Customer Accounts & Suitability Flashcards

Before a mutual fund can be sold to a customer, regulations require that the customer receive or have access to which document?

Answer: The fund's prospectus

SEC rules require that customers receive the fund's prospectus, which contains the information material to an investment decision, before or at the time of sale.

A trade confirmation sent to a customer after a mutual fund purchase must include all of the following EXCEPT:

Answer: The fund's five-year performance history

Trade confirmations must include transaction date, price, shares, and costs such as sales loads, but historical performance data is not a required element of a confirmation.

Which FINRA rule governs communications with the public and requires that all communications be fair, balanced, and not misleading?

Answer: FINRA Rule 2210

FINRA Rule 2210 governs communications with the public and establishes standards requiring that all member communications be fair, balanced, and not misleading.

Before a new retail communication (such as an advertisement) is used by a registered representative, who must typically approve it?

Answer: A registered principal of the broker-dealer

FINRA Rule 2210 requires that retail communications be approved by a registered principal of the member firm prior to first use.

Which of the following statements about social media use by registered representatives is TRUE under FINRA rules?

Answer: Static social media content is treated as retail communication subject to principal pre-approval

FINRA classifies static social media content (such as a profile page or posted content that does not change) as retail communication, requiring principal pre-approval.

Under FINRA rules, an advertisement for a mutual fund that includes performance data must also include:

Answer: A standardized performance disclosure and a statement that past performance does not guarantee future results

FINRA and SEC rules require that performance advertising include standardized performance figures and prominently disclose that past performance does not guarantee future results.

A customer receives a variable annuity contract and has the right to return it for a full refund within a specified period. This right is known as the:

Answer: Free-look period

The free-look period gives variable annuity purchasers the right to return the contract within a specified number of days (typically 10 days or more) for a full refund of premiums paid.