FINRA Safety and Compliance 3

Question 1

A registered representative receives a gift worth $125 from a client as a thank-you. Under FINRA Rule 3220, this gift is:

Accepted Answer

Impermissible because it exceeds the $100 annual per-person limit

Answer

FINRA Rule 3220 prohibits giving or receiving gifts in excess of $100 per person per year in connection with the business of the employer.

Question 2

Which of the following is an example of market manipulation prohibited under FINRA rules?

Accepted Answer

Entering buy and sell orders simultaneously in the same security to create the appearance of active trading

Answer

Entering matched orders to create artificial trading volume is a classic form of market manipulation known as wash trading.

Question 3

Under FINRA Rule 4370, a member firm's Business Continuity Plan (BCP) must be reviewed and updated:

Accepted Answer

At least annually

Answer

FINRA Rule 4370 requires member firms to review and update their BCPs at least annually.

Question 4

What does FINRA's suitability rule (Rule 2111) require before a registered representative makes a recommendation?

Accepted Answer

The representative must have a reasonable basis to believe the recommendation is suitable based on the customer's profile

Answer

Rule 2111 requires representatives to have a reasonable basis for believing a recommended strategy is suitable given the customer's financial situation, needs, and investment objectives.

Question 5

A registered representative discovers that a colleague may be misappropriating client funds. The representative's FIRST obligation under FINRA standards is to:

Accepted Answer

Report the suspicion to the firm's compliance department or supervisor

Answer

Representatives must promptly escalate concerns about misconduct to their firm's compliance department or supervisors, who are responsible for further action.

(FINRA) FINRA Exams Practice Test

(FINRA) FINRA Exams Practice Test

FINRA Safety and Compliance 3