A member firm's chief financial officer resigns on March 3 and the board appoints a replacement the same day. The replacement is a control person who must be listed on the firm's Form BD. By when must the firm file the Form BD amendment reflecting the change?
A. Within 10 business days of the appointment
B. Within 15 calendar days of the appointment
C. Within 30 days after the firm learns of the facts requiring the amendment
D. Within 45 days, when the SEC reviews the change
Show answer and reasoning
Correct answer: C. Within 30 days after the firm learns of the facts requiring the amendment
FINRA By-Laws Art. IV Sec. 1(c) requires a member to keep its Form BD current by filing an amendment no later than 30 days after learning of the facts. SEA Rule 15b3-1 separately requires the amendment to be filed promptly.
- A: Ten business days is not the standard for keeping Form BD current; that period applies to certain filings with FINRA Advertising Regulation, not membership applications.
- B: Fifteen calendar days is the Form D and Rule 5123 filing window after a first sale, not the deadline for Form BD amendments.
- D: The SEC has 45 days to act on an initial registration application under SEA Sec. 15(b)(1); it is not a deadline for amendments and the SEC does not review each amendment.
Source: FINRA By-Laws Art. IV Sec. 1(c)
A branch manager is reviewing four events involving one registered representative to decide which one must be disclosed on the representative's Form U4 under the customer complaint disclosure question (Question 14I). Which event requires disclosure?
A. An oral complaint received six months ago alleging churning, with the customer claiming $10,000 in losses
B. A written complaint received 18 months ago alleging an unsuitable recommendation and claiming $8,000 in compensatory damages
C. A written complaint received three years ago alleging misrepresentation and claiming $50,000, never settled and never taken to arbitration
D. A written complaint received 12 months ago about slow account transfers that alleges no sales practice violation
Show answer and reasoning
Correct answer: B. A written complaint received 18 months ago alleging an unsuitable recommendation and claiming $8,000 in compensatory damages
A written, investment-related, consumer-initiated complaint received within the past 24 months that alleges a sales practice violation and claims compensatory damages of $5,000 or more must be disclosed on Form U4, and the U4 must be amended within 30 days of learning of it.
- A: The 24-month complaint disclosure question applies to written complaints. An oral complaint, even a serious one, does not trigger this Form U4 item by itself.
- C: The complaint falls outside the 24-month look-back and was neither settled for $15,000 or more nor escalated to arbitration or litigation, so no disclosure item is triggered.
- D: A written complaint that does not allege a sales practice violation, forgery, theft, misappropriation or conversion is not reportable under the complaint question regardless of timing.
Source: FINRA By-Laws Art. V Sec. 2(c)
A broker-dealer that has wound down its business files Form BDW with the SEC through the CRD system on June 1. Assuming the SEC takes no action and sets no other date, when does the withdrawal from SEC registration become effective?
A. Immediately upon filing, since the firm no longer has customers
B. On the 30th day after filing
C. On the 45th day after filing
D. On the 60th day after filing
Show answer and reasoning
Correct answer: D. On the 60th day after filing
Under SEA Rule 15b6-1 a notice of withdrawal on Form BDW becomes effective on the 60th day after filing unless the SEC sets an earlier date or institutes a proceeding to impose terms or deny withdrawal.
- A: Withdrawal is not effective on filing. The SEC retains the ability to institute proceedings or impose terms before the withdrawal takes effect.
- B: Thirty days is the U4, U5 and Form BD amendment window, not the effective date for withdrawal from registration.
- C: Forty-five days is the period in which the SEC must grant registration or institute proceedings on an initial Form BD under SEA Sec. 15(b)(1); it does not govern Form BDW.
Source: SEA Rule 15b6-1
A member firm is opening a new office in Denver where four registered representatives will solicit and accept customer orders. Before business begins there, which filing is required to register the location?
A. Form BR filed through the CRD system for the new branch office
B. An amendment to Schedule E of Form BD listing the new office
C. A Form U4 amendment for the branch manager adding the Denver address
D. A Form MC-400 application designating the branch supervisor
Show answer and reasoning
Correct answer: A. Form BR filed through the CRD system for the new branch office
Form BR is the uniform branch office registration form filed through CRD to register a branch office with FINRA and the states, and it must be kept current by amendment.
- B: Schedule E of Form BD was retired when Form BR was adopted; branch offices are no longer reported by amending Form BD.
- C: A Form U4 amendment updates an individual's office of employment address but does not register the office itself as a branch.
- D: Form MC-400 is the application a member files to seek approval to associate with a person subject to statutory disqualification, not a branch registration form.
Source: FINRA By-Laws Art. IV Sec. 8
A newly formed firm's Form BD registration with the SEC became effective last week. Its FINRA membership application is still pending. The firm's president wants to begin effecting over-the-counter securities transactions for customers immediately. Which statement is correct?
A. The firm may begin because SEC registration is the only requirement for OTC business
B. The firm may not effect the transactions until it becomes a member of a registered national securities association
C. The firm may begin if it limits activity to unsolicited customer orders
D. The firm may begin if it files a Form BD amendment noting that FINRA membership is pending
Show answer and reasoning
Correct answer: B. The firm may not effect the transactions until it becomes a member of a registered national securities association
Under SEA Sec. 15(b)(8), a registered broker-dealer may not effect any securities transaction unless it is a member of a registered national securities association (FINRA), or is an exchange member effecting transactions only on that exchange.
- A: SEC registration alone is not enough. Section 15(b)(8) prohibits a registered broker-dealer from effecting transactions unless it belongs to a registered securities association or is an exchange member transacting only on that exchange.
- C: There is no unsolicited order exception to the membership requirement in Section 15(b)(8); that concept belongs to foreign broker-dealer relief under Rule 15a-6.
- D: A Form BD amendment discloses facts; it does not substitute for membership in a self-regulatory organization.
Source: SEA Sec. 15(b)(8)
