Series 26 Sales Practices

Question Answer
Explain the different prospectuses. Preliminary (red herring), Statutory (effective, final), Summary (Rule 498), Omitting (tombstone ad)
_______ can be used to solicit indications of interest but not to declare final offering price of an actual sale. Red herrings
When an investor purchases fund shares on the basis of a summary prospectus, what may be satisfied through access on an internet website? Access to the statutory prospectus
_____ promotes an investment medium but does not refer to any specific security or investment company. General advertising
____ is any communication, in writing/radio/television, that a person uses to offer to sell investment company securities. Sales literature
What is the name rule? If an investment company's name suggests that the company focuses on a type of investment, the fund must invest at least 80% of its assets in that (i.e. Bond Fund)
Sales literature on money market funds must include a statement regarding what? That it's not insured or guaranteed by the FDIC, seeks to preserve the value of your investment at $1 per share, but you may lose money by investing
In any sales literature that contains performance data, what must they include? Legend disclosing past performance doesn't equal future results, a tollfree number to obtain current data, and if any sales loads are charged that that isn't reflected in that performance data and if it did, the data would be lower
_____ is any written communication distributed only to institutional investors. Institutional communication
Define retail communication. Any written or electronic communication to more than 25 investors in 30 calendar days
Define correspondence. Any written or electronic communication to 25 or fewer investors in 30 calendar days
What is an independently prepared reprint? Any article reprint that's been issued by an independent publisher and not altered by the member in any way
Websites are considered what type of communication? Retail communication
When must retail communication be reviewed and approved by a principal? Retail communication is prior to first use
_____ can be classified as either retail communication or correspondence depending on the size and identity of the audience. Instant messaging
If a recommendation includes a stock purchase, the firm must provide the stock's ________. Current price
_________ is the only form of written communication that does not require the member's name, ,according to FINRA rules. Blind recruitment ads
For dollar cost averaging, any material should point out what? The plan involves continuous investment, regardless of fluctuating prices
A _______ is any entity that provides general info about investment companies, is independent of an investment company, and hasn't been procured by an investment company. Ranking entity
Volatility ratings may only be used in ____. sales literature
_____________ is a description used by independent third parties to assess the sensitivity of a bond fund's portfolio to changes in market conditions. Bond mutual fund volatility ratings
How long must retail communication be kept on file? 3 years
What are the filing requirements for retail communication within the first year of membership and every year after? First year, must file with FINRA 10 business days BEFORE first use, every year after is within 10 business days OF first use
Regardless of first year or not, any retail communications that include a ranking must be filed…? 10 business days before first use
Hypothetical illustrations for variable products can go up to ___ percent, provided that )5 is also stated as one of the returns. 12%
Selling a life insurance policy to an entity other than the insurance company is known as a ______. life settlement
How does a life settlement work? Buyer pays a lump sump for the policy and any additional premiums to support the cost of the policy until the insured dies when the buyer receives the death benefit
When member firms decide to newly engage in life settlements,, FINRA considers that a change in business operations, and the member must file what? Continuing Membership Application
When must life settlement retail communications be approved by the principal? 10 business days priors to first use
A customer placed on the DNC list must remain on that list for _____ years of request 10
According to the TCPA, telephone solicitation can only occur between the hours of…? 8am-9pm in the customer's time zone
When a customer purchases securities on margin, the securities are pledged to a bank as a collateral for the loan (________). hypothecation
What is the SEC rule 15c2-1? Prohibits commingling one customer's securities with another as joint collateral for a bank loan unless the customers allow
What are two things to remember when doing broker/dealer activities on the premises of a financial institution? Business must be conducted in a physical location separate from the bank, and you must remind the customer that the investments are not FDIC insured
Borrowing and Lending: FINRA rules permit 5 types of lending arrangements: Immediate family relationships between reps and customers, the customer is a FI, the customer and rep are both reps, the customer and rep have a personal relationship, and the customer and rep have a business relationship outside of the broker/customer
Reps are prohibited from sharing in profits and losses in a customer's account unless..? The profit/loss is shared in proportion to the capital contributed by each party (unless there is an immediate family relationship), and the arrangement is approved in writing by the principal and customers involved
No member that is a party to a sales agreement may purchase a mutual fund at a price lower than the bid price next quoted by or for the issuer, meaning…? No discounts from the NAV
FINRA regulations prohibit the sharing of commissions by a rep unless…? Other person is registered with the same member
If a mutual fund does not offer breakpoints and rights of accumulation, what is the max sales charge they can use? 6.25%
What is a breakpoint sale? Making higher commissions by selling shares in a dollar amount just below a breakpoint
If they give you the POP and the NAV, how do you find the PERCENTAGE of sales charges/ Sales charge amount divided by the POP gives the percentage
If they give you the NAV and the sales percentage, how do you find the sales charges in dollar amount? Subtract the sales percentage from 100, divide the NAV by that, and subtract the NAV from that amount
A mutual fund that grants any reduction in sales load to shareholders must notify all shareholders how often? At least once a year
All purchase payments for variable products must be submitted _______. promptly
With respect to institutional investors (at least 50 mil invested) a member can fulfill suitability by focusing on 2 factors: Institution's capability to independently evaluate risk, and the extent to which the institution makes independent investment decisions
What is a blanket recommendation? Recommending the same security to all or most investors
What is painting the tape? Conducting transactions that misrepresent the actual level of trading or interest in a security
A _______ account is set up with preapproved authority for the rep to make transactions without having to ask. Discretionary
_________ is defined as the authority to decide whether to buy/sell, what to buy/sell, and how much to buy/sell. Discretion
When must a principal approve each order in writing in a discretionary account? Promptly, although not necessary before order entry
What is Rule 5130? prohibits member firms from selling a new common stock issue to any account in which restricted persons (FINRA members, APs of members, portfolio managers etc.) have a beneficial interest
What does Rule 3220 involve? The supervising procedures and ethical practices with deferred variable annuities

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