Under which of the following circumstances, if any, is a registered representative (RR) permitted to share in the profits and losses of security interests that the RR has purchased jointly with a customer?
Under FINRA Rule 2150, registered representatives may share in profits and losses in a customer's account if:
The customer provides written consent.
The arrangement is approved by the RR's firm.
The sharing is proportional to the RR's financial contribution.
C is correct because it aligns with FINRA requirements.
A, B, and D are incorrect because they do not meet the necessary conditions for sharing.
Which of the following statements characterizes the typical relationship between the market value of a municipal bond portfolio and interest rates?
Step by Step Explanation:
Inverse Relationship: Bond prices and interest rates have an inverse relationship. When interest rates fall, existing bonds with higher coupon rates become more valuable, leading to an increase in market value.
Incorrect Options:
A: Market value decreases as interest rates increase.
C: Interest rates and bond values move inversely, not in the same direction.
D: Interest rates are not constant; they fluctuate over time.
SEC Municipal Bonds Overview: SEC Municipal Bonds.
Which of the following rates is the interest rate at which banks borrow and lend to each other on an overnight basis?
Step by Step Explanation:
Federal Funds Rate: The rate at which depository institutions lend reserves to each other overnight. It is set by the Federal Open Market Committee (FOMC).
Other Rates:
Prime Rate: Rate banks charge their most creditworthy customers.
Discount Rate: Rate the Federal Reserve charges banks for borrowing directly from it.
LIBOR: Interbank lending rate used internationally, now being phased out.
Federal Reserve Explanation of Rates: Federal Funds Rate.
Which of the following statements is true of the comparison between penny stocks and blue-chip stocks?
Step by Step Explanation:
Penny Stocks: These are low-priced, highly speculative stocks often issued by small or distressed companies. They generally have low liquidity, meaning they can be difficult to buy or sell without significantly impacting the price.
Incorrect Options:
Dividends: Penny stocks rarely pay dividends, unlike blue-chip stocks.
Price Stability: Penny stocks are highly volatile compared to blue-chip stocks.
Capitalization: Blue-chip companies are far better capitalized.
SEC Bulletin on Penny Stocks: SEC Penny Stocks.
A broker-dealer (BD) creates a marketing postcard that includes a statement regarding FINRA's endorsement of the BD. Which of the following responses is true?
Step by Step Explanation:
FINRA Rule 2210: Firms are prohibited from suggesting or implying FINRA's endorsement or approval in any advertising materials.
Approvals: Even if a principal or FINRA approves the content, such a statement remains impermissible.
Key Point: FINRA's role is to regulate, not to endorse firms or their marketing.
FINRA Rule 2210 (Communications with the Public): FINRA Rule 2210.
