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Wiley FINRA Series 99 Exam Review 2017: The Operations Professional Examination

ISBN: 978-1-119-40317-3
432 pages
March 2017
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Description

The go-to guide to acing the Series 99 Exam!

Passing the Operations Professional Qualification Exam (Series 99) qualifies an individual to perform a variety of operations functions in support of a broker-dealer. The exam covers the broker-dealer business at a fundamental level, standard operations functions, investor protection and market integrity regulations, identifying and escalating regulatory red-flag issues to the appropriate person in a firm, and professional conduct and ethical standards. There are no prerequisites for the Series 99 Exam, but all candidates must be sponsored by a FINRA member firm.

Created by the experts at The Securities Institute of America, Inc., Wiley Series 99 Exam Review 2017 arms you with everything you need to pass this challenging 100-question test. Designed to help you build and fine-tune your knowledge of all areas covered in the exam and to guarantee that you're prepared mentally and strategically to take the test, it provides:

  • Dozens of examples
  • Assorted practice questions for each subject area covered in the exam
  • Priceless test-taking tips and strategies
  • Helpful hints on how to study for the test, manage stress, and stay focused

Wiley Series 99 Exam Review 2017 is your ticket to passing the Series 99 test on the first try—with flying colors!

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Table of Contents

About the Series 99 Exam xiii

About This Book xvi

About the Test Bank xvii

About the Securities Institute of America xviii

Chapter 1 Equity and Debt Securities 1

What Is a Security? 1

Capitalization 2

Common Stock 3

Preferred Stock 9

Types of Dividends 12

Rights 13

Warrants 14

Options 15

American Depositary Receipts (ADRs)/American Depositary Shares (ADSs) 20

Debt Securities/Bonds 21

The Money Market 36

Limited Partnerships 38

Pretest 45

Chapter 2 Brokerage Office Procedures and Back-Office Operations 49

Hiring New Employees 49

Resignation of a Registered Representative 50

Registration Exemptions 51

Persons Ineligible to Register 52

Disciplinary Actions Against a Registered Representative 53

Termination for Cause 54

Outside Employment 54

Private Securities Transactions 55

Gift Rule 55

Sharing in a Customer’s Account 56

Borrowing and Lending Money 56

Order Tickets 57

Executing an Order 57

Becoming a Stockholder 59

Clearly Erroneous Reports 60

Execution Errors 61

Unconfirmed Trades 62

Corporate and Municipal Securities Settlement Options 62

When-Issued Securities 64

Government Securities Settlement Options 65

Accrued Interest 65

Close Outs 66

Customer Confirmations 67

Rules for Good Delivery 68

Rejection of Delivery 70

Reclamation 70

Marking to the Market 71

Customer Account Statements 71

Dividend Distribution 72

Proxies 74

Operations Professionals Covered Persons 75

Operational Red Flags 76

Pretest 77

Chapter 3 Record Keeping, Financial Requirements, and Clearing 81

Blotters 81

General Ledger 82

Customer Accounts 82

Suspense Account 82

Subsidiary (Secondary) Records 82

Securities Position Book (Ledger) Stock Record 83

Order Tickets 83

Confirmations and Notices 83

Monthly Trial Balances and Net Capital Computations 83

Employment Applications 83

Records Required to Be Maintained for 3 Years 84

Records Required to Be Maintained for 6 Years 84

Records Required to Be Maintained for the Life of the Firm 84

Requirement to Prepare and Maintain Records Under SEC 17a-3 and 17a-4 86

Financial Requirements 87

Box Counts 89

Missing and Lost Securities 90

The Customer Protection Rule 91

FINRA Financial Requirements 94

Fidelity Bonds 95

Carrying of Customer Accounts 96

The Depository Trust & Clearing Corporation (DTCC) 97

The Fixed Income Clearing Corporation (FICC) 98

The Option Clearing Corporation (OCC) 99

American vs. European Exercise 99

Expiration and Exercise 100

Pretest 101

Chapter 4 Issuing Corporate Securities 105

The Prospectus 106

The Final Prospectus 106

Prospectus to Be Provided to Aftermarket Purchasers 107

SEC Disclaimer 108

Misrepresentations 108

Tombstone Ads 108

Free Riding and Withholding/FINRA Rule 5130 109

Underwriting Corporate Securities 110

Types of Underwriting Commitments 111

Types of Offerings 113

Exempt Securities 115

Exempt Transactions 115

Rule 137 Nonparticipants 122

Rule 138 Nonequivalent Securities 123

Rule 139 Issuing Research Reports 123

Rule 415 Shelf Registration 124

Securities Offering Reform Rules 124

SEC Rule 405 125

Additional Communication Rules 126

Crowdfunding 127

Pretest 129

Chapter 5 Trading Securities 133

Types of Orders 133

The Exchanges 137

The Role of the Designated Market Maker 138

Crossing Stock 141

Do Not Reduce (DNR) 141

Adjustments for Stock Splits 142

Super Display Book (SDBK) 142

Short Sales 143

Threshold Securities 146

Over the Counter/Nasdaq 147

Electronic Communication Networks (ECNs) 150

Non-Nasdaq OTC Bulletin Board 151

Pink OTC Market 151

Third Market 152

Fourth Market 152

The Order Audit Trail System (OATS) 153

Broker vs. Dealer 153

FINRA’s 5% Markup Policy 154

Markups/Markdowns When Acting as a Principal 155

Riskless Principal Transactions 155

Net Transactions with Customers 156

Proceeds Transactions 156

Firm Quote Rule 157

Trade Complaints Between Members 157

Pretest 159

Chapter 6 General Supervision 163

The Role of the Principal 163

Continuing Education 165

Tape Recording Employees 167

Heightened Supervisory Requirements 167

Information Obtained from an Issuer 168

Customer Complaints 168

Investor Information 169

Member Offices 169

Annual Compliance Review 171

Business Continuity Plan 171

Currency Transactions 172

The Patriot Act 172

Identity Theft 174

Pretest 175

Chapter 7 Customer Accounts 179

Opening a New Customer Account 179

Holding Securities 181

The Depository Trust Company (DTC) 182

Mailing Instructions 183

Types of Ownership 183

Death of a Customer 184

Partnership Accounts 185

Trusts 185

Corporate Accounts 186

Trading Authorization 186

Accounts for Employees of Other Broker Dealers 191

Numbered Accounts 191

Prime Brokerage Accounts 191

Account Transfers 192

Bulk Account Transfers 193

Margin Accounts 194

Guaranteeing a Customer’s Account 196

Day Trading Accounts 196

Commingling Customer’s Pledged Securities 196

Wrap Account 197

Regulation S-P 197

Pretest 199

Chapter 8 Margin Accounts 203

Regulation of Credit 203

House Rules 206

Establishing a Long Position in a Margin Account 206

Establishing a Short Position in a Margin Account 212

Margin Requirements for Day Trading 216

Combined Margin Accounts 217

Portfolio Margin Accounts 218

Securities Backed Lines of Credit 219

Minimum Margin for Leveraged ETFs 219

Pretest 221

Chapter 9 Investment Companies 225

Investment Company Philosophy 225

Types of Investment Companies 226

Investment Company Registration 228

Investment Company Components 230

Mutual Fund Distribution 233

Distribution of Mutual Fund Shares 234

Mutual Fund Prospectus 234

Additional Disclosures by a Mutual Fund 236

Anti-Reciprocal Rule 236

Money Market Funds 237

Valuing Mutual Fund Shares 237

Mutual Fund Sales Charges 237

Sales Charge Reductions 239

Voting Rights 243

Portfolio Turnover 244

Recommending Mutual Funds 244

Exchange Traded Funds/ETFs 245

Exchange Traded Notes/ETNs 245

ETFs That Track Alternatively Weighted Indexes 245

Alternative Funds 246

Floating Rate Bank Loan Funds 246

Structured Retail Products/SRPs 247

Pretest 249

Chapter 10 Variable Annuities and Retirement Plans 253

Annuities 253

Recommending Variable Annuities 257

Retirement Plans 262

ERISA 404C Safe Harbor 275

Department of Labor Fiduciary Rules 276

Health Savings Accounts 276

Pretest 279

Chapter 11 Securities INDUSTRY Rules and Regulations 283

The Securities Exchange Act of 1934 283

Becoming a Member of FINRA 287

Registration of Agents/Associated Persons 288

State Registration 289

Retail Communications/Communications with the Public 289

Securities Investor Protection Corporation Act of 1970 294

The Securities Acts Amendments of 1975 295

The Insider Trading and Securities Fraud Enforcement Act of 1988 296

Firewalls 296

Telemarketing Rules 297

The Penny Stock Cold Call Rule 298

Violations and Complaints 299

Political Contributions 303

Investment Adviser Registration 304

Investment Adviser Representatives 306

Investment Adviser Advertising and Sales Literature 307

Soft Dollars 308

The Uniform Securities Act 310

Pretest 311

Answer Keys 315

Glossary of Exam Terms 323

Index 389

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