Sunday, August 16, 2009

Active Military Duty

On the Series 7 exam you will see several questions about the registration of representatives and principals of a broker-dealer. One question might ask what happens when a registered representative volunteers or is called into active military duty. If he or she is away from the firm more than two years, does the license expire? Does he have to take continuing education courses in some cave in Afghanistan? Does she lose all the commissions she could have made on her "book of business"?

Not surprisingly, FINRA and the SEC are extremely accomodating when a registered rep or principal is called away from the firm to serve Uncle Sam. Here are the basic facts:

  • license is placed on "inactive status"
  • continuing education requirements waived
  • dues, assessments waived
  • two-year expiration period does not apply - exam might refer to this as "tolling"
  • can earn commissions, usually by splitting them with another rep who will service the book of business
  • the "inactive" rep can not perform any of the duties of a registered rep while on inactive status

You could see a question about a "sole proprietor" called into active military duty. If so, tell the test that the same bullet points above would apply.

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