SIE Set 2

Which of the following is part of a financial institution's AML program?

• Maintaining a record of all transactions

• Maintaining a record of checks in excess of $3,000

• Maintaining a record of cash deposits and withdrawals that are not in excess of $3,000

• Maintaining a record of wire transfers in excess of $3,000

Answer explanation

A financial institution's AML program must contain policies, procedures, and internal controls that are designed to comply with the Bank Secrecy Act (BSA). One of the requirements is that broker-dealers must retain records for transmittals (e.g., wires) and transfers of funds in excess of $3,000. If the person making the request is not a customer, the broker-dealer must also verify the person's identity. (20976)

When opening a new customer account, who's required to sign the new account form?

• The customer only

• The registered representative only

• The principal only

• The customer, the registered representative, and the principal

Answer explanation

When opening a new customer account, the principal is required to sign and approve the account. Some firms require customers to sign the new account form as well; however, this is an in-house rule and not a regulatory requirement. (14303)

An older investor has an brokerage account with a firm and her registered representative (RR) is concerned that a person is exploiting her financially. What step should be taken by the RR?

• 
  Obtain information on the fiduciary of the account.

• Obtain information on a trusted contact person.

• Refuse any incoming orders from the investor.

• Take no action since exploitation is unlikely.

Answer explanation

When an account is opened, registered representatives should request from the client the name and address of a trusted contact person for the account. A trusted contact person is the person to be contacted by the brokerage firm in limited circumstances, such as if her firm cannot reach the account owner or if the firm has a reasonable belief that the owner's account may be exposed to possible financial exploitation. (23803)

A customer has just moved and notified her firm of her new address. The firm must send a copy of the revised information to the customer within what period?

• 
  Immediately

• Within 15 days

• 
  Within 30 days

• There's no need to send this to the client since the client provided the information.

Answer explanation

When there's a change to a client's account information, the broker-dealer must update its records and forward the change to the client within 30 days or at the time the next account statement is sent. (23798)

FINRA's requirement for maintaining a written business continuity plan includes all of the following, EXCEPT:

• The plan must be filed with FINRA.

• The plan must cover regulatory reporting in an emergency.

• 
  A description of the plan must be available to customers.

• The plan must cover backing up and restoring data in an emergency.

Answer explanation

For member firms to protect their obligations to customers, the firms must create and maintain a business continuity plan (BCP) which identifies the procedures to be followed in an emergency or business disruption. The plan is not required to be filed with FINRA, but it must be available upon request and maintained at a secure, off-site facility. When opening an account, each broker-dealer must provide written notification to its customers regarding how its business continuity plan addresses the possibility of a natural disaster or other significant business disruption. (23789)

Under Regulation S-P, when is a firm required to provide a privacy notice to a consumer?

• 
  If the consumer is part of a call list or other record that's maintained by the firm

•  If the firm intends to disclose information about the consumer

• 
  At the time the account is opened

• Annually

Answer explanation

For purposes of Regulation S-P, a “customer” is an individual who has an ongoing relationship with a firm, while a “consumer” is an individual who doesn't yet have a relationship. A firm is only required to provide a privacy notice to consumers if it intends to disclose any information about the consumer to non-affiliated third parties. On the other hand, customers must receive the privacy notice at the time their account is opened and annually thereafter. Both customers and consumers must also be given adequate notice of their ability to opt out of having their personal information shared with third parties, and the means by which they may opt out must be reasonable. (23783)

For how long must a broker-dealer maintain customer account records after an account is closed?

• 
  Two years

• Three years

• Six years

• The life of the firm

Answer explanation

Records that relate to customer accounts must be maintained for a total of six years after the account is closed. For the first two years, the records must be kept in an easily accessible location. (17569)

If a broker-dealer is acting as a trustee for a corporation, is it able to use shareholder information to prospect for customers?

•  If approved by FINRA

• 
  If approved by the SEC

• 
  If approved by the corporation

• Without any approval

Answer explanation

If a broker-dealer is acting as a trustee for a corporation, it's only allowed to use shareholder information for cold-calling or prospecting if it's for the benefit of, and approved by, the corporation. (14315)

An individual is considered to have an established business relationship if a transaction occurred no longer ago than:

• Within the last six months

• Within the last 12 months

• Within the last 18 months

• 
  Within the last 24 months

Answer explanation

An individual is considered to have an established business relationship if a transaction occurred no longer ago than within the last 18 months. (14323)

Which of the three FINRA suitability obligations apply to institutional customers?

• The reasonable basis obligation only

• 
  The reasonable basis and customer-specific obligations

•  The reasonable basis and quantitative obligations only

•  The reasonable basis, customer-specific, and quantitative obligations

Answer explanation

The reasonable basis and quantitative obligations apply to institutional customers. Assuming the institutional customers can exercise independent judgment when evaluating recommendations, they're exempt from the customer-specific obligation. (14307)