ABOUT THE SERIES 26 EXAM ABOUT THIS BOOK ABOUT THE TEST BANK ABOUT THE SECURITIES INSTITUTE OF AMERICA CHAPTER 1 BROKERAGE OFFICE PROCEDURES 1

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1 Contents ABOUT THE SERIES 26 EXAM XI ABOUT THIS BOOK XV ABOUT THE TEST BANK XVII ABOUT THE SECURITIES INSTITUTE OF AMERICA XIX CHAPTER 1 BROKERAGE OFFICE PROCEDURES 1 Hiring New Employees 1 Resignation of a Registered Representative 2 Registration Exemptions 3 Persons Ineligible to Register 3 Disciplinary Actions against a Registered Representative 4 Termination for Cause 5 Outside Employment 5 Private Securities Transactions 5 Gift Rule 6 Sharing in a Customer s Account 7 Borrowing and Lending Money 7 Order Tickets 7 ftoc.indd v 27/09/2014 4:04 AM

2 vi Contents Executing an Order 8 Becoming a Stockholder 9 Dividend Distribution 17 Pretest 21 CHAPTER 2 RECORD KEEPING, FINANCIAL REQUIREMENTS, AND REPORTING 25 Types of Records 25 Storage Requirements 27 Financial Requirements 30 Pretest 45 CHAPTER 3 RECOMMENDATIONS TO CUSTOMERS 51 General Guidelines 51 Recommending Mutual Funds 52 Exchange-Traded Funds (ETFs) 56 Periodic Payment Plans 57 Mutual Fund Current Yield 58 Suitability 58 Fair Dealings with Customers 58 Recommendations to an Institutional Customer 62 Short Sales in Connection with Recommendations 63 Issuing Research Reports 63 Regulation FD (Fair Disclosure) 66 Pretest 67 CHAPTER 4 GENERAL SUPERVISION 71 The Role of the Principal 71 Supervisor Qualifications and Prerequisites 72 Continuing Education 73 Tape Recording Employees 74 ftoc.indd vi 27/09/2014 4:04 AM

3 Contents vii Heightened Supervisory Requirements 75 Information Obtained from an Issuer 75 Customer Complaints 76 Investor Information 76 Member Offices 77 Currency Transactions 78 The Patriot Act 79 Pretest 81 CHAPTER 5 CUSTOMER ACCOUNTS 85 New Accounts 85 Holding Securities 87 The Depository Trust Company (DTC) 88 Mailing Instructions 89 Types of Account Ownership 89 Trading Authorization 91 Accounts for Employees of Other Broker Dealers 96 Numbered Accounts 96 Prime Brokerage Accounts 96 Account Transfer 97 Margin Accounts 98 Day Trading Accounts 99 Commingling Customer s Pledged Securities 100 Wrap Accounts 100 Regulation S-P 100 Pretest 103 CHAPTER 6 INVESTMENT COMPANIES 107 Investment Company Philosophy 107 Types of Investment Companies 108 Investment Company Registration 111 ftoc.indd vii 27/09/2014 4:04 AM

4 viii Contents Investment Company Components 113 Mutual Fund Distribution 115 Mutual Fund Prospectus 116 Anti-Reciprocal Rule 118 Valuing Mutual Fund Shares 119 Sales Charges 120 Taxation of Mutual Funds 127 Voting Rights 132 Yields 133 Portfolio Turnover 133 Purchasing Mutual Fund Shares 133 Withdrawal Plans 136 Pretest 139 CHAPTER 7 VARIABLE ANNUITIES, LIFE INSURANCE, AND RETIREMENT PLANS 143 Annuities 143 Life Insurance 152 Retirement Plans 157 Death of an IRA Owner 162 ERISA 404C SAFE HARBOR 170 Pretest 171 CHAPTER 8 SECURITIES INDUSTRY RULES AND REGULATIONS 175 Issuing Securities 175 The Securities Exchange Act of The National Association of Securities Dealers (NASD) 181 Becoming a Member of FINRA 183 Foreign Broker Dealers 184 Registration of Agents/Associated Persons 185 Retiring Representatives/Continuing Commissions 185 State Registration 186 ftoc.indd viii 27/09/2014 4:04 AM

5 Contents ix Communications with the Public 186 Securities Investor Protection Corporation Act of 1970 (SIPC) 191 The Securities Acts Amendments of The Insider Trading & Securities Fraud Enforcement Act of The Telephone Consumer Protection Act of The Penny Stock Cold Call Rule 194 Violations and Complaints 195 Political Contributions 199 Investment Adviser Registration 200 Investment Adviser Representatives 202 Investment Adviser Advertising and Sales Literature 203 Investment Adviser Brochure Delivery 204 Soft Dollars 204 Broker Dealers on the Premises of Other Financial Institutions 206 The Uniform Securities Act 206 Sarbanes-Oxley Act 207 SEC Regulation S-K 208 SEC Regulation M-A 209 The Hart-Scott-Rodino Act 210 FINRA Rule 2290 (Fairness Opinion) 211 SEC Regulation S-X 212 Pretest 213 ANSWER KEYS 217 GLOSSARY OF EXAM TERMS 225 INDEX 291 ftoc.indd ix 27/09/2014 4:04 AM

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