Money Laundering
The acceptance of large amounts of cash from individuals or businesses where the money is suspected of being used for illegal purposes.
Suspicious Activity Report (SAR)
must be filed when any transaction conducted through a Broker Dealer involving funds or assets of $5,000 or more takes place and where the Broker-Dealer detects any known or suspected Federal Criminal Violation.
Securities Investor Protection Act of 1970 (SIPC)
Put into place for the purpose of protecting public customers against the risk of loss due to the failure of a Broker-Dealer.
SIPC will provide protection for customers of up to $500,000 per separate customer for cash and securities, but not more than $250,000 may be paid for a cash claim.
SIPC protection limits provided for customers :
up to $500,000 per separate customer for cash and securities, but not more than $250,000 may be paid for a cash claim.
MSRB rules are enforced by:
The SEC, FINRA, Governors of the Federal Reserve Banks, the Comptroller of Currency, and the Federal Deposit Insurance Corporations (FDIC)
Self Regulatory Organizations (SRO)
SROs set rules, regulations, and penalties related to the securities and transations which they oversee. Examples include FINRA, the MSRB, and Excanges such as the NYSE.
Insider Trading
A violation of Federal Securities Laws and applies to anyone that trades securities based on material, non-public information.
The MSRB requires charges (commission, mark-up/down, prices) to be fair and reasonable.
FINRA Code of Arbitration
Its purpose is to handle any disputes, claims, or controversies arising out of or in connection with the business of any member of FINRA.
The Municipal Securities Rulemaking Board (MSRB)
was created in 1975 to formulate rules to regulate all firms transacting business in municipal securities.
Securities Exchange Act of 1934
Designed to protect the public against unfair and inequitable practices in secondary market securities transactions.
The five ways the Federal Reserve regulates the flow of money and credit in the economy
1. Open Market Operations 2. Changing the primary reserve requirement 3. Changing the discount rate 4. Changing the margin required by broker-dealers 5. Moral suasion
Decisions by Code of Arbitration
Are final and binding on all parties.
FINRA's 5% Markup Policy
Applies to all OTC principal and/or agency trades.
When does the 5% markup policy Not apply?
When a prospectus or offering circular must be delivered. For example: New Issues, Registered Secondary Offerings, and Sales of Open End Investment Company Shares.
Broker Dealers who transfer funds, including wire fund transfers of $3,000 or more, must collect, retain, and record certain information.
Account statement timing requirement
Statements must be sent out monthly if there is activity and quarterly if there has been no activity in the account.
SEC Rule 144: control stock that can be sold within a 90 day window
1. 1% of the outstanding stock; OR 2. the average trading volume for the previous4 weeks, whichever is greater
Markup Policy
The 5% guideline that must be used when calculating the markup or markdown on transactions between a market maker and customer.
SEC Rule 144
sets forth the conditions under which a holder of unregistered securities may make a public sale without filing a registration statement with the SEC. It covers the resale of restricted and control stock.
Restricted stock holding period
Restricted securities must be fully paid for and owned for at least 6 months.
FINRA Code of Procedure
Purpose: to handle trade practice complaints relating to violations of the rules.
The Securities Act of 1933
1. Requires registration of new issues with the SEC before sale to the public. 2. Calls for full and fair disclosure 3. Requires the delivery of a prospectus for the sale of new issues 4. prohibits fraud in the sale of new issues
FINRA (Financial Industry Regulatory Authority)
the SRO that was created when the regulatory divisions of the NYSE and the NASD joined to form one regulatory body, eliminating duplication of regulation of members.
Currency Transaction Reports (CTR)
Broker-Dealers must file CTRs for transactions involving currency (cash) over $10,000.
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