Series 6 flashcards

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

Retail communication definition

Under FINRA rules, a retail communication is a written or electronic message distributed to more than 25 retail investors within any 30-calendar-day period.

National Do Not Call Registry

A registry of residential telephone numbers that telemarketers may not call unless an exception applies, such as an existing business relationship or prior express consent.

Gift limit to customers

FINRA generally limits gifts to non-institutional persons to $100 per person per year; gifts may not be conditioned on sales or other business.

Testimonial disclosure requirements

Testimonials in retail communications must disclose that they may not be representative and that past performance does not guarantee future results, among other required statements.

Finder's fee prohibition

Paying unregistered persons for securities referrals is generally prohibited; compensation to finders may be allowed only if the person is registered or an applicable exemption applies.

Outside business activity notice

An associated person must give written notice to the member firm before engaging in outside business activities; the firm may require approval and may limit the activity.

Principal approval of advertising

A registered principal must approve retail communications before use unless the content is narrowly limited to identifying information or other exempt material under FINRA rules.

Seminar solicitation rules

When a seminar is used to solicit securities business, the materials may be retail communications subject to principal approval, filing, and recordkeeping requirements.

Customer Identification Program elements

CIP requires the firm to collect a customer's name, date of birth, address, and identification number, and to verify identity within a reasonable time.

Trusted contact person

An individual the firm may contact about possible exploitation or unusual account activity; the firm may not share the customer's assets or account proceeds with that person.

Discretionary account authorization

The customer must give written discretionary authority, and a designated principal must approve the account in writing within 30 days of the first transaction.

Joint tenants with right of survivorship

Ownership form in which the surviving account owner receives the deceased owner's interest; the account avoids probate as to the joint property.

Tenants in common account

Ownership form in which each owner holds a stated fractional interest; when one owner dies, that interest passes to the owner's estate, not the survivor.

UTMA custodial account

An irrevocable gift account managed by a custodian for a minor; the minor generally gains control at the state-specified age, often 18 or 21.

Reg BI care obligation

The care obligation requires a broker-dealer to understand the product, have a reasonable basis, and recommend a series of transactions that is in the retail customer's best interest.

Beneficial ownership certification

For legal entity customers, firms must identify and verify each individual who owns 25 percent or more and one individual who controls the entity.

Public offering price

The price at which a mutual fund share is sold, equal to the net asset value per share plus the applicable front-end sales charge.

Breakpoint discount

A reduced front-end sales charge that applies when the dollar amount of a mutual fund purchase reaches a level specified in the fund's prospectus.

Letter of intent

A written commitment to invest a specified amount within 13 months to qualify for a breakpoint; shares may be held in escrow until the commitment is met.

Rights of accumulation

A feature that lets an investor count the current value of existing fund holdings toward a breakpoint for a new purchase, as described in the prospectus.

Variable annuity separate account

An investment account held apart from the insurer's general account; contract owners bear the investment risk, and values fluctuate with the underlying portfolio performance.

1035 exchange

A tax-deferred transfer of annuity or life insurance values to another annuity or life policy that meets Section 1035 requirements; it is not a taxable sale if rules are followed.

ACATS transfer

The Automated Customer Account Transfer Service moves customer assets between member firms after the customer authorizes the receiving firm to initiate the transfer.

Summary prospectus delivery

A fund may satisfy prospectus delivery with a summary prospectus if the statutory prospectus is available online and the required notice and access conditions are met.

Forward pricing

Mutual fund orders are priced at the next net asset value calculated after the order is received in good order, not at a previously quoted NAV.

Good order instruction

An order that contains all required information and documentation so the firm can process it; incomplete orders may be delayed or rejected.

Trade confirmation contents

A confirmation generally states the security, trade date, amount, price, and commission or sales charge, and must be delivered at or before settlement.

T+1 settlement

The standard settlement cycle for most securities transactions, meaning the trade settles one business day after the trade date; mutual fund orders are priced forward.

Order ticket timestamp

The record of when an order was received and when it was executed; firms must maintain order tickets and related records under applicable rules.

Signature guarantee

A financial institution's certification of a customer's signature, often required for transfers, redemptions, or changes when the firm needs added protection against fraud.

CDSC redemption charge

A contingent deferred sales charge is a back-end sales charge charged when fund shares are redeemed within a specified period, often declining over time.

Redemption proceeds calculation

Redemption proceeds equal the shares redeemed multiplied by the next computed NAV, less any redemption fee, CDSC, or required tax withholding.