What IS a Series 7?

Maybe you're wondering what a Series 7 is, what it's used for, and why you might or might not want to go there. Click on the video below if you're curious . . .

Need Help With the Series 7 Exam?

Can I get registered with FINRA if I have a felony conviction?

So, the post called "felonies and FINRA registration" has now grown to about 215 comments (half of them mine, of course). Who knew it was such a hot topic? Let's see what FINRA has to say about some of the quesitons I've been receiving.

Q: if a registered person is arrested but not charged with a crime, is the arrest required to be reported?
A: No. An arrest without a charge is not required to be reported.

Q: if a registered person is convicted of a crime and later pardoned, must the conviction continue to be reported? What if the conviction is set aside?
A: A person convicted of a crime and subsequently pardoned must continue to report the conviction. A pardon releases an individual from the punishment of the crime, but does not remove the conviction.

So, that comes close--but not quite--to answering the questions I keep getting from guys (it's always guys) who want to know if a conviction that is 'expunged' must be reported. Above FINRA uses the word "pardoned," which I don't think is the same thing as "expungement." But whether a conviction were pardoned or expunged, it appears that the CHARGE still has to be reported. FINRA gives me that clue with this statement, "Even if the conviction is not reportable, the charge may still be reportable." Don't you love the shades of gray they use? They then write, "Registered persons have an obligation to determine whether a criminal event is required to be reported through one or more questions under Item 14A or 14B."

Hmm . . . so I plan to talk to some more attorneys, but it appears my assumption so far is correct: even if you get a felony conviction expunged from your record, your truthful answer to the question of whether you were ever CHARGED with a felony is . . . YES.

Unregistered Personnel

FINRA's website (http://www.finra.org/Industry/Compliance/Registration/QualificationsExams/RegisteredReps/Qualifications/p011102) posts this frequently asked question, "Can a firm hire unregistered individuals whose sole function will be to cold call potential customers?" The answer is, "yes, but . . . " Basically, these unregistered cold callers can only invite people to attend events where registered personnel can discuss investing with them, or ask if they'd like to meet with a registered representative in order to discuss investments or receive investment literature from the firm. Notice how in none of these cases would the cold caller be talking to people about investing. FINRA also says, "The firms employing unregistered persons to perform these functions must be sure these employees do not discuss general or specific investment products or services offered by the firm, prequalify prospective customers as to financial status, investment history, and objectives, or solicit new accounts or orders." What if the individual will only sell exempt securities, or will only sell to institutions? FINRA rules require him to register. An exempt security simply doesn't have to be registered. The representatives who sell them--whether to retail or institutional investors--must be registered. Can unregistered persons provide published quotes to the firm's customers? FINRA answers on their website, "If the operators provide published yield quotations only to the firm's clients, they do not have to be registered with FINRA in any capacity." As you'll see at the link above unregistered persons can not accept unsolicited orders for securities, but they can help existing clients perform transfers among different mutual funds within a family of funds. So, no, an unregistered assistant can not accept an unsolicited order to buy 1,000 shares of XYZ today, but he or she could help an existing client put in a redemption order to sell shares of her ABC Growth Fund and a purchase order to buy shares of the ABC Income Fund with the proceeds.
Will the Series 7 exam expect you to know which activities registered and unregistered persons can perform for their member firm? Yes. I think it's worth spending five minutes at the FAQ section mentioned above. You can never be too prepared for the Series 7.

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.