Conduct and Practices Handbook Course (CPH) Quiz 34

In the FINRA Rule 11892 (Clearly Erroneous Transactions in Exchange-Listed Securities), if the reference price is greater than $50.00 than the transaction’s % difference from the reference price should be 6% that is calculated in outside normal market hours numerical guidelines.

In the FINRA Rule 11892 (Clearly Erroneous Transactions in Exchange-Listed Securities), if the reference price for any events involving five or more, but less than twenty, securities whose executions occurred within a period of five minutes or less than the transaction’s % difference from the reference price should be 10% that is calculated in outside normal market hours numerical guidelines.

In the FINRA Rule 11892 (Clearly Erroneous Transactions in Exchange-Listed Securities), if the reference price for any events involving twenty or more securities whose executions occurred within a period of five minutes or less than the transaction’s % difference from the reference price should be 30% that is calculated in outside normal market hours numerical guidelines.

In the FINRA Rule 11892 (Clearly Erroneous Transactions in Exchange-Listed Securities), FINRA will nullify as clearly erroneous all transactions that are at prices equal to or greater than 30% away from the Reference Price in each affected security during the review period selected by FINRA.

In the FINRA Rule 11892 (Clearly Erroneous Transactions in Exchange-Listed Securities), a series of transactions in a particular security on one or more trading days may be viewed as one event if all such transactions were effected based on the same fundamentally incorrect or grossly misinterpreted issuance information resulting in a severe valuation error for all such transactions (the “Event”).

In the FINRA Rule 11892 (Clearly Erroneous Transactions in Exchange-Listed Securities), a FINRA officer, acting on his or her own motion, shall take action to declare all transactions that occurred during the Event null and void not later than the start of trading on the day following the last transaction in the Event.

In the FINRA Rule 11892 (Clearly Erroneous Transactions in Exchange-Listed Securities), If trading in the security is halted before the valuation error is corrected, a FINRA officer shall take action to declare all transactions that occurred during the Event null and void prior to the resumption of trading.

In the FINRA Rule 11892 (Clearly Erroneous Transactions in Exchange-Listed Securities), FINRA believes that coordinating with other self-regulatory organizations with the goal of having consistency and transparency regarding the clearly erroneous process is important to the marketplace and to investors.

In the FINRA Rule 11891 (General), the terms of a transaction are “clearly erroneous” when there is an obvious error in any term, such as price, number of shares or other units of trading, or identification of the security.

In the FINRA Rule 11893 (Clearly Erroneous Transactions in OTC Equity Securities), if the reference price is $0.9999 and under, then the transaction’s % difference from the reference price should be 20% that is calculated in numerical guidelines.

In the FINRA Rule 11893 (Clearly Erroneous Transactions in OTC Equity Securities), if the reference price is $1.0000 and up to and including $4.9999 then the transaction’s % difference from the reference price should be low end of range minimum 20% and high end of range minimum 10% that is calculated in numerical guidelines.

In the FINRA Rule 11893 (Clearly Erroneous Transactions in OTC Equity Securities), if the reference price is $5.0000 and up to and including $74.9999 then the transaction’s % difference from the reference price should be 10% that is calculated in numerical guidelines.

In the FINRA Rule 11893 (Clearly Erroneous Transactions in OTC Equity Securities), if the reference price is $1.0000 and up to and including $4.9999 then the transaction’s % difference from the reference price should be low end of range minimum 10% and high end of range minimum 5% that is calculated in numerical guidelines.

In the FINRA Rule 11893 (Clearly Erroneous Transactions in OTC Equity Securities), if the reference price is $200.0000 and up to and including $499.9999 then the transaction’s % difference from the reference price should be 5% that is calculated in numerical guidelines.

In the FINRA Rule 11893 (Clearly Erroneous Transactions in OTC Equity Securities), if the reference price is $1.0000 and up to and including $4.9999 then the transaction’s % difference from the reference price should be low end of range minimum 5% and high end of range minimum 3% that is calculated in numerical guidelines.

In the FINRA Rule 11893 (Clearly Erroneous Transactions in OTC Equity Securities), if the reference price is $1,000.0000 and over then the transaction’s % difference from the reference price should be 3% that is calculated in numerical guidelines.

In the FINRA Rule 11894 (Review by the Uniform Practice Code (“UPC”) Committee), a written appeal of determination to declare a transaction null and void must receive by FINRA within thirty (30) minutes after the person making the appeal is given the notification of the determination being appealed.

In the FINRA Rule 2231 (Customer Account Statements), Each general securities member shall, with a frequency of not less than once every calendar quarter, send a statement of account (“account statement”) containing a description of any securities positions, money balances, or account activity to each customer whose account had a security position, money balance, or account activity during the period since the last such statement was sent to the customer.

In the FINRA Rule 2231 (Customer Account Statements), quarterly account statements need not be sent to a customer on the following conditions:-

(a) The customer’s account is carried solely for the purpose of execution on a DVP/RVP basis.
(b) All transactions effected for the account are done on a DVP/RVP basis in conformity with Rule 11860.
(c) The account does not show security or money positions at the end of the quarter (provided, however, that positions of a temporary nature, such as those arising from fails to receive or deliver, errors, questioned trades, dividend or bond interest entries and other similar transactions, shall not be deemed security or money positions.
(d) The customer consents to the suspension of such statements in writing. The member must maintain such consents in a manner consistent with Rule 4512 and SEA Rule 17a-4.
(e) The member undertakes to provide any particular statement or statements to the customer promptly upon request.
(f) The member undertakes to promptly reinstate the delivery of such statements to the customer upon request.

In the FINRA Rule 2231 (Customer Account Statements), at any time before 150 days following the second anniversary of breaking escrow, the member may include a per share estimated value reflecting the “net investment” disclosed in the issuer’s most recent periodic or current report (“Issuer Report”).

In the FINRA Rule 2231 (Customer Account Statements), At any time, the member may include a per share estimated value reflecting an appraised valuation disclosed in the Issuer Report, which shall be consistent with the valuation requirements of the 1940 Act and the rules thereunder.

In the FINRA Rule 4370 (Business Continuity Plans and Emergency Contact Information), each member must create and maintain a written business continuity plan identifying procedures relating to an emergency or significant business disruption. Such procedures must be reasonably designed to enable the member to meet its existing obligations to customers. In addition, such procedures must address the member’s existing relationships with other broker-dealers and counter-parties. The business continuity plan must be made available promptly upon request to FINRA staff.

In the FINRA Rule 4370 (Business Continuity Plans and Emergency Contact Information), each member must update its plan in the event of any material change to the member’s operations, structure, business or location. Each member must also conduct an annual review of its business continuity plan to determine whether any modifications are necessary in light of changes to the member’s operations, structure, business, or location.

In the FINRA Rule 4370 (Business Continuity Plans and Emergency Contact Information), the elements that comprise a business continuity plan are flexible and may be tailored to the size and needs of a member. Each plan must at a minimum address the following:-

(a) Data back-up and recovery (hard copy and electronic).
(b) All mission critical systems.
(c) Financial and operational assessments.
(d) Alternate communications between customers and the member.
(e) Alternate communications between the member and its employees.
(f) Alternate physical location of employees.
(g) Critical business constituent, bank, and counter-party impact.
(h) Regulatory reporting.
(i) Communications with regulators.
(j) How the member will assure customers’ prompt access to their funds and securities in the event that the member determines that it is unable to continue its business.

In the FINRA Rule 4370 (Business Continuity Plans and Emergency Contact Information), the emergency contact information for the member includes the designation of two associated persons as emergency contact persons.

In the FINRA Rule 4370 (Business Continuity Plans and Emergency Contact Information), each member must promptly update its emergency contact information in the event of any material change via such electronic or other means as FINRA may specify.

In the FINRA Rule 4370 (Business Continuity Plans and Emergency Contact Information), “Financial and operational assessment” means a set of written procedures that allow a member to identify changes in its operational, financial, and credit risk exposures.

In the FINRA Rule 4511 (General Requirements), members shall preserve for a period of at least six years those FINRA books and records for which there are no specified period under the FINRA rules or applicable Exchange Act rules.

In the FINRA Rule 4512 (Customer Account Information), the following information should be maintained by each member for each account:-

(a) Customer’s name and residence.
(b) Whether customer is of legal age.
(c) Name(s) of the associated person(s), if any, responsible for the account, and if multiple individuals are assigned responsibility for the account, a record indicating the scope of their responsibilities with respect to the account, provided, however, that this requirement shall not apply to an institutional account.
(d) Signature of the partner, officer or manager denoting that the account has been accepted in accordance with the member’s policies and procedures for acceptance of accounts.
(e) If the customer is a corporation, partnership or other legal entity, the names of any persons authorized to transact business on behalf of the entity.
(f) Subject to Supplementary Material .06, name of and contact information for a trusted contact person age 18 or older who may be contacted about the customer’s account; provided, however, that this requirement shall not apply to an institutional account.

In the FINRA Rule 4512 (Customer Account Information), members shall preserve a record of any customer account information that subsequently is updated for at least six years after the date that such information is updated.