Conduct and Practices Handbook Course (CPH) Quiz 36

Simplified Employee Pension (SEP) IRAs are designed for owners of small businesses and self -employed persons, as well as their employees. (That is, eligible employers can directly make contributions to their employees’ SEP IRAs.)

Most stocks and corporate bonds are approved for IRA purchases, as are federal government securities, mutual funds, and annuities. But municipal bonds are forbidden, as are collectibles (except U.S.-issued gold and silver coins). Options are forbidden, except for covered calls. Short selling and buying on margin are also forbidden.

Adjudicator – a person or group that presides over a proceeding and renders a decision or recommendation.

Rollovers involve a temporary period when the individual can hold the assets without any early withdrawal penalties or taxes. There are rules restricting rollovers, however. As one example, an individual cannot roll over funds between IRAs more than once within a twelve-month period.

For qualified plans, distributions are taxed entirely as income, but for nonqualified plans, since the original contributions were from after-tax dollars, only the distributions in excess of the original contributions are taxed as income.

Under a payroll deduction retirement plan, an employee allows the employer to take out a certain amount or percentage of the employee’s wages and invest that money. The money comes out of the employee’s net pay after taxes have been paid.

In a deferred compensation retirement plan, an employee agrees to forego some present income on the condition that his employer pay that portion after the employee retires from the company. The advantage of this plan is that most employees who take advantage of it will likely be in a lower tax bracket after retirement, and will therefore be able to pay lower taxes on the income than if they received it when they earned it.

The defined benefit plan, in which the corporation promises to pay the employee a certain amount of money after the employee retires. The defined benefit plan was once quite common, but is now becoming increasingly scarce.

To defined contribution plans (sometimes called money-purchase pension plans), in which the corporation agrees to contribute a certain amount of money, but makes no promises of what the investments will be worth when the employee retires.

Market Regulation Committee — a FINRA committee designated to consider federal securities laws and FINRA rules in relation to securities quotes, transaction execution and reporting, and trading practices.

Statutory Disqualification Committee — a subcommittee of the National Adjudicatory Council that makes a recommended decision to grant or deny an application for relief from FINRA eligibility requirements. ions.

With a 401(k), employees contribute a portion of their wages or salary, which are not counted as part of their gross income. Their contributions and the earnings on the contributions are tax deferred until withdrawal.

403(b) plans are also called tax-sheltered annuity (TSA) plans. They are only available to people who work in educational institutions, including college, universities, elementary schools, middle schools, high schools, religious institutions, private hospitals, and institutions with an educational purpose, such as zoos and museums.

457 plans are nonqualified plans available to government employers (as well as certain non-government employers), similar in structure to 401(k)s and 403(b)s. They are deferred-compensation plans, and unlike 401(k)s and 403(b)s, they have no penalty on early distributions, even though distributions are taxed as income.

UGMA stands for the Uniform Gift to Minors Act, which governs fiduciary accounts set up for minors (that is, accounts handled by a custodian for the sake of the minor). Anyone may donate either cash or securities to a UGMA account. Once they have, the gift may not be revoked or returned.

UTMA stands for the Uniform Transfer to Minors Act. UTMA accounts are very similar to UGMA accounts, the main difference being that they permit gifts besides cash and securities, e.g. land, intangible assets (like patents), art, etc.

Coverdell Education Savings Accounts (CESAs), formerly known as Coverdell IRAs, were created by Congress to enable parents to help fund their children’s future college education.

Taxes are deferred on the money invested in 529 plans, the money is generally not taxed in most states, and it isn’t taxed by the federal government when withdrawn if applied directly to legitimate college educational expenses of the named beneficiary.

There are two kinds of 529 plans. One is a pre-paid tuition plan, which allows a parent to purchase a certain number of units of tuition, “locking in” the units, which will be used in the future, at today’s rates, thereby protecting against rises in tuition over the years.

Health savings accounts (HSAs) are accounts designed for people with high-deductible health plans (HDHPs). These accounts allow tax-deductible contributions which are then used to pay for qualified medical expenses not covered by the health plans.

1. The firm has a designated principal or officer in charge(ii) The delivery takes place at a site under the control of the firm(iii) The continuing education is supervised by a proctor(iv) The sites are made available to FINRA for examination

According to Rule 791, member firms, allied members and employees of member firms shall not distribute any advertisement, educational material, sales literature or other communication to a customer or the public that contains the following:

* An untrue statement or omission of material fact that is false or misleading.
* A promise of specific results, unwarranted claims, opinions that do not have a reasonable basis or forecasts of future events that are unwarranted.
* A hedge clause or disclaimer which is not legible, which disclaims responsibility for the content of the communication or is inconsistent with the communication
* Would constitute a prospectus as defined under the Securities Act of 1933

Extended Proceeding Committee – an appellate adjudicator that participates in the National Adjudicatory Council’s consideration of an extended proceeding.

a representative associated with a member may register as a Limited Representative – Direct Participation Program if his activities are limited to the equity interests in or the debt of direct participation programs, and the person passes a corresponding Qualification Examination.

A representative associated with a member may register as a Limited Representative – Investment Company and Variable Contracts Products if his activities are limited to the solicitation, purchase, or sale of certain investment companies’ redeemable securities, certain closed-end investment companies’ securities, and certain exempt variable contracts and insurance premium funding programs, and the person passes a corresponding Qualification Examination.

representative associated with a member must register as a Limited Representative – Investment Banking if his activities involve advising on debt or equity securities or advising on or facilitating mergers and acquisitions, tender offers, financial restructurings, asset sales, divestitures or other corporate reorganizations, unless such person’s activities are limited to advising on the placement of direct participation program securities, private securities offerings, or retail or institutional sales activities. He also must pass a corresponding Qualification Examination.

all research analysts associated with a member are to be registered. The analysts must first be registered as a General Securities Representative and have passed a Qualification Examination.

Rule 2220 defines three types of options communications with the public: Advertisements, Educational material, Sales literature

FINRA Rule 2360 requires members to keep a central file at their principal place of business to log complaints.