5
SUPERVISION OF THE SECONDARY MARKET 147
The Securities Exchange Act of 1934 147
Listing Requirements for the NYSE 152
Types of Orders 155
The Exchanges 158
Limit Up Limit Down (LULD) 170
The Nasdaq Market 171
Pink Sheets 182
Trade Reporting and Comparison Service (TRACS) 182
Advanced Computerized Execution System (ACES) 183
The Order Audit Trail System (OATS) 183
Electronic Communication Networks (ECNs) 184
Third Market 185
Nasdaq Market Center for Listed Securities 185
Fourth Market 185
SEC Regulation ATS 186
FINRA 5% Markup Policy 186
Markups and Markdowns When Acting as a Principal 187
Riskless Principal Transactions 188
Proceeds Transactions 189
Dominated and Controlled Markets 189
ACT/TRF Trade Scan 190
Pretest 193
CHAPTER 6
MSRB RULES AND REGULATIONS 197
Municipal Bonds 197
Issuing Municipal Securities 198
Municipal Fund Securities 209
Variable Rate Securities 210
Municipal Bond Trading 210
Recommending Municipal Bonds 214
Municipal Bond Advertising 215
Municipal Bond Insurance 215
Political Contributions 215
Registration Requirements for Municipal Securities Professionals 217
MSRB Overview 219
Pretest 223
ANSWER KEYS 227
GLOSSARY OF EXAM TERMS 233
INDEX 299
