OPRA Exam flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

FINRA Rule 2010

Requires member firms and associated persons to observe high standards of commercial honor and just and equitable principles of trade in securities business.

SEC Regulation Best Interest

SEC rule requiring broker-dealers to act in the best interest of retail customers when recommending securities, with Disclosure, Care, Conflict of Interest and Compliance obligations.

SIPC coverage limit

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

Self-regulatory organization

An entity such as FINRA that has authority under SEC oversight to adopt and enforce rules for its member broker-dealers.

FINRA Rule 3110

Requires a member firm to establish and maintain a supervisory system, written supervisory procedures and designated principals reasonably designed to achieve compliance.

Rule 4511 retention

FINRA rule requiring books and records to be preserved for six years, with the first two years readily accessible to regulators.

Conflict of interest

A situation where personal, financial or firm interests could improperly influence a recommendation or action, requiring disclosure and mitigation or elimination.

Gift limit Rule 3220

FINRA rule limiting gifts given in connection with business to $100 per person per year; entertainment is treated separately from gifts.

Outside business activity

Compensated activity outside the member firm that requires prior written notice to the firm under FINRA Rule 3270.

Selling away

An associated person's participation in private securities transactions without prior written notice to and approval from the member firm under FINRA Rule 3280.

Material nonpublic information

Information not publicly available that a reasonable investor would consider important in an investment decision; trading on it in breach of duty is insider trading.

Customer Identification Program

AML requirement to collect name, date of birth, address and identification number and verify identity within a reasonable time before or after account opening.

Trusted contact person

An individual the customer authorizes the firm to contact about account activity or suspected financial exploitation, required under FINRA Rule 4512.

Beneficial ownership rule

CDD requirement to identify each beneficial owner with 25% or more ownership and one control person for legal entity customers.

Discretionary account authorization

Written customer authorization and written acceptance by a designated principal are required before a firm may exercise discretion in an account.

Options account approval

Before options trading, the firm must obtain an options account agreement and approve the customer based on objectives, experience and financial status.

Best execution

FINRA Rule 5310 duty to use reasonable diligence to ascertain the best market and execute customer orders at the best price under prevailing conditions.

T+1 settlement

Regular-way settlement for US equities, corporate bonds, municipal securities and options, requiring completion one business day after trade date.

Limit order

An order to buy or sell at a specified price or better; it will not execute at a worse price than the limit.

Reg SHO locate

Before accepting a short sale, the firm must locate borrowable shares or reasonably believe they can be borrowed for delivery.

Rule 10b-10 confirmation

Requires a written confirmation disclosing security, price, capacity, commission and settlement date for customer securities transactions.

SEC Rule 17a-4

Prescribes retention periods and acceptable formats for broker-dealer records, including electronic records with non-rewritable, non-erasable storage or audit trails.

Three-way reconciliation

Comparison of the firm's internal records with clearing firm, bank and custodian records to identify cash and securities differences daily.

Quarterly securities count

SEC Rule 17a-13 requirement to physically count and verify securities held by the firm at least quarterly.

Order ticket audit trail

Sequentially numbered, time-stamped order records capturing customer, security, side, quantity, price and handling details for regulatory review.

Account statement frequency

FINRA rules generally require customer account statements at least quarterly, with more frequent statements for accounts with activity or debit balances.

SAR filing deadline

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

CTR threshold

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

OFAC screening

Checking customers and transactions against the SDN list and blocking or rejecting dealings with sanctioned persons or entities.

AML program pillars

The four required elements are internal controls, a designated AML compliance officer, ongoing training and independent testing.

FINRA Rule 4530

Requires member firms to report certain customer complaints and internal conclusions of violations to FINRA within specified timeframes.

Rule 2165 temporary hold

Permits a firm to place a temporary hold on disbursements when it reasonably suspects financial exploitation of a specified adult.