Series 79 Exam Questions with Correct Answers
Trust indenture Correct Answer-A trust indenture cannot mandate that a
trustee repay all creditors in full in an event of default, because this is
not feasible.
Cross-default clause Correct Answer-A cross-default clause triggers a
debt default if the issuer defaults on any of its other debt obligations. Its
purpose is to protect lenders from a default elsewhere in the borrower's
capital structure.
Insider trading; what is allowed? Correct Answer-While in possession of
inside information, a rep or broker-dealer can accept an unsolicited order
from a customer to purchase that particular security. However, the rep
cannot recommend (i.e., solicit) the security.
Insider trading: Firm defense Correct Answer-Broker-dealers must have
procedures in place to prevent insider trading. If a rep is accused of
insider trading, the firm can avoid liability by showing 1) effective
supervisory procedures were in place, and 2) those procedures were
willfully ignored.
Insider trading: Individuals Correct Answer-Individuals with inside
information cannot trade on that information while it remains
undisclosed. It is the fact that the information is undisclosed to the
investing public that makes it illegal insider trading.
Reg FD Correct Answer-Regulation FD aims to promote the full and fair
disclosure of material information to all investors at the same time. It
,requires simultaneous access to information for all investors, including
retail and professional investors, such as stock analysts, research
analysts, credit agencies, or large institutional investors.
An issuer can satisfy Reg FD by publicly disclosing material
information via an SEC filing (e.g., 8-K) or a combination of methods,
including a press release, a news conference, a webcast, and/or social
media. Disclosing the information in the next 10-K would typically not
be sufficient.
Statutory disqualification Correct Answer-A person subject to a
statutory disqualification cannot be employed (as a rep or in a clerical
position) by a member firm, unless the firm applies for and receives a
waiver from FINRA.
A person banned, expelled, barred, or suspended from membership by a
foreign regulator is subject to a statutory disqualification in the US.
An arrest is not grounds for a statutory disqualification. If a rep were
arrested for shoplifting, compliance may be notified, but the legal
process would be allowed to run its course.
Form U-4 Correct Answer-10 years of employment history, and the firm
must verify the most recent three years
Settlements of securities-related litigation involving a registered rep of
$15,000 or more
,Settlements of securities-related litigation involving a firm of $25,000 or
more
Settlements below these amounts do not require public disclosure.
CE Inactive Correct Answer-A rep who does not complete Regulatory
Element continuing education within 120 days of her second
anniversary, and every third anniversary thereafter (i.e., in years 2, 5, 8,
11, 14, etc.), is CE inactive. The rep can work in a clerical role but
cannot act in a registered capacity or receive compensation for activities
that require registration.
An individual who is CE inactive for two years or longer will have all
licenses (e.g., Series 79) administratively terminated and must requalify
by exam.
Office inspection Correct Answer-a) Offices of supervisory jurisdiction
(OSJs) and supervisory branch offices are subject to annual inspection
b) non-supervisory branch offices must be inspected every three years
c) non-branch offices must be inspected periodically.
Annual compliance meeting Correct Answer-Broker-dealers must
conduct an annual compliance meeting for both registered reps and
registered principals. Key characteristics include:
- It may be held at a branch office.
, - It can include a discussion of non-compliance matters.
- It can be recorded and delivered on-demand, but only if the participants
have an opportunity to discuss the issues raised with compliance
personnel.
Parking a registration Correct Answer-Firms may not maintain, or park,
any person's registration unless it is for bona fide business purposes.
An issuer may not "park" a registration statement at a broker-dealer to
solicit investors itself and avoid hiring an underwriter.
Instant messaging Correct Answer-If a firm cannot record instant
messaging communications ("IMs") between its employees and clients,
IMs are not permitted
Selling away Correct Answer-Private securities transactions (selling
away) without compensation require written notice to the firm but do not
require firm permission.
Those selling away without cash compensation but who will receive
future deal flow (or any other type of non-cash compensation) must
receive permission and be supervised by their firm. Examples of private
securities transactions include:
- Direct sales of securities that are not SEC registered
- A registered rep at one firm selling securities at another firm for
compensation (for example, commercial paper)
Trust indenture Correct Answer-A trust indenture cannot mandate that a
trustee repay all creditors in full in an event of default, because this is
not feasible.
Cross-default clause Correct Answer-A cross-default clause triggers a
debt default if the issuer defaults on any of its other debt obligations. Its
purpose is to protect lenders from a default elsewhere in the borrower's
capital structure.
Insider trading; what is allowed? Correct Answer-While in possession of
inside information, a rep or broker-dealer can accept an unsolicited order
from a customer to purchase that particular security. However, the rep
cannot recommend (i.e., solicit) the security.
Insider trading: Firm defense Correct Answer-Broker-dealers must have
procedures in place to prevent insider trading. If a rep is accused of
insider trading, the firm can avoid liability by showing 1) effective
supervisory procedures were in place, and 2) those procedures were
willfully ignored.
Insider trading: Individuals Correct Answer-Individuals with inside
information cannot trade on that information while it remains
undisclosed. It is the fact that the information is undisclosed to the
investing public that makes it illegal insider trading.
Reg FD Correct Answer-Regulation FD aims to promote the full and fair
disclosure of material information to all investors at the same time. It
,requires simultaneous access to information for all investors, including
retail and professional investors, such as stock analysts, research
analysts, credit agencies, or large institutional investors.
An issuer can satisfy Reg FD by publicly disclosing material
information via an SEC filing (e.g., 8-K) or a combination of methods,
including a press release, a news conference, a webcast, and/or social
media. Disclosing the information in the next 10-K would typically not
be sufficient.
Statutory disqualification Correct Answer-A person subject to a
statutory disqualification cannot be employed (as a rep or in a clerical
position) by a member firm, unless the firm applies for and receives a
waiver from FINRA.
A person banned, expelled, barred, or suspended from membership by a
foreign regulator is subject to a statutory disqualification in the US.
An arrest is not grounds for a statutory disqualification. If a rep were
arrested for shoplifting, compliance may be notified, but the legal
process would be allowed to run its course.
Form U-4 Correct Answer-10 years of employment history, and the firm
must verify the most recent three years
Settlements of securities-related litigation involving a registered rep of
$15,000 or more
,Settlements of securities-related litigation involving a firm of $25,000 or
more
Settlements below these amounts do not require public disclosure.
CE Inactive Correct Answer-A rep who does not complete Regulatory
Element continuing education within 120 days of her second
anniversary, and every third anniversary thereafter (i.e., in years 2, 5, 8,
11, 14, etc.), is CE inactive. The rep can work in a clerical role but
cannot act in a registered capacity or receive compensation for activities
that require registration.
An individual who is CE inactive for two years or longer will have all
licenses (e.g., Series 79) administratively terminated and must requalify
by exam.
Office inspection Correct Answer-a) Offices of supervisory jurisdiction
(OSJs) and supervisory branch offices are subject to annual inspection
b) non-supervisory branch offices must be inspected every three years
c) non-branch offices must be inspected periodically.
Annual compliance meeting Correct Answer-Broker-dealers must
conduct an annual compliance meeting for both registered reps and
registered principals. Key characteristics include:
- It may be held at a branch office.
, - It can include a discussion of non-compliance matters.
- It can be recorded and delivered on-demand, but only if the participants
have an opportunity to discuss the issues raised with compliance
personnel.
Parking a registration Correct Answer-Firms may not maintain, or park,
any person's registration unless it is for bona fide business purposes.
An issuer may not "park" a registration statement at a broker-dealer to
solicit investors itself and avoid hiring an underwriter.
Instant messaging Correct Answer-If a firm cannot record instant
messaging communications ("IMs") between its employees and clients,
IMs are not permitted
Selling away Correct Answer-Private securities transactions (selling
away) without compensation require written notice to the firm but do not
require firm permission.
Those selling away without cash compensation but who will receive
future deal flow (or any other type of non-cash compensation) must
receive permission and be supervised by their firm. Examples of private
securities transactions include:
- Direct sales of securities that are not SEC registered
- A registered rep at one firm selling securities at another firm for
compensation (for example, commercial paper)
