FINRA Industry Regulations 2 — Questions and Answers
Question 1: Under FINRA Rule 4512, how long must a broker-dealer retain customer account records?
- 3 years
- 5 years
- 6 years (Correct answer)
- 10 years
Correct answer: 6 years
FINRA Rule 4512 requires customer account records to be retained for at least 6 years.
Question 2: Which FINRA rule governs the supervision of registered persons and requires written supervisory procedures (WSPs)?
- Rule 3110 (Correct answer)
- Rule 4370
- Rule 2010
- Rule 5130
Correct answer: Rule 3110
FINRA Rule 3110 requires firms to establish and maintain a system to supervise the activities of registered persons, including written supervisory procedures.
Question 3: A broker-dealer's net capital falls below the required minimum. Under SEC Rule 15c3-1, the firm must:
- Continue operations while seeking additional capital
- Immediately cease operations and notify FINRA
- Cease opening new accounts and notify regulators immediately (Correct answer)
- File a report within 5 business days
Correct answer: Cease opening new accounts and notify regulators immediately
When net capital falls below the required minimum, the firm must immediately cease opening new accounts and promptly notify FINRA and the SEC.
Question 4: Under FINRA Rule 2111 (Suitability), which of the following is NOT one of the three main suitability obligations?
- Reasonable-basis suitability
- Customer-specific suitability
- Quantitative suitability
- Temporal suitability (Correct answer)
Correct answer: Temporal suitability
The three suitability obligations under Rule 2111 are reasonable-basis, customer-specific, and quantitative suitability; temporal suitability is not a recognized category.
Question 5: Which regulatory body has primary authority over municipal securities dealers and their associated persons?
- FINRA
- MSRB (Correct answer)
- SEC
- FDIC
Correct answer: MSRB
The Municipal Securities Rulemaking Board (MSRB) has primary rulemaking authority for municipal securities dealers, though FINRA enforces those rules for broker-dealers.
Question 6: Under Regulation T, the initial margin requirement for purchasing listed equity securities in a margin account is:
- 25%
- 50% (Correct answer)
- 75%
- 100%
Correct answer: 50%
Regulation T requires customers to deposit at least 50% of the purchase price of listed equity securities as initial margin.
Question 7: FINRA Rule 8210 grants FINRA the authority to:
- Impose criminal penalties on registered persons
- Require members to provide documents and testimony during investigations (Correct answer)
- Revoke a firm's SEC registration
- Freeze customer assets during investigations
Correct answer: Require members to provide documents and testimony during investigations
Rule 8210 authorizes FINRA to require members and associated persons to provide information, documents, and testimony during investigations or proceedings.
FINRA Industry Regulations 2
Under FINRA Rule 4512, how long must a broker-dealer retain customer account records?