OPRA Exam key terms

The self-regulatory organization that writes and enforces rules for U.S. broker-dealers and their registered personnel, operating under oversight of the SEC.

The federal agency that administers U.S. securities laws, oversees FINRA and other self-regulators, and can bring enforcement actions against firms and individuals.

The FINRA rulebook governing settlement mechanics between member firms, covering delivery standards, ex-date rules, buy-in procedures, and how firms resolve open or compared trades.

Federal Reserve rule setting initial margin requirements and payment periods for securities purchases, including how long a customer has to pay for securities bought in a cash or margin account.

SEC rule requiring brokers holding customer assets to keep customer securities segregated and to hold cash reserves covering what they owe customers, so clients are protected if the firm fails.

SEC rule requiring broker-dealers to maintain a minimum amount of liquid net worth relative to liabilities, limiting leverage and helping ensure a firm can wind down without harming customers.

A nonprofit membership corporation funded by broker-dealers that returns customer securities and limited cash, within statutory caps, when a member firm fails and assets are missing.

Buying or selling securities while in possession of material, nonpublic information obtained in breach of a duty, or tipping that information to someone who trades on it.

An internal information barrier that prevents personnel with access to confidential transaction or research information from sharing it with colleagues who trade or advise clients.

FINRA rule barring firm personnel from giving anything of value above $100 per person per year to employees of another firm in connection with that firm's business, absent written approval.

FINRA rule requiring registered persons to notify their firm in writing before accepting a second job or outside business role, so conflicts and time commitments can be reviewed and approved.

Required procedures a broker-dealer uses to verify each new customer's identity, typically name, date of birth, address and taxpayer identification number, before or shortly after the account is opened.

FINRA rule requiring firms to use reasonable diligence to understand each customer, the account's beneficial owners, and the authority of anyone acting on the account.

FINRA rule requiring a recommendation to a customer to be reasonably suited in light of the customer's investment profile, including objectives, risk tolerance, time horizon, liquidity needs and experience.

Someone a client names, other than the client, whom the firm may contact about possible financial exploitation, health changes or unusual account activity; the contact has no authority to trade the account.

A written authorization letting a named person act on a customer's account; any trading authority must be documented and accepted by the firm before orders are taken from that person.

SEC privacy rule requiring firms to tell customers how their personal information is used and protected, and to maintain safeguards against unauthorized access to that data.

FINRA duty to use reasonable diligence to execute customer orders at the most favorable terms available under prevailing market conditions, weighing price, speed, certainty of execution and order size.

The date an order is executed and the price is fixed; it starts the settlement clock and sets the accounting date used on the firm's books and records.

The industry standard, effective May 2024, requiring most U.S. securities transactions to settle, with cash and securities exchanged, one business day after the trade date.

A firm that opens customer accounts and accepts orders but routes clearing, custody, cash movement and settlement to a separate clearing firm under a clearing agreement.

A firm that processes and settles trades on behalf of other firms, maintaining records and handling cash movement, custody, margin and confirmations for the introducing firm's customers.

A clearing agency system that nets each member's purchases and sales in a security into a single daily position, cutting the number of deliveries and rolling unsettled positions forward.

A situation in which the selling party does not deliver securities to the buyer by settlement date, leaving an open obligation that must be resolved or closed out.

The process by which a firm that did not receive securities it bought purchases them in the open market at the failing party's expense, after giving notice under prescribed procedures.

The date a security begins trading without the right to the declared dividend, so a buyer on or after that date does not receive the upcoming payment.

Written or electronic notice delivered at or before settlement stating the security, price, quantity, capacity, commission and other required terms of a customer's transaction.

A record created when an order is taken, capturing customer, security, side, quantity, price limits, time of receipt and handling instructions, used to evidence and supervise the order.

A daily log of every trade executed by a firm or representative, used to reconcile executions against confirmations and clearing records and to support regulatory review.

A difference between two records of the same item, such as the firm's books and the clearing statement, that must be researched, explained and corrected or documented.

The periodic financial and operational report broker-dealers file with regulators, covering net capital, customer reserve calculations, liabilities and other measures of financial condition.

Rules requiring firms to preserve books and records such as blotters, confirmations and communications for set periods, generally six years with the most recent two years readily accessible.

A confidential filing to FinCEN describing transactions a firm suspects involve illegal activity, generally due within 30 days of detection and never disclosed to the customer.

A filing to FinCEN required when a customer conducts more than $10,000 in currency transactions in a single business day, identifying the individual and the transaction details.

The Treasury office that maintains sanctions lists of people, entities and countries; firms must screen customers and transactions and block or reject prohibited dealings.

Breaking up cash transactions to stay below the $10,000 reporting threshold; the practice is illegal and is itself a suspicious activity, even when the underlying funds are legitimate.

Extra scrutiny applied to higher-risk customers, such as foreign political figures or accounts in high-risk jurisdictions, involving source-of-funds checks and more frequent monitoring.

A warning sign suggesting possible fraud, money laundering or identity theft, such as an unusual address, reluctance to supply information, or transactions with no apparent business purpose.

FINRA rule requiring firms to report specified events, including written customer complaints alleging theft, misappropriation or sales-practice violations, generally within 30 days after the month of the event.