Series 7 flashcards
Series 7 · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Do Not Call scrubbing rule
- Firms making telemarketing calls must compare their outbound lists against the FTC Do Not Call registry at least once every 31 days.
- Cold call disclosures
- The caller must promptly give their name, the firm's name, a phone number or address, and state that the purpose of the call is to solicit business.
- Gift and entertainment limit
- FINRA Rule 3220 caps gifts or entertainment given to another firm's employees at $100 per person per year absent prior written consent from the employing firm.
- Correspondence definition
- Written or electronic messages distributed to 25 or fewer retail investors within any 30-day period; these require supervisory review but not principal pre-approval.
- Regulation Best Interest
- Requires broker-dealers to act in a retail customer's best interest when recommending securities or strategies, through disclosure, care, conflict-of-interest, and compliance obligations.
- Suspicious Activity Report
- A confidential filing made to FinCEN within 30 calendar days of detecting suspicious activity involving at least $5,000; the customer must never be informed.
- Finder's fee prohibition
- Paying transaction-based compensation to an unregistered person for soliciting securities business violates the registration requirements of Exchange Act Section 15(a).
- Retail communication pre-approval
- Under FINRA Rule 2210, retail communications must be approved by a registered principal before first use, while ordinary correspondence needs only post-use supervision.
- CIP required elements
- The customer identification program must collect name, date of birth for individuals, address, and an identification number, then verify identity within a reasonable time.
- Trusted contact requirement
- FINRA Rule 4512 requires firms to make reasonable efforts to obtain the name and contact information of a trusted contact person for each natural-person account.
- Temporary hold on disbursements
- Under FINRA Rule 2165, a firm suspecting financial exploitation of a specified adult may hold a disbursement 15 business days, extendable by 10 more.
- JTWROS account
- A joint account with right of survivorship in which the deceased owner's share passes by contract to the surviving owner, avoiding probate.
- Tenancy in common
- A joint account in which each owner holds a stated undivided interest that passes through the owner's estate at death rather than to the other holders.
- Options agreement timing
- After account approval the customer receives the options disclosure document and must return the signed options agreement promptly, generally within 15 days.
- Loan consent clause
- An optional margin agreement provision that lets the broker-dealer lend the customer's margin securities to itself or to other firms.
- Verbal discretion limits
- A customer may authorize a single order verbally, but continuing discretion requires written power of attorney and approval of the account by the firm.
- ACATS transfer timing
- The receiving firm submits the transfer instruction within one business day of the customer's request, and the delivering firm must validate within three business days.
- Six-year retention standard
- Most broker-dealer books and records must be kept six years with the first two years readily accessible; correspondence and communications are kept three years.
- Complaint record retention
- Records of customer complaints, including the complaint itself and the firm's response, must be preserved for four years.
- Testimonial disclosure rule
- A retail communication containing a client testimonial must state that it may not be representative of other clients and disclose any compensation paid for it.
- Fund performance periods
- Retail communications showing fund performance must present 1-, 5-, and 10-year periods, or since inception if shorter, using standardized total return.
- Analyst independence separation
- Research analysts may not be supervised or controlled by investment banking staff and may not be paid for specific investment banking transactions.
- Churning analysis
- Excessive trading is shown by high turnover or cost-to-equity ratios, proving the volume of trades cannot be justified by the customer's objectives.
- Account statement frequency
- FINRA Rule 2231 requires account statements at least quarterly, and monthly whenever the account has activity during the period.
- Regular-way settlement cycle
- Regular-way settlement for stocks and corporate bonds is trade date plus one business day (T+1), effective May 28, 2024.
- Limit order mechanics
- A buy limit executes only at or below the stated price and a sell limit only at or above it, so an unfavorable limit may go unfilled.
- Stop order mechanics
- A stop order becomes a market order once the stop price is reached, so the eventual execution price is not guaranteed.
- Confirmation required disclosures
- Rule 10b-10 confirmations must show the security, price, date and time of execution, capacity as agent or principal, and the commission charged.
- Pattern day trader threshold
- A customer with four or more day trades in five business days in a margin account must maintain $25,000 minimum equity to continue day trading.
- Maintenance margin on longs
- FINRA requires equity of at least 25% of a long stock position's market value, though firms may impose higher house requirements.
- Free-riding restriction
- A customer who does not pay for a purchase by settlement is limited to cash-up-front trading for 90 days under Regulation T.
- Best execution obligation
- FINRA Rule 5310 requires reasonable diligence to execute customer orders at the most favorable terms reasonably available under current market conditions.