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Series 82 study materials
Series 82 study resources

Series 82 practice questions

One question at a time. Build your Series 82 understanding.

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Question 1Seeks Business for the Broker-dealer from Customers and Potential Customers

Under FCC telemarketing rules, a cold call to a residential telephone number is generally permitted only during which window?

  1. 7:00 a.m. to 10:00 p.m. local time at the called party
  2. 9:00 a.m. to 8:00 p.m. in the caller's time zone
  3. 8:00 a.m. to 9:00 p.m. local time at the called party Correct answer.
  4. Any hour, if the caller discloses the purpose of the call

Explanation

The Telephone Consumer Protection Act restricts telephone solicitations to between 8:00 a.m. and 9:00 p.m. local time of the person being called, regardless of where the caller is located. Calls outside that window are prohibited even if the recipient does not object.

Question 2Seeks Business for the Broker-dealer from Customers and Potential Customers

An established business relationship that permits a firm to call a number listed on the national Do-Not-Call Registry must generally have arisen within the preceding:

  1. 18 months Correct answer.
  2. There is no time limit on an established business relationship
  3. 3 months
  4. 5 years

Explanation

An established business relationship based on a prior transaction lasts 18 months from the date of the last transaction, while one based only on an inquiry or application lasts 3 months. Once the applicable period lapses, the registry prohibition applies again.

Question 3Seeks Business for the Broker-dealer from Customers and Potential Customers

At the outset of an outbound telephone sales call, a representative must do which of the following?

  1. Provide the prospect's credit score
  2. Obtain the prospect's Social Security number
  3. Identify the firm and state that the call is a sales call Correct answer.
  4. Recite the firm's most recent audited financial statements

Explanation

Telemarketing rules require the caller to promptly disclose his or her identity, the identity of the firm, and that the purpose of the call is to sell goods or services. The disclosure must come before any sales presentation begins.

Question 4Seeks Business for the Broker-dealer from Customers and Potential Customers

A private fund sponsor wants to advertise an offering to the general public and to accept investors who self-certify that they are accredited. Which exemption permits that approach?

  1. Rule 504
  2. Rule 506(c) Correct answer.
  3. Section 4(a)(1½)
  4. Rule 506(b)

Explanation

Rule 506(c) is the only Regulation D safe harbor that permits general solicitation and general advertising, and it requires the issuer to take reasonable steps to verify that every purchaser is accredited. Self-certification alone is generally not sufficient verification.

Question 5Seeks Business for the Broker-dealer from Customers and Potential Customers

An individual investor qualifies as an accredited investor on an income basis if income exceeded which threshold in each of the two most recent years, with a reasonable expectation of the same in the current year?

  1. $500,000 individually or $750,000 jointly with a spouse
  2. $50,000 individually or $75,000 jointly with a spouse
  3. $200,000 individually or $300,000 jointly with a spouse Correct answer.
  4. $100,000 individually or $150,000 jointly with a spouse

Explanation

The income test under Regulation D requires individual income above $200,000, or joint income with a spouse or spousal equivalent above $300,000, in each of the two most recent years plus a reasonable expectation of reaching the same level in the current year.

Question 6Seeks Business for the Broker-dealer from Customers and Potential Customers

For purposes of the accredited investor net worth test, an individual's net worth calculation excludes:

  1. The cash value of life insurance policies
  2. The equity in the person's primary residence Correct answer.
  3. Municipal bonds held in a brokerage account
  4. Balances held in retirement accounts

Explanation

The net worth standard excludes the value of a person's primary residence, and indebtedness secured by the residence is excluded up to its fair market value. Other assets, including retirement balances and life insurance cash value, are counted.

Question 7Seeks Business for the Broker-dealer from Customers and Potential Customers

Which activity is most likely to be treated as general solicitation?

  1. Discussing an offering with an investor who approached the firm unsolicited
  2. Sending a private placement memorandum to a pre-screened list of long-standing clients
  3. Meeting with an institutional investor referred by an existing limited partner
  4. Posting an offering summary on a public website available to anyone Correct answer.

Explanation

General solicitation means public advertising or broad communications to people with whom the firm has no pre-existing substantive relationship. Unrestricted web postings reach the public at large and therefore constitute general solicitation.

Question 8Seeks Business for the Broker-dealer from Customers and Potential Customers

A firm wants to show a pre-existing substantive relationship with prospects so it can offer a Rule 506(b) deal without general solicitation. Which factor best supports that conclusion?

  1. The prospect self-certified as accredited
  2. The prospect's name appears on a purchased mailing list
  3. The prospect registered for a public webinar
  4. The firm previously evaluated the prospect's objectives Correct answer.

Explanation

A pre-existing substantive relationship requires that the firm know the investor well enough to evaluate sophistication and financial circumstances before the offering is presented. Prior individualized assessment of the prospect's objectives supports that finding.

Question 9Seeks Business for the Broker-dealer from Customers and Potential Customers

An unregistered individual with no brokerage affiliation introduces prospective investors to a private placement and is paid a percentage of the amounts invested. How should this arrangement be characterized?

  1. Impermissible finder's fee arrangement Correct answer.
  2. Permissible if the payment is disclosed to the investors
  3. Permissible if the individual passes a qualification exam
  4. Permissible because the offering is exempt from registration

Explanation

Receiving transaction-based compensation for effecting securities transactions is the hallmark of broker-dealer activity and requires registration. The issuer's exemption from registration does not extend to unregistered intermediaries, and disclosure to investors does not cure the problem.

Question 10Seeks Business for the Broker-dealer from Customers and Potential Customers

A registered representative wants to pay an accountant a fee for referring clients who invest in a private placement. Which statement is correct?

  1. Any referral fee must be paid by the accountant's employer
  2. Referral fees are prohibited in all circumstances
  3. Only to a registered person, with written firm approval Correct answer.
  4. The fee must be paid in a lump sum to the client

Explanation

Transaction-based compensation for referring securities business may be shared only with registered or qualified persons and only with the firm's knowledge and written approval. Paying an unregistered accountant for securities referrals would constitute unregistered broker activity.

Question 11Seeks Business for the Broker-dealer from Customers and Potential Customers

Under FINRA rules, a representative may give a gift to an employee of another member firm in connection with the firm's business only if the gift does not exceed, per person per year:

  1. $500
  2. $100 Correct answer.
  3. $50
  4. $25

Explanation

FINRA Rule 3220 caps gifts given to employees of other members at $100 per person per year, and the rule forbids gifts that are preconditioned on the receipt of business. Gifts above the cap require a different compliance path, such as a permissible business entertainment analysis.

Question 12Seeks Business for the Broker-dealer from Customers and Potential Customers

Which statement best describes business entertainment of a client's purchasing agent under FINRA rules?

  1. It must be pre-approved in writing by the SEC
  2. It is permitted only if the client pays a portion
  3. Reasonable and not conditioned on getting the business Correct answer.
  4. It is never permitted during a live offering

Explanation

Business entertainment is permissible when it is reasonable in cost, not excessive, and not contingent on the award of business. Recordkeeping and firm approval policies also apply, but SEC pre-approval is never required.

Question 13Seeks Business for the Broker-dealer from Customers and Potential Customers

Under FINRA Rule 2210, a retail communication must be approved before first use by:

  1. The Chief Compliance Officer
  2. A registered principal Correct answer.
  3. FINRA's Advertising Regulation Department
  4. Any associated person of the firm

Explanation

Rule 2210 requires that retail communications be approved by a registered principal before they are used. The principal approval must be evidenced in writing and retained by the firm.

Question 14Seeks Business for the Broker-dealer from Customers and Potential Customers

Under FINRA Rule 5123, a member firm that offers a private placement must file the offering document with FINRA:

  1. With the SEC instead of FINRA, because the offering is unregistered
  2. Before the first investor is solicited, at least 10 days in advance
  3. Only after the offering closes and all investors are admitted
  4. Within 10 business days after the first sale, unless exempt Correct answer.

Explanation

Rule 5123 requires filing of the private placement memorandum, term sheet, or other offering document within 10 business days of the date of first sale, or a representation that no such document exists. Certain offerings, such as those sold only to institutional accounts, are exempt from the filing requirement.

Question 15Seeks Business for the Broker-dealer from Customers and Potential Customers

When a private placement advertisement includes a forecast of returns, the communication must:

  1. State the assumptions and label the data as hypothetical Correct answer.
  2. Guarantee the minimum projected return
  3. Omit explanation so the message stays concise
  4. Present only the most favorable scenario

Explanation

Projections must be accompanied by the assumptions on which they rest and must be clearly identified as hypothetical rather than as realized results. Presenting forecasts without that context is misleading.

Question 16Seeks Business for the Broker-dealer from Customers and Potential Customers

Which statement in a marketing piece for a private fund would violate FINRA's communications rules?

  1. A promise that the sponsor guarantees a 12% annual return Correct answer.
  2. An explanation that the fund is speculative and illiquid
  3. A statement that interests are suitable only for accredited investors
  4. A disclosure that past performance does not guarantee future results

Explanation

Communications may not contain promises or guarantees of investment results. Stating that a sponsor guarantees a specified return is an unwarranted claim and misrepresents the risk of the investment.

Question 17Seeks Business for the Broker-dealer from Customers and Potential Customers

A representative suspects that an elderly client no longer understands the risks of a proposed private placement. The best course of action is to:

  1. Escalate to a supervisor and consider a trusted contact Correct answer.
  2. Reduce the investment amount and keep the details confidential
  3. Ask the client's adult children to sign on the client's behalf
  4. Proceed, since the client signed the subscription agreement

Explanation

FINRA rules on senior investors direct representatives to escalate suspected diminished capacity to a principal and permit contact with a trusted contact person or a temporary hold on disbursements. A signed agreement does not relieve the firm of its suitability and care obligations.

Question 18Seeks Business for the Broker-dealer from Customers and Potential Customers

Before opening an account for a new customer, a representative must:

  1. Obtain a copy of the customer's tax return
  2. Obtain a credit report from a consumer reporting agency for every new account
  3. Gather the customer's financial profile and investment objectives Correct answer.
  4. Receive the customer's written authorization to share commissions with third parties

Explanation

Firms must collect the customer's financial situation, tax status, investment objectives, and other suitability information as part of account opening and know-your-customer obligations. Tax returns and credit reports are not required elements of that process.

Question 19Seeks Business for the Broker-dealer from Customers and Potential Customers

Under Regulation Best Interest, recommending a private placement to a retail customer requires that the representative:

  1. Obtain a written waiver of all conflicts of interest from the customer
  2. Guarantee the investment will not lose value
  3. Have a reasonable basis to believe it is in the customer's best interest Correct answer.
  4. Recommend only the private placement product with the lowest available fee structure

Explanation

Regulation Best Interest requires a reasonable basis to believe the recommendation is in the retail customer's best interest, considering reasonably available alternatives and the customer's objectives. Conflicts must be disclosed and mitigated, not waived away by the customer.

Question 20Seeks Business for the Broker-dealer from Customers and Potential Customers

Under the customer identification program rules, a broker-dealer must verify a new customer's identity:

  1. Only for accounts opened in person
  2. Only when the account is funded with more than $100,000
  3. Within a reasonable time after the account is opened Correct answer.
  4. Within one year of the first transaction

Explanation

The CIP rule requires firms to verify identity before or within a reasonable time after the account is opened, using documents, non-documentary methods, or both. Verification is not conditioned on account size or on how the account was opened.

Question 21Seeks Business for the Broker-dealer from Customers and Potential Customers

A representative may solicit a customer who resides in another state only if:

  1. The investment is exempt from registration
  2. The representative's firm is incorporated in that state
  3. The customer initiates the contact first
  4. The representative is properly registered in that state Correct answer.

Explanation

State securities laws require an associated person to be registered in a state before soliciting residents of that state, subject to limited exemptions. Whether the customer or the representative initiates the contact does not remove the registration requirement.

Question 22Seeks Business for the Broker-dealer from Customers and Potential Customers

A firm sponsors a free dinner seminar to market a private placement. Which is required?

  1. Attendees must sign a subscription agreement before leaving
  2. The seminar must be limited to accredited investors only, verified before the event
  3. The firm must file a prospectus with the SEC in advance
  4. The invitation and materials must be reviewed and approved as advertisements Correct answer.

Explanation

Seminar invitations and handout materials used to market securities are communications with the public and must go through principal review and approval like any other advertisement. Live events may need to be supervised and the materials retained.

Question 23Seeks Business for the Broker-dealer from Customers and Potential Customers

A representative posts an unsolicited comment about an ongoing private placement on a public social media profile. How is this best characterized?

  1. An interactive communication exempt from recordkeeping
  2. Permissible because social media is not a business communication
  3. A public communication subject to firm supervision and approval Correct answer.
  4. A purely personal communication outside FINRA's advertising rules

Explanation

Content that promotes a securities offering to the public is a communication with the public, even when posted on a personal profile, and it must be supervised and approved under the firm's procedures. Firms must also retain records of such communications.

Question 24Seeks Business for the Broker-dealer from Customers and Potential Customers

A sponsor conducting a Rule 506(c) offering later discovers that one purchaser was not an accredited investor. The consequence is that the issuer:

  1. Loses the 506(c) exemption because all purchasers must be accredited Correct answer.
  2. May treat that purchaser as a 506(b) investor in the same offering
  3. Must file an amended Form D within 15 calendar days
  4. May retain the exemption if it promptly refunds the purchaser's money

Explanation

Rule 506(c) is available only if every purchaser in the offering is accredited and the issuer took reasonable steps to verify that status. A single non-accredited purchaser defeats the exemption for the offering; refunding the investment after the fact does not restore it.

Question 25Seeks Business for the Broker-dealer from Customers and Potential Customers

A customer sends a written complaint alleging that a representative misrepresented a private placement. The representative must:

  1. Forward the complaint to FINRA within 24 hours of receipt
  2. Resolve the complaint directly with the client and keep no record
  3. Send the client a new subscription agreement for signature
  4. Report the complaint to the firm so it can be logged and reviewed Correct answer.

Explanation

Written complaints must be captured in the firm's complaint system and reviewed by supervisory personnel, because they are a required record and may need to be reported. Representatives may not settle or suppress customer complaints on their own.

Question 26Seeks Business for the Broker-dealer from Customers and Potential Customers

Under telemarketing rules, a representative may initiate a cold call to a residential prospect only during which time window?

  1. Between 7:00 a.m. and 8:00 p.m. local time at the prospect's location
  2. Between 9:00 a.m. and 5:00 p.m. local time at the prospect's location
  3. Between 8:00 a.m. and 9:00 p.m. local time at the prospect's location Correct answer.
  4. Between 6:00 a.m. and 10:00 p.m. local time at the prospect's location

Explanation

Telemarketing rules restrict calls to residential consumers to the hours of 8:00 a.m. to 9:00 p.m. local time at the called party's location. Calls outside that window are improper even if the representative has a pre-existing business relationship.

Question 27Seeks Business for the Broker-dealer from Customers and Potential Customers

Under FINRA Rule 2210, a written communication becomes a retail communication when it is distributed to:

  1. 25 or fewer retail investors in any 30 calendar-day period
  2. More than 10 retail investors in any 30 calendar-day period
  3. Any retail investor who receives it in a 12-month period
  4. More than 25 retail investors in any 30 calendar-day period Correct answer.

Explanation

FINRA defines retail communication by the breadth of distribution: more than 25 retail investors within any 30 calendar-day period. Communications to 25 or fewer retail investors in that period are generally correspondence.

Question 28Seeks Business for the Broker-dealer from Customers and Potential Customers

A broker-dealer completes the first sale in a Regulation D private placement on March 1. When must it file Form D with the SEC?

  1. Before any general solicitation begins
  2. Within 15 calendar days after the offering terminates
  3. Within 30 calendar days after the first sale
  4. Within 15 calendar days after the first sale Correct answer.

Explanation

Regulation D requires Form D to be filed no later than 15 calendar days after the first sale of securities in the offering. The deadline runs from the first sale, not from the closing or termination of the offering.

Question 29Seeks Business for the Broker-dealer from Customers and Potential Customers

Which statement in a communication about a private placement is prohibited?

  1. "Investing involves risk, including possible loss of principal."
  2. "Past performance does not guarantee future results."
  3. "Diversification does not ensure a profit."
  4. "Your principal is guaranteed against loss by the firm." Correct answer.

Explanation

Communications may not state or imply that a firm guarantees against loss, because securities investments carry risk and no such guarantee exists. Balanced risk disclosure is permitted and encouraged.

Question 30Seeks Business for the Broker-dealer from Customers and Potential Customers

Which activity is treated as a public appearance under FINRA communications rules?

  1. An unscripted live television interview about market conditions Correct answer.
  2. A printed brochure mailed to 100 retail prospects
  3. An email sent to 10 retail customers
  4. A pre-recorded radio advertisement approved by a principal

Explanation

A public appearance includes participation in a seminar, forum, radio or television interview, or other unscripted live presentation. Pre-recorded advertisements and written materials are treated differently under the communications rules.

Question 31Seeks Business for the Broker-dealer from Customers and Potential Customers

Under Regulation Best Interest, a recommendation of a private placement to a retail customer requires the representative to:

  1. Act in the customer's best interest, considering reasonably available alternatives Correct answer.
  2. Obtain a signed waiver of the customer's right to sue the firm for investment losses
  3. Disclose in writing that the firm's interests come before the customer's interests
  4. Recommend only products that the firm has approved for sale to any customer

Explanation

Regulation Best Interest requires recommendations to retail customers to be in the customer's best interest, not merely suitable. The representative must consider reasonably available alternatives and cannot place the firm's interests ahead of the customer's.

Question 32Seeks Business for the Broker-dealer from Customers and Potential Customers

When making a telemarketing call to a prospective customer, the representative must promptly:

  1. Provide the firm's most recent audited financial statements
  2. Read the firm's privacy policy before continuing the conversation
  3. Provide the representative's CRD number and branch office address
  4. Identify the caller, the firm, and the purpose of the call Correct answer.

Explanation

Telemarketing rules require the caller to promptly identify himself or herself, the firm, and the purpose of the call. Additional information, such as an address or telephone number, must be provided if requested.

Question 33Seeks Business for the Broker-dealer from Customers and Potential Customers

A customer asks a representative to stop calling and to put the customer on the firm's internal do-not-call list. The firm must:

  1. Transfer the caller to a supervisor before ending the call
  2. Record the request and place the number on the firm's do-not-call list Correct answer.
  3. Send the customer written confirmation within 5 business days
  4. Report the request to FINRA within 10 business days

Explanation

A firm must maintain an internal do-not-call list and honor a customer's request to be placed on it. The request should be recorded so that future calls are avoided.

Question 34Seeks Business for the Broker-dealer from Customers and Potential Customers

After a customer asks not to receive further telemarketing calls, the firm must honor the request no later than:

  1. 30 days Correct answer.
  2. 60 days
  3. 90 days
  4. 5 business days

Explanation

Telemarketing rules require a seller or telemarketer to honor a do-not-call request within a reasonable time, and no later than 30 days after the request. The firm should also maintain records of the request.

Question 35Seeks Business for the Broker-dealer from Customers and Potential Customers

A retail communication includes a customer testimonial, and the customer was paid for it. What is required?

  1. The firm must obtain FINRA approval before each use of the testimonial
  2. The communication must include the customer's tax identification number
  3. The communication must disclose that the testimonial was paid and any conflicts Correct answer.
  4. The testimonial must be removed because paid testimonials are prohibited

Explanation

Testimonials may be used if they are fair and balanced and not misleading. If the person giving the testimonial was paid, the communication must disclose the payment and any conflicts of interest.

Question 36Seeks Business for the Broker-dealer from Customers and Potential Customers

A representative plans to hand out a printed slide deck at a free seminar promoting a private placement. The handout must be:

  1. Approved by the compliance department within 24 hours after use
  2. Filed with FINRA at least 10 days before the seminar
  3. Delivered to every attendee's attorney for review
  4. Approved by a registered principal before first use Correct answer.

Explanation

A written handout used to market securities to retail investors is a retail communication that must be approved by a registered principal before first use. Post-use or attorney review does not satisfy the pre-approval requirement.

Question 37Seeks Business for the Broker-dealer from Customers and Potential Customers

A firm posts a static social media biography that mentions its private placement services. How is the post treated under FINRA communications rules?

  1. As correspondence because social media is electronic
  2. As an institutional communication not subject to FINRA rules
  3. As a retail communication that requires principal approval before posting Correct answer.
  4. As a public appearance exempt from approval

Explanation

Static social media content that the firm controls and makes available to a broad audience is generally treated as a retail communication. It must be approved by a registered principal before it is posted.

Question 38Seeks Business for the Broker-dealer from Customers and Potential Customers

A member firm may distribute a third-party research report to retail customers if:

  1. The member pays the research provider a success fee
  2. The report is at least 12 months old
  3. The member rewrites the conclusions to match its own views
  4. The report is not materially altered and required disclosures are included Correct answer.

Explanation

A member may distribute third-party research if it is not materially altered and the required disclosures are included. The firm may not change the report's conclusions to suit its own marketing.

Question 39Seeks Business for the Broker-dealer from Customers and Potential Customers

A representative wants to send 200 retail prospects a favorable newspaper article about a private fund. The reprint must be:

  1. Treated as a retail communication and approved by a principal Correct answer.
  2. Approved by the newspaper's editor before distribution
  3. Accompanied by audited financial statements of the fund
  4. Filed with the SEC as a prospectus

Explanation

Reprinting an article for marketing purposes creates a retail communication controlled by the firm. It must be approved by a registered principal and must be fair and balanced.

Question 40Seeks Business for the Broker-dealer from Customers and Potential Customers

Before a customer invests in a private placement, the firm should ensure that the customer:

  1. Has the private placement memorandum filed with FINRA before delivery
  2. Signs a waiver of all risk disclosures
  3. Receives the private placement memorandum before or at the time of sale Correct answer.
  4. Receives the private placement memorandum within 30 days after funding

Explanation

The customer should receive the private placement memorandum and material offering information before or at the time of sale. Delivering it after the customer has already invested defeats informed decision-making.

Question 41Seeks Business for the Broker-dealer from Customers and Potential Customers

Under Rule 506(b) of Regulation D, a private placement may be sold to:

  1. Up to 35 non-accredited purchasers who meet sophistication standards Correct answer.
  2. Any number of non-accredited purchasers if they sign a waiver
  3. No non-accredited purchasers under any circumstances
  4. Up to 500 non-accredited purchasers without any sophistication review

Explanation

Rule 506(b) permits sales to an unlimited number of accredited investors and up to 35 non-accredited purchasers who are financially sophisticated. The non-accredited purchasers must meet the sophistication standard.

Question 42Seeks Business for the Broker-dealer from Customers and Potential Customers

An issuer relying on Rule 506(c) must:

  1. Rely solely on a signed accredited investor questionnaire
  2. File a registration statement with the SEC
  3. Limit sales to 35 purchasers
  4. Take reasonable steps to verify each purchaser's accredited status Correct answer.

Explanation

Rule 506(c) permits general solicitation only if the issuer takes reasonable steps to verify that all purchasers are accredited investors. Self-certification alone generally is not sufficient verification.

Question 43Seeks Business for the Broker-dealer from Customers and Potential Customers

Under the customer identification program rules, when a legal entity opens an account, the firm generally must:

  1. Verify only the entity's president
  2. Obtain a certification identifying the entity's beneficial owners Correct answer.
  3. Verify the entity's tax-exempt status
  4. Obtain a list of all employees

Explanation

For legal entity customers, CIP rules require the firm to identify beneficial owners and a control person, typically through a certification. This helps the firm understand who actually owns or controls the entity.

Question 44Seeks Business for the Broker-dealer from Customers and Potential Customers

When opening an account for a natural person, a member firm must make reasonable efforts to:

  1. Close the account if no family member is listed
  2. Obtain a power of attorney
  3. Obtain a trusted contact person Correct answer.
  4. Require the customer to name the firm as beneficiary

Explanation

FINRA rules require firms to make reasonable efforts to obtain the name and contact information of a trusted contact person for a natural person customer. The trusted contact helps the firm address issues such as diminished capacity or potential exploitation.

Question 45Seeks Business for the Broker-dealer from Customers and Potential Customers

A registered representative wants to sell insurance products to her brokerage customers through a separate outside business. Under FINRA rules, she must first:

  1. Register the separate business with FINRA as a branch office
  2. Give the firm written notice and obtain its approval Correct answer.
  3. Wait until after the first sale to inform the firm
  4. Use only the firm's letterhead for the insurance sales

Explanation

FINRA Rule 3270 requires a representative to provide written notice to the firm before engaging in an outside business activity. The firm must evaluate and approve or reject the activity under its supervisory procedures.

Question 46Seeks Business for the Broker-dealer from Customers and Potential Customers

Under Regulation Best Interest, a firm's conflict of interest obligation requires it to:

  1. Disclose conflicts only after the recommendation is made
  2. Eliminate every conflict of interest, including ordinary compensation
  3. Prohibit all sales contests and sales quotas
  4. Identify and mitigate conflicts that could create an incentive to put the firm's interest ahead of the customer's Correct answer.

Explanation

Regulation Best Interest requires firms to identify and mitigate conflicts that could create incentives to place the firm's interests ahead of the retail customer's. Certain conflicts may require elimination, but not every ordinary compensation arrangement must be eliminated.

Question 47Seeks Business for the Broker-dealer from Customers and Potential Customers

Institutional sales literature includes hypothetical performance for a private fund. The material must:

  1. Be filed with FINRA before use
  2. Avoid all discussion of risk to keep the presentation balanced
  3. Include only the best-case scenario
  4. Clearly disclose the assumptions, limitations, and hypothetical nature of the results Correct answer.

Explanation

Hypothetical performance may be used only if it is fair and balanced and clearly discloses its assumptions, limitations, and the fact that the results are hypothetical. It must not imply that the hypothetical results will be achieved.

Question 48Seeks Business for the Broker-dealer from Customers and Potential Customers

A representative "likes" and shares a third-party social media post praising a private placement the firm is selling. How is this treated?

  1. The firm has no responsibility because the post was not created by the firm
  2. The firm has adopted the content and must ensure it complies with communications rules Correct answer.
  3. The firm must delete all social media accounts immediately
  4. The post may be treated as a public appearance without review

Explanation

When a firm or its representative endorses, likes, or shares third-party content, the firm may be treated as having adopted that content. Adopted content must comply with the applicable communications rules, including approval and supervision requirements.

Question 49Seeks Business for the Broker-dealer from Customers and Potential Customers

Under Rule 506(d), what is the effect of a disqualifying event involving a covered person in a Regulation D offering?

  1. Disqualification applies only to offerings made under Rule 504
  2. A covered person's disqualifying event can disqualify the offering Correct answer.
  3. The issuer must refund all purchasers if any covered person is disqualified
  4. Only the purchaser's accredited status matters for disqualification

Explanation

Rule 506(d) contains "bad actor" disqualification provisions. A relevant disqualifying event for a covered person can make the Rule 506 exemption unavailable unless a waiver or exception applies.

Question 50Seeks Business for the Broker-dealer from Customers and Potential Customers

A firm reasonably believes that a senior customer is being financially exploited and is about to disburse funds to the suspected exploiter. Under FINRA Rule 2165, the firm may:

  1. Share the customer's account records with the suspected exploiter
  2. Liquidate all of the customer's securities immediately
  3. Refuse to accept any future deposits from the customer
  4. Place a temporary hold on the disbursement while investigating Correct answer.

Explanation

FINRA Rule 2165 permits a firm that reasonably believes a customer is experiencing financial exploitation to place a temporary hold on disbursements. The firm must follow its procedures and make reasonable efforts to investigate and contact appropriate parties.