Series 39 flashcards

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

Limited partnership DPP

A DPP structured as a limited partnership in which a general partner manages the program and limited partners contribute capital with passive, illiquid interests.

Fifteen percent O&O cap

FINRA Rule 2310 generally limits a DPP's organization and offering expenses to 15% of gross proceeds; exceeding the cap restricts member compensation.

Ten percent compensation cap

Under FINRA Rule 2310, total underwriting compensation paid in connection with a DPP offering is generally limited to 10% of gross proceeds.

Rule 506(b) private placement

Regulation D exemption permitting a DPP private placement to sell to an unlimited number of accredited investors and up to 35 non-accredited purchasers without general solicitation.

Impoundment of subscriptions

Subscription funds are deposited in escrow and released only after the minimum offering amount is raised; otherwise funds are promptly returned to subscribers.

Passive activity loss limit

IRC Section 469 generally limits an investor's DPP losses to passive income; disallowed losses are suspended and may be used on disposition of the interest.

Rule 2310 due diligence

FINRA rule requiring a member participating in a DPP offering to conduct a reasonable investigation of the sponsor, program, and use of proceeds.

Non-listed REIT

A DPP that invests primarily in real estate, must distribute at least 90% of taxable income to shareholders, and whose shares are not exchange-listed.

DPP order pre-approval

A registered principal must review and approve a DPP purchase order for suitability before the order is entered, documenting the basis for approval.

Rule 2210 fair and balanced

Rule 2210 requires DPP sales communications to be fair and balanced, prohibit misleading projections, and disclose material risks including illiquidity.

Advertising filing requirement

Certain DPP sales literature must be filed with FINRA Advertising Regulation within 10 business days of first use, per Rule 2210(c).

Principal correspondence review

Rule 3110(b)(4) requires a registered principal to review and approve outgoing correspondence and internal communications, including DPP-related sales messages.

Complaint final review

Rule 3110(b)(6) requires a registered principal to review each customer complaint and determine whether escalation and Rule 4530 reporting are required.

Suitability documentation

Before approving a DPP purchase, the principal must document the customer's financial profile, objectives, risk tolerance, liquidity needs, and existing DPP holdings.

Rule 3110 supervision

FINRA Rule 3110 requires a member to establish, maintain, and enforce a supervisory system, including written supervisory procedures tailored to its business.

Designated supervisor

Each registered representative must be assigned to a registered principal who supervises the representative's activities and reviews their conduct.

Annual compliance meeting

Rule 3110(a)(7) requires registered persons to attend an annual compliance meeting or complete equivalent annual compliance training covering applicable rules.

Rule 3120 control testing

Rule 3120 requires a member to annually test and verify its supervisory control system and report the results to senior management.

Rule 3210 outside accounts

Rule 3210 requires an associated person to obtain written approval from their member firm before opening a securities account at another broker-dealer.

Rule 3270 outside business

Rule 3270 requires a registered person to provide prior written notice to the member before engaging in an outside business activity.

Rule 3280 private transactions

Rule 3280 requires a registered person to obtain prior written approval before participating in a private securities transaction outside the member firm.

FINRA Rule 2010

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

Form U5 filing

A member must file Form U5 with CRD within 30 days after a registered representative terminates association with the firm.

Rule 4530 reporting

Rule 4530 requires members to report specified events to FINRA, including certain customer complaints and internal conclusions that a violation occurred.

FINRA arbitration Rule 12200

Rule 12200 requires a FINRA member to arbitrate a dispute with a customer when the customer requests arbitration, subject to the rule's conditions.

Rule 2210 principal approval

Rule 2210 requires a registered principal to approve public communications before use, except for certain specified categories that are exempt.

Continuing education requirement

Registered persons must complete the annual Regulatory Element and their firm's Firm Element training program each year to maintain registration.

Net capital early warning

Rule 17a-11 requires a member to notify the SEC and FINRA within 24 hours after net capital falls below 120% of its minimum requirement.

Rule 15c3-3 reserve

Rule 15c3-3 requires a member to segregate customer securities and compute a weekly reserve of customer funds held in a special bank account.

FOCUS report filing

Form X-17A-5, the FOCUS Report, is filed with FINRA monthly, quarterly, or annually depending on the member's size and business activities.

Record retention 17a-4

Rules 17a-3 and 17a-4 require records to be preserved for six years, with the first two years maintained in an easily accessible place.

Net capital minimum

Rule 15c3-1 requires a broker-dealer that carries customer accounts to maintain minimum net capital of at least $250,000.