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FINRA Series 7 General Securities Representative Exam

4. Obtains and Verifies Orders, Processes Transactions / Pricing and markups: practice questions

Our FINRA Series 7 bank has 7 questions on this topic. Here are 3 of them with answers; the full mock exam draws from every topic, like the real one.

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Question 1

Under SEA Rule 10b-10, a confirmation must be sent to the customer:

  1. At or before completion of the transaction
  2. Within 30 days of the trade
  3. At the end of each calendar quarter
  4. Only on request in writing
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A. At or before completion of the transaction — Rule 10b-10 requires written notification at or before completion (settlement) of the transaction, including the capacity in which the firm acted.

Question 2

Under FINRA Rule 2232, a retail customer confirmation for a corporate bond must disclose the firm's markup when the firm:

  1. Sold the bond to an institutional account
  2. Acted as agent and charged a separate commission
  3. Bought the same bond as principal the same day it sold to the customer
  4. Held the bond in inventory for more than one year
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C. Bought the same bond as principal the same day it sold to the customer — Rule 2232(c) requires markup or markdown disclosure (as dollars and percent of prevailing market price) for non-institutional customers when the firm made an offsetting principal trade the same day.

Question 3

A customer sells one stock and uses the proceeds to buy another the same day. Under the FINRA markup policy, the firm should:

  1. Compute the markup as if it were one combined transaction
  2. Charge the full markup on both trades
  3. Charge no markup or commission at all
  4. Base the markup on the larger of the two trades only
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A. Compute the markup as if it were one combined transaction — In a proceeds transaction, total compensation must be fair as if the customer had paid for the purchase in cash (Rule 2121 Supplementary Material).

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