Series 22 cheat sheet

Telemarketing Rule: solicitation calls may be placed only between 8:00 a.m. and 9:00 p.m. local time at the called party's location, and the firm must honor the national Do Not Call registry and its own internal list.

An existing business relationship permits calls for 18 months after the last transaction and 3 months after a customer inquiry, unless the customer has opted out.

Transaction-based compensation paid to an unregistered third party for locating investors is a prohibited finder's fee; only registered persons may be compensated for securities solicitation.

Rule 506(b) offerings prohibit general solicitation and advertising; Rule 506(c) permits it only when every purchaser is a verified accredited investor.

Retail communications concerning public direct participation programs must be filed with FINRA's Advertising Regulation Department within 10 business days of first use (Rule 2210(c)(3)).

A registered principal must approve retail communications, including cold-call scripts and seminar materials, before first use; copies are retained for 3 years.

Live, unscripted public appearances and seminars are excluded from the definition of retail communication but remain subject to supervision and the fair-dealing standards of Rule 2210.

Outside business activities and private securities transactions require prior written notice to, and approval by, the firm under FINRA Rules 3270 and 3280.

Core suitability data: age, tax bracket, net worth excluding primary residence, liquid net worth, annual income, investment experience, risk tolerance, time horizon, and near-term liquidity needs.

Accredited investor: net worth over $1,000,000 excluding the primary residence, or income over $200,000 individually ($300,000 jointly) in each of the two most recent years with a reasonable expectation of the same.

Qualified purchaser status for Section 3(c)(7) funds requires at least $5,000,000 in investments.

Industry guideline: aggregate direct participation program holdings should generally not exceed 10% of liquid net worth; individual programs frequently impose their own lower written standards.

Customer Identification Program rules require name, date of birth, residential address, and identification number before or within a reasonable time after account opening, plus identity verification.

FINRA Rule 4512 requires reasonable efforts to obtain a trusted contact person for natural-person accounts; the firm may not disclose account information to, or act on instructions from, that person.

Joint tenants with right of survivorship take equal interests that pass automatically to survivors; in a tenancy in common each owner's interest passes through that owner's estate.

UGMA/UTMA accounts have one custodian and one irrevocable minor owner; assets must be used for the minor's benefit and terminate at the age set by state law.

Regulation Best Interest's care obligation requires a reasonable basis for the recommendation, customer-specific suitability, and consideration of reasonably available alternatives including cost.

A final prospectus must be delivered to the purchaser no later than with the confirmation of sale in a registered direct participation program offering.

Required prospectus content includes risk factors, use of proceeds, the compensation and fee table, conflicts of interest, management, tax aspects, and disclosure that no established secondary market exists.

Sales literature may not project investment returns or promise tax benefits; tax consequences must be described as not guaranteed and the program may not imply IRS approval.

The estimated use of proceeds table supports break-even analysis, showing how long cash flow must be received to recover sales charges and offering expenses.

Passive activity rules (IRC Section 469): DPP losses offset only passive income; suspended losses become fully deductible when the entire interest is disposed of in a taxable transaction.

At-risk rules (IRC Section 465): deductions are limited to the investor's economic risk, generally cash invested plus recourse debt; nonrecourse debt does not create at-risk basis except in real estate.

Intangible drilling costs: independent producers may expense 70% of IDCs in the year incurred and amortize the remaining 30% over 60 months; integrated producers amortize 100% over 60 months.

Percentage depletion for independent producers and royalty owners equals 15% of gross income from the property, capped at 100% of net income from the property and 65% of the taxpayer's taxable income.

Real estate programs use straight-line depreciation over 27.5 years for residential rental property and 39 years for nonresidential property.

Regulation Best Interest imposes four obligations: disclosure, care, conflict of interest, and compliance.

A typical DPP suitability profile is a long time horizon, a high marginal tax bracket, no near-term liquidity need, and the financial ability to bear loss of the entire investment.

Concentration in one program, sponsor, or asset type magnifies illiquidity and sponsor risk; diversification across programs and sponsors is a stated suitability consideration.

Books and records must be preserved for six years, the first two in an easily accessible place (Rule 17a-4); account records under Rule 17a-3 must be updated as facts change.

Rule 17a-3 requires a record of each customer's investment objectives and of each order, including terms, time of receipt, and account identification.

Transfers of limited partnership units generally require the general partner's written consent and may be barred entirely by the partnership agreement; the secondary market is thin and units often trade at a discount.

Death of a limited partner does not dissolve the partnership; the estate or successor holds an assignee interest with economic rights until admitted as a substitute limited partner.

FINRA Rule 4513 requires the firm to keep a record of each written customer complaint and the firm's response.

Recommendations must be documented so the firm can demonstrate the basis for the suitability and best-interest determination at the time of the transaction.

Subscription package: subscription agreement, investor questionnaire or suitability statement, accredited investor certification or verification, Form W-9, and entity or trust authorization documents.

Rule 15c2-4: in an offering with a minimum contingency, investor funds must be deposited in a separate escrow or impound account and returned promptly if the minimum is not met.

Subscription checks must be payable to the escrow agent or issuer, never to the representative or the broker-dealer.

Form D must be filed with the SEC within 15 days after the first sale in a Regulation D offering; states may require separate notice filings and fees.

Rule 10b-10 confirmations must disclose capacity, price, remuneration, and, for direct participation programs, that the security is a DPP and whether it is a blind pool.

Under Rule 506(c) the issuer must take reasonable steps to verify accredited status, such as reviewing tax returns, bank or brokerage statements, or a written confirmation from a securities professional.

State blue sky suitability standards, including minimum income or net worth thresholds, apply in addition to federal requirements.

The representative confirms the customer's purchase instructions and suitability before submission; the firm may reject a subscription that fails suitability or documentation requirements.

Offering proceeds may not be released from escrow or applied to the program until the stated escrow release condition is satisfied.