Series 6 Exam
FINRA exam for selling investment company products and variable contracts.
Getting Started: Your Series 6 Journey
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FINRA Series 6 Investment Company and Variable Contracts Products Representative Examination — key terms, tricks & tips
Everything from the course in one searchable place: 220 entries. Use it to review before a practice test or look up a word you forgot.
220 results
Investment Company Products
Securities like mutual funds, UITs, and face-amount certificates.
Getting Started: Your Series 6 Journey
Variable Contracts
Insurance products with investment features, like variable annuities.
Getting Started: Your Series 6 Journey
Scored Questions
Questions that count towards your final exam score.
Getting Started: Your Series 6 Journey
Unscored Questions
Experimental questions that do not affect your final score.
Getting Started: Your Series 6 Journey
Content Outline
FINRA document detailing exam topics and question weights.
Getting Started: Your Series 6 Journey
Passing Score
Minimum percentage required to pass the exam (70% for Series 6).
Getting Started: Your Series 6 Journey
Understanding the Series 6 Exam: Format & Structure
To remember the retake policy: 30-30-180. Think of it as 'Two Thirties and a Hundred Eighty' days for attempts.
Getting Started: Your Series 6 Journey
Understanding the Series 6 Exam: Format & Structure
The Series 6 exam is 90 minutes long and has 50 scored questions. A 70% passing score is required. Be precise about the number of questions and time limit.
Getting Started: Your Series 6 Journey
Understanding the Series 6 Exam: Format & Structure
Underestimating the importance of the content outline and question weighting.
Getting Started: Your Series 6 Journey
Understanding the Series 6 Exam: Format & Structure
Spending too much time trying to identify unscored questions during the exam.
Getting Started: Your Series 6 Journey
Understanding the Series 6 Exam: Format & Structure
Not adhering to the retake waiting periods if you don't pass on the first attempt.
Getting Started: Your Series 6 Journey
Active Learning
Engaging with material through summarizing, teaching, or problem-solving.
Getting Started: Your Series 6 Journey
Study Plan
A structured schedule outlining topics, resources, and timelines for exam preparation.
Getting Started: Your Series 6 Journey
Mock Exam
A practice test designed to simulate the actual exam conditions and format.
Getting Started: Your Series 6 Journey
Time Management
Strategically allocating time during study sessions and the actual exam.
Getting Started: Your Series 6 Journey
Knowledge Gap
An area of the curriculum where understanding or recall is weak.
Getting Started: Your Series 6 Journey
Pacing
Controlling the speed at which one progresses through exam questions.
Getting Started: Your Series 6 Journey
Elimination Strategy
Removing incorrect answer choices to increase the probability of selecting the right one.
Getting Started: Your Series 6 Journey
Effective Study Strategies & Test-Taking Tips
For 'Study Plan Success,' remember: P-L-A-N: Prioritize, Learn Actively, Assess, Nurture (your well-being).
Getting Started: Your Series 6 Journey
Effective Study Strategies & Test-Taking Tips
The exam tests your ability to apply knowledge, not just recall it. Focus on understanding 'why' a rule exists and 'how' it impacts client situations.
Getting Started: Your Series 6 Journey
Effective Study Strategies & Test-Taking Tips
Passive reading without active recall or practice.
Getting Started: Your Series 6 Journey
Effective Study Strategies & Test-Taking Tips
Cramming all material at the last minute instead of consistent study.
Getting Started: Your Series 6 Journey
Effective Study Strategies & Test-Taking Tips
Not utilizing practice questions and full mock exams.
Getting Started: Your Series 6 Journey
Effective Study Strategies & Test-Taking Tips
Ignoring personal well-being (sleep, nutrition) before the exam.
Getting Started: Your Series 6 Journey
SEC
Primary federal regulator of the U.S. securities industry.
Regulatory Landscape & Investment Basics
FINRA
Self-Regulatory Organization (SRO) for broker-dealers, overseen by SEC.
Regulatory Landscape & Investment Basics
MSRB
SRO for municipal securities, writes rules, overseen by SEC.
Regulatory Landscape & Investment Basics
Blue Sky Laws
State-level securities laws protecting investors from fraud.
Regulatory Landscape & Investment Basics
SRO
Self-Regulatory Organization; writes/enforces rules for its members.
Regulatory Landscape & Investment Basics
Registered Representative
An individual licensed to sell securities to the public.
Regulatory Landscape & Investment Basics
Key Regulators: SEC, FINRA, MSRB, State Regulators
To remember the main regulators: 'Silly FINRA Members Regulate States.' S=SEC, F=FINRA, M=MSRB, R=Regulate (State).
Regulatory Landscape & Investment Basics
Key Regulators: SEC, FINRA, MSRB, State Regulators
The exam often tests the overlapping jurisdictions. Remember that state 'Blue Sky Laws' require registration of securities, broker-dealers, and agents within that state, in addition to federal requirements. Look for keywords like 'in-state' or 'state of residence'.
Regulatory Landscape & Investment Basics
Key Regulators: SEC, FINRA, MSRB, State Regulators
Confusing the enforcement body with the rule-making body (e.g., MSRB writes rules, FINRA enforces for broker-dealers).
Regulatory Landscape & Investment Basics
Key Regulators: SEC, FINRA, MSRB, State Regulators
Forgetting that state 'Blue Sky Laws' are in addition to, not instead of, federal regulations.
Regulatory Landscape & Investment Basics
Key Regulators: SEC, FINRA, MSRB, State Regulators
Assuming FINRA regulates all financial professionals; it specifically regulates broker-dealers and their registered representatives.
Regulatory Landscape & Investment Basics
Investment Company
Pools investor money to invest in securities.
Regulatory Landscape & Investment Basics
Mutual Fund
Open-end management company, actively managed.
Regulatory Landscape & Investment Basics
Open-End
Continuously issues and redeems shares.
Regulatory Landscape & Investment Basics
Net Asset Value (NAV)
Fund assets minus liabilities, divided by shares.
Regulatory Landscape & Investment Basics
Unit Investment Trust (UIT)
Unmanaged, fixed portfolio, defined termination.
Regulatory Landscape & Investment Basics
Fixed Portfolio
Securities held do not change after inception.
Regulatory Landscape & Investment Basics
Redeemable Shares
Can be sold back to the issuing company.
Regulatory Landscape & Investment Basics
Investment Company Types: Mutual Funds & UITs
Think 'M' for Mutual Fund = Managed and 'U' for UIT = Unmanaged.
Regulatory Landscape & Investment Basics
Investment Company Types: Mutual Funds & UITs
The Series 6 exam often tests the distinction between open-end and closed-end funds. Remember, mutual funds are ALWAYS open-end, issuing new shares and redeeming existing shares at NAV. Closed-end funds trade on exchanges and are not covered in detail for Series 6.
Regulatory Landscape & Investment Basics
Investment Company Types: Mutual Funds & UITs
Confusing mutual funds (open-end) with closed-end funds (which trade on exchanges).
Regulatory Landscape & Investment Basics
Investment Company Types: Mutual Funds & UITs
Believing UITs are actively managed; they are fixed portfolios.
Regulatory Landscape & Investment Basics
Investment Company Types: Mutual Funds & UITs
Incorrectly calculating NAV or understanding when it is calculated (daily close).
Regulatory Landscape & Investment Basics
Variable Annuity
Insurance contract with investment component for retirement income.
Regulatory Landscape & Investment Basics
Variable Life Insurance
Permanent life insurance with fluctuating cash value/death benefit.
Regulatory Landscape & Investment Basics
Subaccount
Investment options within variable contracts, similar to mutual funds.
Regulatory Landscape & Investment Basics
Accumulation Phase
Period where variable contract value grows tax-deferred.
Regulatory Landscape & Investment Basics
Annuitization Phase
Period where annuity converts to periodic income payments.
Regulatory Landscape & Investment Basics
Separate Account
Account holding assets of variable contracts, distinct from insurer's general account.
Regulatory Landscape & Investment Basics
Suitability
Ensuring a product matches a client's financial needs and risk tolerance.
Regulatory Landscape & Investment Basics
Variable Contracts: Annuities & Life Insurance
Think 'V' for Variable: Volatile Value, Varies with Investments, and requires a Valid (securities) license!
Regulatory Landscape & Investment Basics
Variable Contracts: Annuities & Life Insurance
Remember that variable contracts are considered securities and require both a securities license (e.g., Series 6) and a state insurance license to sell. The prospectus must be delivered at or before the time of sale.
Regulatory Landscape & Investment Basics
Variable Contracts: Annuities & Life Insurance
Confusing variable contracts with fixed contracts, which offer guaranteed returns.
Regulatory Landscape & Investment Basics
Variable Contracts: Annuities & Life Insurance
Underestimating the importance of suitability and recommending these products to clients with low-risk tolerance or short time horizons.
Regulatory Landscape & Investment Basics
Variable Contracts: Annuities & Life Insurance
Forgetting that variable contracts are regulated as both insurance products and securities.
Regulatory Landscape & Investment Basics
ETF
Fund that trades like a stock on exchanges.
Regulatory Landscape & Investment Basics
REIT
Company owning income-producing real estate.
Regulatory Landscape & Investment Basics
Hedge Fund
Private fund with aggressive strategies.
Regulatory Landscape & Investment Basics
Private Equity
Fund investing directly in private companies.
Regulatory Landscape & Investment Basics
Accredited Investor
High net worth or income investor.
Regulatory Landscape & Investment Basics
Retail Communication
Communication to more than 25 retail investors.
Regulatory Landscape & Investment Basics
Disclosure
Providing all material facts and risks.
Regulatory Landscape & Investment Basics
Other Investment Products & Communications with Public
For FINRA Communications: F-A-I-R: Fair, Accurate, Impartial, and Reasonable.
Regulatory Landscape & Investment Basics
Other Investment Products & Communications with Public
For the exam, remember that all 'retail communications' (to more than 25 retail investors within 30 calendar days) must be approved by a principal prior to use. Correspondence and institutional communications have different rules.
Regulatory Landscape & Investment Basics
Other Investment Products & Communications with Public
Recommending complex products like hedge funds to non-accredited investors.
Regulatory Landscape & Investment Basics
Other Investment Products & Communications with Public
Posting investment advice on social media without principal approval or risk disclosures.
Regulatory Landscape & Investment Basics
Other Investment Products & Communications with Public
Assuming an investment is suitable without fully understanding the client's financial profile.
Regulatory Landscape & Investment Basics
New Account Form
Document collecting client's personal and financial data.
Client Onboarding & Suitability
Principal Approval
Required supervisory sign-off before account activation.
Client Onboarding & Suitability
Cash Account
Securities paid in full; no borrowing.
Client Onboarding & Suitability
Margin Account
Allows borrowing from firm to buy securities.
Client Onboarding & Suitability
Margin Agreement
Contract for margin accounts outlining terms of borrowing.
Client Onboarding & Suitability
FINRA Rule 4512
Mandates specific customer account information.
Client Onboarding & Suitability
Know Your Customer (KYC)
Due diligence to verify client identity and prevent fraud.
Client Onboarding & Suitability
Opening Customer Accounts: Procedures & Documentation
P.A.I.D. (Principal Approved, Information Documented) – Remember that a Principal must Approve after all Information is Documented.
Client Onboarding & Suitability
Opening Customer Accounts: Procedures & Documentation
The exam often tests the sequence of events. Remember that principal approval *must* occur before any trades can be executed in a new account. Also, be precise about which documents are needed for specific account types (e.g., margin agreement for margin accounts).
Client Onboarding & Suitability
Opening Customer Accounts: Procedures & Documentation
Executing trades before principal approval of the new account.
Client Onboarding & Suitability
Opening Customer Accounts: Procedures & Documentation
Failing to obtain all necessary signatures for joint or special accounts.
Client Onboarding & Suitability
Opening Customer Accounts: Procedures & Documentation
Not updating client information when significant life changes occur.
Client Onboarding & Suitability
Suitability Rule
FINRA Rule 2111, requiring recommendations to fit client profiles.
Client Onboarding & Suitability
Customer-Specific Suitability
Recommendation is appropriate for a particular client's profile.
Client Onboarding & Suitability
Reasonable-Basis Suitability
Representative understands the product and its risks.
Client Onboarding & Suitability
Quantitative Suitability
Series of transactions is not excessive for the client.
Client Onboarding & Suitability
Risk Tolerance
Client's willingness and ability to take investment risk.
Client Onboarding & Suitability
Investment Objectives
Client's financial goals for their investments (e.g., growth, income).
Client Onboarding & Suitability
Financial Status
Client's income, assets, liabilities, and net worth.
Client Onboarding & Suitability
Gathering Customer Information & Suitability
To remember the key suitability factors, think 'AIR': Age, Income, Risk Tolerance. These are fundamental for any recommendation!
Client Onboarding & Suitability
Gathering Customer Information & Suitability
On the exam, always prioritize the client's best interest. If a client insists on an unsuitable investment, you must document your concerns and, if necessary, refuse the transaction. 'Know Your Customer' (KYC) is a core principle.
Client Onboarding & Suitability
Gathering Customer Information & Suitability
Recommending a product based solely on its past performance without considering the client's profile.
Client Onboarding & Suitability
Gathering Customer Information & Suitability
Failing to update client information after a significant life event, leading to outdated recommendations.
Client Onboarding & Suitability
Gathering Customer Information & Suitability
Assuming a client's risk tolerance based on their age alone, without deeper discussion.
Client Onboarding & Suitability
Due Diligence
Thorough investigation of an investment product.
Client Onboarding & Suitability
FINRA Rule 2111
Governs suitability requirements for recommendations.
Client Onboarding & Suitability
Time Horizon
Length of time an investment is held.
Client Onboarding & Suitability
Monitoring
Ongoing review of investments and client profile.
Client Onboarding & Suitability
Investment Recommendations & Due Diligence
D.U.E. D.I.L.I.G.E.N.C.E. = Discover, Understand, Evaluate, Disclose, Implement, Govern, Ensure, Nurture, Continually, Evolve.
Client Onboarding & Suitability
Investment Recommendations & Due Diligence
The exam often tests the order of operations: client information gathering MUST precede recommendation. Keywords to spot are 'reasonable basis' when discussing suitability and 'ongoing' for monitoring.
Client Onboarding & Suitability
Investment Recommendations & Due Diligence
Recommending a product solely based on its past performance without considering client suitability.
Client Onboarding & Suitability
Investment Recommendations & Due Diligence
Failing to disclose all fees and charges associated with an investment product.
Client Onboarding & Suitability
Investment Recommendations & Due Diligence
Not periodically reviewing a client's account to ensure continued suitability.
Client Onboarding & Suitability
Risk Capacity
Client's financial ability to take on investment risk.
Client Onboarding & Suitability
Capital Preservation
Investment objective focused on protecting principal.
Client Onboarding & Suitability
Capital Appreciation
Investment objective focused on long-term growth.
Client Onboarding & Suitability
Income Generation
Investment objective focused on regular cash flow.
Client Onboarding & Suitability
Understanding Client Risk Tolerance & Investment Objectives
To remember the difference: Tolerance is how much you TOLERATE (emotionally). Capacity is how much you CAN (financially) take.
Client Onboarding & Suitability
Understanding Client Risk Tolerance & Investment Objectives
The exam often tests the distinction between risk tolerance (willingness) and risk capacity (ability). Look for keywords like 'emotional comfort' for tolerance and 'financial situation' or 'ability to absorb losses' for capacity. Remember that an investment must be suitable for both.
Client Onboarding & Suitability
Understanding Client Risk Tolerance & Investment Objectives
Confusing risk tolerance with risk capacity; they are distinct concepts.
Client Onboarding & Suitability
Understanding Client Risk Tolerance & Investment Objectives
Recommending products based solely on a client's stated objective without assessing their actual risk tolerance or capacity.
Client Onboarding & Suitability
Understanding Client Risk Tolerance & Investment Objectives
Failing to update a client's risk profile and objectives periodically, especially after significant life events.
Client Onboarding & Suitability
Solicited Order
Order recommended by the agent.
Order Processing & Transaction Management
Unsolicited Order
Order initiated by the client.
Order Processing & Transaction Management
Market Order
Buy/sell immediately at best available price.
Order Processing & Transaction Management
Limit Order
Buy/sell at a specified price or better.
Order Processing & Transaction Management
Stop Order
Becomes market order at stop price.
Order Processing & Transaction Management
Best Execution
Executing trades at most favorable terms reasonably available.
Order Processing & Transaction Management
Order Ticket
Record of client's order details.
Order Processing & Transaction Management
Order Handling & Execution Procedures
SOLICITED = Salesperson Offered, UNsolicited = UNprompted by you.
Order Processing & Transaction Management
Order Handling & Execution Procedures
The exam often tests the distinction between solicited and unsolicited orders, especially regarding suitability. Remember: you must execute an unsolicited order even if unsuitable, but you must disclose and document the unsuitability. For solicited orders, suitability is paramount.
Order Processing & Transaction Management
Order Handling & Execution Procedures
Failing to distinguish between solicited and unsolicited orders, especially concerning suitability documentation.
Order Processing & Transaction Management
Order Handling & Execution Procedures
Delaying order transmission, which can lead to missed prices or opportunities for the client.
Order Processing & Transaction Management
Order Handling & Execution Procedures
Not documenting every detail of an order, including time stamps and any specific client instructions.
Order Processing & Transaction Management
Trade Date (T)
The date when a buy or sell order is executed.
Order Processing & Transaction Management
Settlement Date (S)
The date when ownership of securities and funds officially transfers.
Order Processing & Transaction Management
Settlement Cycle
The number of business days between trade date and settlement date.
Order Processing & Transaction Management
T+0 Settlement
Settlement occurs on the same day as the trade date.
Order Processing & Transaction Management
T+1 Settlement
Settlement occurs one business day after the trade date.
Order Processing & Transaction Management
T+2 Settlement
Settlement occurs two business days after the trade date.
Order Processing & Transaction Management
Failed Settlement
When a party fails to deliver securities or funds by settlement date.
Order Processing & Transaction Management
Transaction Reporting
Communicating trade details to regulatory bodies.
Order Processing & Transaction Management
Transaction Reporting & Settlement Cycles
Think of 'S' for Settlement as 'S' for 'Shares Swapped' and 'S' for 'Spending Money'. It's when the real exchange happens!
Order Processing & Transaction Management
Transaction Reporting & Settlement Cycles
Memorize the standard settlement cycles: T+2 for most corporate securities (stocks, bonds, mutual funds), T+1 for U.S. government securities and options, and T+0 for cash transactions. The exam often tests these specific timelines.
Order Processing & Transaction Management
Transaction Reporting & Settlement Cycles
Confusing trade date with settlement date.
Order Processing & Transaction Management
Transaction Reporting & Settlement Cycles
Applying the wrong settlement cycle to different types of securities.
Order Processing & Transaction Management
Transaction Reporting & Settlement Cycles
Underestimating the importance of failed settlements and their consequences.
Order Processing & Transaction Management
Customer Complaint
Written grievance alleging wrongdoing by firm or person.
Order Processing & Transaction Management
FINRA Rule 4513
Rule defining customer complaints and recordkeeping requirements.
Order Processing & Transaction Management
FINRA Rule 4530
Rule requiring firms to report certain events to FINRA.
Order Processing & Transaction Management
Associated Person
Any person associated with a FINRA member firm.
Order Processing & Transaction Management
Escalation
Process of forwarding a complaint to higher authority.
Order Processing & Transaction Management
Recordkeeping
Maintaining documentation for regulatory compliance.
Order Processing & Transaction Management
Misappropriation
Improper or dishonest use of funds or property.
Order Processing & Transaction Management
Customer Complaints: Handling & Resolution
Think of 'W-R-I-T-E': **W**ritten, **R**eport (to supervisor), **I**nvestigate, **T**rack (recordkeeping), **E**scalate (to FINRA if needed).
Order Processing & Transaction Management
Customer Complaints: Handling & Resolution
Memorize that a customer complaint must be in WRITING for FINRA reporting purposes. Oral complaints are generally not reported to FINRA under Rule 4530, but firms still document them. Keywords to spot: 'written statement,' 'alleges a grievance.'
Order Processing & Transaction Management
Customer Complaints: Handling & Resolution
Trying to resolve a written complaint yourself without involving your supervisor or compliance.
Order Processing & Transaction Management
Customer Complaints: Handling & Resolution
Not documenting a written complaint because you believe it has no merit.
Order Processing & Transaction Management
Customer Complaints: Handling & Resolution
Failing to report a serious complaint (e.g., theft allegation) to FINRA within the required timeframe.
Order Processing & Transaction Management
FINRA Rule 4511
General requirements for firms to maintain books and records.
Order Processing & Transaction Management
SEC Rule 17a-4
Mandates record retention periods for broker-dealers.
Order Processing & Transaction Management
Suitability Documentation
Records proving a recommendation matched client's needs.
Order Processing & Transaction Management
WORM Format
Write Once, Read Many; for non-erasable electronic records.
Order Processing & Transaction Management
Audit Trail
A chronological record of transactions for verification.
Order Processing & Transaction Management
Confirmation Statement
Document detailing a completed securities transaction.
Order Processing & Transaction Management
Retention Period
Minimum time records must be kept by law.
Order Processing & Transaction Management
Recordkeeping Requirements for Transactions
Remember 'S.A.F.E. Records' for what to keep: Suitability, Applications, Firm Correspondence, and Executed Orders.
Order Processing & Transaction Management
Recordkeeping Requirements for Transactions
The exam often tests the minimum record retention period for general broker-dealer records. Remember 'six years, two accessible' for most transaction-related documents. Keywords: 'minimum retention,' 'readily accessible.'
Order Processing & Transaction Management
Recordkeeping Requirements for Transactions
Assuming electronic records don't need backups or specific accessibility requirements.
Order Processing & Transaction Management
Recordkeeping Requirements for Transactions
Discarding records prematurely, especially those subject to the six-year rule.
Order Processing & Transaction Management
Recordkeeping Requirements for Transactions
Failing to document client conversations or suitability assessments, leading to gaps in the audit trail.
Order Processing & Transaction Management
Ethical Conduct
Acting with integrity, honesty, and fairness.
Ethics, Conduct & Fiduciary Duties
Professional Standards
Guidelines for competent and responsible behavior.
Ethics, Conduct & Fiduciary Duties
Commercial Honor
High standards of business ethics and integrity.
Ethics, Conduct & Fiduciary Duties
Just & Equitable Principles
Fair and impartial dealings with all parties.
Ethics, Conduct & Fiduciary Duties
Transparency
Openness and clarity in all communications.
Ethics, Conduct & Fiduciary Duties
Integrity
Adherence to moral and ethical principles.
Ethics, Conduct & Fiduciary Duties
Competence
Possessing necessary knowledge and skills.
Ethics, Conduct & Fiduciary Duties
Ethical Conduct & Professional Standards
TRUST: Transparency, Responsibility, Understanding, Sincerity, Trustworthiness. Remember these to guide your ethical decisions!
Ethics, Conduct & Fiduciary Duties
Ethical Conduct & Professional Standards
The exam often asks about the difference between legal compliance and ethical behavior. Remember, ethical standards generally exceed legal minimums. Keywords like 'highest standards,' 'just and equitable,' and 'commercial honor' point to ethical principles.
Ethics, Conduct & Fiduciary Duties
Ethical Conduct & Professional Standards
Confusing legal compliance with ethical behavior; ethical standards are often higher.
Ethics, Conduct & Fiduciary Duties
Ethical Conduct & Professional Standards
Prioritizing personal gain or firm's interests over the client's best interest.
Ethics, Conduct & Fiduciary Duties
Ethical Conduct & Professional Standards
Failing to disclose all relevant information, even if not explicitly asked.
Ethics, Conduct & Fiduciary Duties
Ethical Conduct & Professional Standards
Assuming clients understand complex financial terms without clarification.
Ethics, Conduct & Fiduciary Duties
Prohibited Practices
Illegal or unethical actions violating securities rules.
Ethics, Conduct & Fiduciary Duties
Market Manipulation
Artificially influencing security prices or trading volume.
Ethics, Conduct & Fiduciary Duties
Insider Trading
Trading based on material, non-public information.
Ethics, Conduct & Fiduciary Duties
Unauthorized Trading
Executing trades without client permission or discretion.
Ethics, Conduct & Fiduciary Duties
Churning
Excessive trading to generate commissions, not client benefit.
Ethics, Conduct & Fiduciary Duties
Conflict of Interest
Personal interests clashing with client's best interests.
Ethics, Conduct & Fiduciary Duties
Fiduciary Duty
Obligation to act solely in client's best interest.
Ethics, Conduct & Fiduciary Duties
Proprietary Products
Products offered by the financial professional's own firm.
Ethics, Conduct & Fiduciary Duties
Prohibited Practices & Conflicts of Interest
Imagine a 'CHURNing' butter machine that keeps spinning, but instead of butter, it's just spitting out 'COMMISSIONS' for the advisor, not 'CLIENT VALUE'.
Ethics, Conduct & Fiduciary Duties
Prohibited Practices & Conflicts of Interest
The exam often tests your ability to distinguish between a legitimate conflict of interest that can be managed through disclosure, and a prohibited practice that is always unacceptable. Keywords like 'undisclosed,' 'excessive,' or 'without authorization' are red flags.
Ethics, Conduct & Fiduciary Duties
Prohibited Practices & Conflicts of Interest
Confusing a manageable conflict of interest with an outright prohibited practice.
Ethics, Conduct & Fiduciary Duties
Prohibited Practices & Conflicts of Interest
Failing to disclose a conflict of interest, even if it seems minor.
Ethics, Conduct & Fiduciary Duties
Prohibited Practices & Conflicts of Interest
Assuming implied authorization for trades instead of explicit consent.
Ethics, Conduct & Fiduciary Duties
Reg BI
FINRA's Best Interest Standard for broker-dealers.
Ethics, Conduct & Fiduciary Duties
Best Interest Standard
Act without placing own interests ahead of client's.
Ethics, Conduct & Fiduciary Duties
Disclosure Obligation
Duty to reveal material facts to clients.
Ethics, Conduct & Fiduciary Duties
Fiduciary Responsibilities & Best Interest Standard
F-I-D-U-C-I-A-R-Y: **F**irst **I**nterests **D**edicated **U**nder **C**lient's **I**nvestment **A**dvice, **R**eally **Y**es!
Ethics, Conduct & Fiduciary Duties
Fiduciary Responsibilities & Best Interest Standard
The exam will test your understanding of the heightened standard of care required by Reg BI compared to the suitability standard. Look for questions that describe scenarios where a representative's interests might conflict with a client's, and identify the action that puts the client's best interest first.
Ethics, Conduct & Fiduciary Duties
Fiduciary Responsibilities & Best Interest Standard
Confusing the 'best interest' standard with the less stringent 'suitability' standard.
Ethics, Conduct & Fiduciary Duties
Fiduciary Responsibilities & Best Interest Standard
Failing to disclose or mitigate conflicts of interest that could impact client recommendations.
Ethics, Conduct & Fiduciary Duties
Fiduciary Responsibilities & Best Interest Standard
Prioritizing firm or personal compensation over the client's financial well-being.
Ethics, Conduct & Fiduciary Duties
Continuing Education (CE)
Ongoing training for registered reps to stay current.
Ethics, Conduct & Fiduciary Duties
Regulatory Element
FINRA-administered CE on rules, due every 3 years.
Ethics, Conduct & Fiduciary Duties
Firm Element
Firm-specific CE on products/services, due annually.
Ethics, Conduct & Fiduciary Duties
Inactive Status
Prohibited from securities business due to CE lapse.
Ethics, Conduct & Fiduciary Duties
FINRA Gateway
Online portal for reps to manage registrations/CE.
Ethics, Conduct & Fiduciary Duties
Anniversary Date
Date of initial registration, used for CE calculation.
Ethics, Conduct & Fiduciary Duties
CE Requirements & Maintaining Licenses
Think of CE as a 'Two-Part Harmony': Regulatory (FINRA's tune, every 3 years) and Firm (your firm's song, annually). You need both to stay in tune!
Ethics, Conduct & Fiduciary Duties
CE Requirements & Maintaining Licenses
On the exam, remember the '2-3-120' rule for the Regulatory Element: due by the 2nd anniversary + 120 days, then every 3 years. The Firm Element is annual. Keywords: 'inactive status,' 're-qualify.'
Ethics, Conduct & Fiduciary Duties
CE Requirements & Maintaining Licenses
Forgetting to track your Regulatory Element deadline, leading to inactive status.
Ethics, Conduct & Fiduciary Duties
CE Requirements & Maintaining Licenses
Assuming your firm will always remind you about CE; it's ultimately your responsibility.
Ethics, Conduct & Fiduciary Duties
CE Requirements & Maintaining Licenses
Confusing the frequency of Regulatory Element (every 3 years) with Firm Element (annually).
Ethics, Conduct & Fiduciary Duties
Supervision
Oversight of reps' activities to ensure compliance and ethical conduct.
Ethics, Conduct & Fiduciary Duties
Chief Compliance Officer (CCO)
Senior executive responsible for a firm's overall compliance program.
Ethics, Conduct & Fiduciary Duties
Principal
Registered individual supervising reps' daily activities and transactions.
Ethics, Conduct & Fiduciary Duties
Written Supervisory Procedures (WSPs)
Firm's detailed document outlining its supervisory system and rules.
Ethics, Conduct & Fiduciary Duties
Compliance Program
System of policies, procedures, and training to ensure regulatory adherence.
Ethics, Conduct & Fiduciary Duties
FINRA Rule 3110
Requires firms to establish and maintain a system of supervision.
Ethics, Conduct & Fiduciary Duties
Designated Supervisor
Specific individual assigned to oversee a particular representative or branch.
Ethics, Conduct & Fiduciary Duties
Supervisory Responsibilities & Compliance
WSPs are like a firm's 'Watchful Supervisory Playbook' – they tell everyone how to stay compliant and avoid penalties.
Ethics, Conduct & Fiduciary Duties
Supervisory Responsibilities & Compliance
The exam often tests your knowledge of who is responsible for what. Remember that the firm, through its principals and CCO, bears ultimate responsibility for supervision, but each registered representative also has a duty to understand and follow the WSPs.
Ethics, Conduct & Fiduciary Duties
Supervisory Responsibilities & Compliance
Believing supervision is only about catching bad actors, not preventing issues.
Ethics, Conduct & Fiduciary Duties
Supervisory Responsibilities & Compliance
Underestimating the personal liability of principals for supervisory failures.
Ethics, Conduct & Fiduciary Duties
Supervisory Responsibilities & Compliance
Thinking WSPs are optional or only for senior management to know.
Ethics, Conduct & Fiduciary Duties