OPRA Exam cheat sheet

Federal securities statutes include the Securities Act of 1933 (registration and disclosure), the Securities Exchange Act of 1934 (markets and broker-dealers), the Investment Company Act of 1940 and the Advisers Act of 1940.

FINRA is a self-regulatory organization (SRO) with authority under SEC oversight to adopt rules, examine and discipline member broker-dealers.

State blue sky laws and state securities administrators apply alongside federal law; the MSRB writes rules for municipal securities and the CFTC oversees futures.

FINRA Rule 2010 requires members to observe high standards of commercial honor and just and equitable principles of trade.

FINRA Rule 3110 requires a supervisory system, written supervisory procedures and designated supervisory principals reasonably designed to achieve compliance.

SEC Regulation Best Interest applies to recommendations to retail customers and imposes Disclosure, Care, Conflict of Interest and Compliance obligations.

SIPC protects customer securities and cash up to $500,000 per customer, including a $250,000 cash sublimit; it does not cover market losses.

FINRA Rule 4511 requires preservation of books and records for six years, with the first two years readily accessible.

Reg BI's four obligations are Disclosure, Care, Conflict of Interest and Compliance; the Care obligation requires understanding of the recommendation and the customer.

Conflicts of interest must be identified, disclosed and either eliminated or mitigated; undisclosed material conflicts breach the duty of loyalty.

FINRA Rule 3220 limits gifts given to a person in connection with business to $100 per person per year; entertainment is not treated as a gift under the rule.

FINRA Rule 3270 requires prior written notice to the member firm before an associated person engages in outside business activity for compensation.

FINRA Rule 3280 (selling away) requires prior written notice and firm approval before an associated person participates in private securities transactions.

Insider trading uses material nonpublic information in breach of a duty; material information is information a reasonable investor would consider important.

Firm policies typically require pre-clearance and reporting of personal securities accounts and holdings to detect front-running and conflicts.

Retaliation against whistleblowers who report suspected violations is prohibited; internal reporting channels should be documented.

CIP requires collecting name, date of birth, address and identification number, and verifying identity within a reasonable time.

The beneficial ownership (CDD) rule requires identifying each beneficial owner with 25% or more ownership and one control person for legal entity customers.

FINRA Rule 4512 requires reasonable efforts to obtain a trusted contact person for accounts of natural persons.

Discretionary accounts require written customer authorization and written acceptance by a designated principal before trading.

Margin accounts require a signed margin agreement, credit approval and delivery of the margin risk disclosure statement.

Options accounts require an options account agreement and approval based on investment objective, experience and financial status.

Suitability requires a reasonable basis for the recommendation and that the recommendation be suitable for the specific customer's profile.

Account documentation should include the customer agreement, disclosures, suitability information and identity verification records.

FINRA Rule 5310 requires reasonable diligence to ascertain the best market for a customer order and to execute at the best price under prevailing conditions.

Regular-way settlement for US equities, corporate bonds, municipal securities and options is T+1 (trade date plus one business day) since May 2024.

Order tickets must capture customer identity, security, side, quantity, price or order type, time received and associated person.

A limit order executes only at the limit price or better; a market order executes at the best available price without a price guarantee.

Reg SHO requires a locate of borrowable shares before accepting a short sale and close-out of fails within specified periods.

Rule 10b-10 requires a confirmation disclosing the security, price, capacity, commission and settlement date.

Trade reporting uses TRACE for corporate and municipal bonds, CAT for equities and options, and MSRB reporting for municipal securities.

Rule 15c3-3 customer protection requires segregation of customer securities and a reserve bank account for customer cash.

SEC Rule 17a-3 specifies records to be created, such as blotters, ledgers and order tickets, and Rule 17a-4 specifies preservation periods and formats.

FINRA Rule 4511 requires six-year retention of books and records, with the first two years readily accessible.

Records may be kept electronically if the system preserves them in a non-rewritable, non-erasable format or with an audit trail.

Daily reconciliation compares firm records with clearing firm, bank and custodian records for cash and securities positions.

SEC Rule 17a-13 requires a quarterly securities count and verification of securities held.

Customer confirmations and account statements must be accurate; account statements are generally sent at least quarterly.

SARs and CTRs must be retained for five years from filing, and supporting documentation should also be kept.

Time-stamping and sequential numbering of order tickets create an audit trail for review and regulatory examinations.

The BSA/AML program has four pillars: internal controls, a designated AML compliance officer, ongoing training and independent testing.

A suspicious activity report (SAR) is filed within 30 calendar days after initial detection, with a possible 30-day extension, and retained five years.

A currency transaction report (CTR) is filed for currency transactions over $10,000 within 15 calendar days and retained five years.

OFAC screening must block or reject transactions involving sanctioned persons or entities on the SDN list.

Enhanced due diligence applies to high-risk customers, foreign politically exposed persons and unusual account activity.

FINRA Rule 4530 requires reporting of certain customer complaints and internal conclusions of violations to FINRA.

FINRA Rule 2165 permits a temporary hold on disbursements when financial exploitation of a specified adult is reasonably suspected.

Complaint handling should log the complaint, investigate promptly, respond in writing and retain records for review.