Wiley Series 10 Securities Licensing Exam Review 2019 + Test Bank: The General Securities Sales Supervisor Examination - General Module

WILEY SECURITIES LICENSING SERIES

This series includes the following titles:

Wiley Securities Industry Essentials Exam Review 2019

Wiley Series 3 Securities Licensing Exam Review 2019 + Test Bank: The National Commodities Futures Examination

Wiley Series 4 Securities Licensing Exam Review 2019 + Test Bank: The Registered Options Principal Examination

Wiley Series 6 Securities Licensing Exam Review 2019 + Test Bank: The Investment Company and Variable Contracts Products Representative Examination

Wiley Series 7 Securities Licensing Exam Review 2019 + Test Bank: The General Securities Representative Examination

Wiley Series 9 Securities Licensing Exam Review 2019 + Test Bank: The General Securities Sales Supervisor Examination—Option Module

Wiley Series 10 Securities Licensing Exam Review 2019 + Test Bank: The General Securities Sales Supervisor Examination—General Module

Wiley Series 24 Securities Licensing Exam Review 2019 + Test Bank: The General Securities Principal Examination

Wiley Series 26 Securities Licensing Exam Review 2019 + Test Bank: The Investment Company and Variable Contracts Products Principal Examination

Wiley Series 57 Securities Licensing Exam Review 2019 + Test Bank: The Securities Trader Examination

Wiley Series 63 Securities Licensing Exam Review 2019 + Test Bank: The Uniform Securities Agent State Law Examination

Wiley Series 65 Securities Licensing Exam Review 2019 + Test Bank: The Uniform Investment Adviser Law Examination

Wiley Series 66 Securities Licensing Exam Review 2019 + Test Bank: The Uniform Combined State Law Examination

Wiley Series 99 Securities Licensing Exam Review 2019 + Test Bank: The Operations Professional Examination

For more on this series, visit the website at www.securitiesCE.com.

WILEY SERIES 10

SECURITIES LICENSING

EXAM REVIEW 2019

+ TEST BANK

The General Securities Sales

Supervisor

Examination—General Module

The Securities Institute of America, Inc.

Cover Design: Wiley

Cover Image: © JumpeeStudio/iStock.com

Copyright © 2019 by The Securities Institute of America, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Previous editions published by The Securities Institute of America, Inc.

Published simultaneously in Canada.

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ISBN 978-1-119-55398-4 (Paperback)

ISBN 978-1-119-55396-0 (ePDF)

ISBN 978-1-119-55401-1 (ePub)

Contents

About the Series 10 Exam

Taking the Series 10 Exam

How to Prepare for the Series 10 Exam

What Type of Positions May a Series 10 Registered Principal Hold?

What Score Is Required to Pass the Exam?

Are There Any Prerequisites for the Series 10?

How Do I Schedule an Exam?

What Must I Take to the Exam Center?

How Soon Will I Receive Results of the Exam?

About This Book

About the Test Bank

About the Securities Institute of America

Chapter 1: Supervision of Brokerage Office Personnel and Procedures

Hiring New Employees

Resignation of A Registered Representative

Registration Exemptions

Foreign Broker Dealers

Compensation Paid to Unregistered Persons

Retiring Representatives/Continuing Commissions

Persons Ineligible to Register

Disciplinary Actions Against A Registered Representative

Termination for Cause

Outside Employment

Private Securities Transactions

Gift Rule

Communications with the Public

Finra Rule 2210 Communications with the Public

Broker Dealer Websites

Sharing In A Customer'S Account

Borrowing And Lending Money

Order Tickets

Executing an Order

Becoming A Stockholder

Accrued Interest

Close Outs

Customer Confirmations

Rules for Good Delivery

Delivery of Round Lots

Delivery of Bond Certificates

Rejection of Delivery

Reclamation

Marking to the Market

Customer Account Statements

Carrying of Customer Accounts

Dividend Distribution

Proxies

Box Counts

Missing And Lost Securities

The Customer Protection Rule

Broker Dealer Books And Records

Pretest

Supervision of Brokerage Office Personnel And Procedures

Chapter 2: General Supervision and Customer Recommendations

The Role of the Principal

Supervisor Qualifications And Prerequisites

Continuing Education

Tape Recording Employees

Heightened Supervisory Requirements

Information Obtained From an Issuer

Customer Complaints

Mediation

Code of Arbitration

Investor Information

Member Offices

Business Continuity Plan

Recommendations to Customers

Research Reports

Recommendations Through Social Media

Regulation Fd (Fair Disclosure)

The Insider Trading & Securities Fraud Enforcement Act of 1988

Firewall

Pretest

General Supervision And Customer Recommendations

Chapter 3: Supervision of Customer Accounts

Opening A New Account

Holding Securities

The Depository Trust Company (Dtc)

Mailing Instructions

Types of Accounts

Trading Authorization

ABLE Accounts

Retirement Plans

Accounts for Employees of Other Broker Dealers

Numbered Accounts

Prime Brokerage Accounts

Account Transfers

Margin Accounts

Special Memorandum Account (Sma) for A Long Margin Account

Wrap Accounts

Regulation S-P

FINRA Rules On Financial Exploitation Of Seniors

Currency Transactions

The Patriot Act

Isolated Sales Account

Securities Investor Protection Corporation Act of 1970 (Sipc)

Health Savings Accounts

The Department of Labor Fiduciary Rules

The Penny Stock Cold Call Rule

Pretest

Supervision of Customer Accounts

Chapter 4: Sales Supervision of New Issues

The Securities Act of 1933

Free Writing Prospectus

Freeriding And Withholding/Finra Rule 5130

Underwriting Corporate Securities

Exempt Securities

Exempt Transactions

Rule 137 Nonparticipants

Rule 138 Nonequivalent Securities

Rule 139 Issuing Research Reports

Rule 415 Shelf Registration

Regulation M, Rule 104

Underwriting Direct Participation Programs

Investment Company Registration

Mutual Fund Distribution

Pretest

Sales Supervision of New Issues

Chapter 5: Supervision of the Secondary Market

The Securities Exchange Act of 1934

Listing Requirements for the Nyse

Types of Orders

Vwap Orders

The Exchanges

Priority of Exchange Orders

Crossing Stock

Limit Up Limit Down (Luld)

The Nasdaq Market

Pink Otc Market

Trade Reporting And Comparison Service (Tracs)

Advanced Computerized Execution System (Aces)

The Order Audit Trail System (Oats)

Electronic Communication Networks (Ecns)

Third Market

Nasdaq Market Center for Listed Securities

Fourth Market

Sec Regulation Ats

Finra 5% Markup Policy

Markups And Markdowns When Acting As A Principal

Riskless Principal Transactions

Proceeds Transactions

Dominated And Controlled Markets

Act/Trf Trade Scan

Pretest

Supervision of the Secondary Market

Chapter 6: MSRB Rules and Regulations

Municipal Bonds

Issuing Municipal Securities

Municipal Fund Securities

Variable Rate Securities

Municipal Bond Trading

Recommending Municipal Bonds

Municipal Bond Advertising

Municipal Bond Insurance

Political Contributions

Registration Requirements for Municipal Securities Professionals

Msrb Overview

Pretest

Msrb Rules And Regulations

Answer Keys

Chapter 1: Supervision of Brokerage Office Personnel And Procedures

Chapter 2: General Supervision And Customer Recommendations

Chapter 3: Supervision of Customer Accounts

Chapter 4: Sales Supervision of New Issues

Chapter 5: Supervision of the Secondary Market

Chapter 6: Msrb Rules And Regulations

Glossary of Exam Terms

Index

Advert

Access Code

End User License Agreement

About the Series 10 Exam

Congratulations! You are on your way to becoming a registered principal, licensed to supervise a broker dealer's general securities business. The Series 10 exam will be presented in a 145-question multiple-choice format. Each candidate will have four hours to complete the exam. A score of 70% or higher is required to pass. Your textbook and exam prep software from The Securities Institute will ensure that you have the required knowledge to pass the Series 10 exam and that you are confident in the application of that knowledge during the exam.

TAKING THE SERIES 10 EXAM

The Series 10 exam is presented in multiple-choice format on a touch-screen computer known as the PROCTOR system. No computer skills are required, and candidates will find that the test screen works in the same way as an ordinary ATM machine. Each test is made up of 145 questions that are randomly chosen from a test bank of several thousand questions. The test has a time limit of four hours, which is designed to provide enough time for all candidates to complete the exam. Each Series 10 exam will comprise questions that focus on the following areas:

HOW TO PREPARE FOR THE SERIES 10 EXAM

For most candidates, the combination of reading the textbook and taking practice questions proves to be sufficient to successfully complete the exam. It is recommended that candidates spend at least 50 to 60 hours preparing for the exam by reading the textbook, underlining key points, and answering as many practice questions as possible. We recommend that candidates schedule their exam no more than one week after finishing their Series 10 preparation.

Test-Taking Tips

□ Read the full question before answering.

□ Identify what the question is asking.

□ Identify key words and phrases.

□ Watch out for hedge clauses, such as except and not.

□ Eliminate wrong answers.

□ Identify synonymous terms.

□ Be wary of changing answers.

WHAT TYPE OF POSITIONS MAY A SERIES 10 REGISTERED PRINCIPAL HOLD?

A Series 10 registered principal may supervise and manage a firm and its agents, conducting a general securities business.

WHAT SCORE IS REQUIRED TO PASS THE EXAM?

A score of 70% or higher is needed to pass the Series 10 exam.

ARE THERE ANY PREREQUISITES FOR THE SERIES 10?

A general securities principal must have passed the Series 7 exam prior to taking the Series 10 exam.

HOW DO I SCHEDULE AN EXAM?

Ask your firm's compliance department to schedule the exam for you or to provide a list of test centers in your area. You must be sponsored by a FINRA member firm prior to making an appointment. The Series 10 exam may be taken any day that the exam center is open.

WHAT MUST I TAKE TO THE EXAM CENTER?

A picture ID is required. All other materials will be provided, including a calculator and scratch paper.

HOW SOON WILL I RECEIVE RESULTS OF THE EXAM?

The exam will be graded as soon as you answer your final question and hit the Submit for Grading button. It will take only a few minutes to get your results. Your grade will appear on the computer screen, and you will be given a paper copy at the exam center.

If you do not pass the test, you will need to wait 30 days before taking it again. If you do not pass on the second try, you will need to wait another 30 days. If you fail on the third try, you are required to wait 6 months before taking the test again.

About This Book

The writers and instructors at The Securities Institute have developed the Series 10 textbook, exam prep software, and videos to ensure that you have the knowledge required to pass the test and that you are confident in the application of that knowledge during the exam. The writers and instructors at The Securities Institute are subject-matter experts as well as Series 10 test experts. We understand how the test is written, and our proven test-taking techniques can dramatically improve your results.

Each chapter includes notes, tips, examples, and case studies with key information, hints for taking the exam, and additional insight into the topics. Each chapter ends with a practice test to ensure that you have mastered the concepts before moving on to the next topic.

About the Test Bank

This book is accompanied by a test bank of more than 150 questions, to further reinforce the concepts and information presented here. The access card in the back of this book includes the URL and PIN code you can use to access the test bank. This test bank provides a small sample of the questions and features that are contained in the full version of the Series 10 exam prep software.

If you have not purchased the full version of the exam prep software with this book, we highly recommend that you do so to ensure that you have mastered the knowledge required for your Series 10 exam. To purchase the exam prep software for this exam, visit The Securities Institute of America online at www.SecuritiesCE.com or call 877-218-1776.

About The Securities Institute of America

The Securities Institute of America, Inc. helps thousands of securities and insurance professionals build successful careers in the financial services industry every year.

Our securities training options include:

Onsite training classes.

Private tutoring.

Classroom training.

Interactive online video training classes.

State-of-the-art exam preparation software.

Printed textbooks.

Real-time tracking and reporting for managers and training directors.

As a result, you can choose a securities training solution that matches your skill level, learning style, and schedule. Regardless of the format you choose, you can be sure that our securities training courses are relevant, tested, and designed to help you succeed. It is the experience of our instructors and the quality of our materials that make our courses requested by name at some of the largest financial services firms in the world.

To contact The Securities Institute of America, visit us on the Web at www.SecuritiesCE.com or call 877-218-1776.

CHAPTER 1

Supervision of Brokerage Office Personnel and Procedures

INTRODUCTION

Guidelines for the practices that a brokerage firm uses to conduct the operation of its daily business are regulated by industry, state, and federal regulators. These guidelines are the foundation for the way that the firm handles all business, from hiring a new agent to executing a customer's order. All Series 10 candidates must have a full understanding of a brokerage firm's operations and procedures to successfully complete the exam.

HIRING NEW EMPLOYEES

A registered principal of a firm will be the individual who interviews and screens potential new employees. The principal will be required to make a thorough investigation into the candidate's professional and personal backgrounds. With few exceptions, other than clerical personnel, all new employees will be required to become registered as an associated person with the firm. Additionally, all employees of the broker dealer who are involved in securities sales, who have access to cash and securities, or who supervise employees must be fingerprinted. The new employee will begin their registration process by filling out and submitting a Uniform Application for Securities Industry Registration, also known as Form U4. The Form U4 is used to collect the applicant's personal and professional history, including the applicant's:

Ten year employment history.

Five-year resident history.

Legal name and any aliases used.

Legal or regulatory actions, if any.

The principal of the firm is required to verify the employment information for the last 3 years and must attest to the character of the applicant by signing Form U4 prior to its submission to FINRA. All U4 forms will be sent to the Central Registration Depository (CRD) for processing and recording. The employing firm must maintain written procedures to verify the accuracy of the information on the new hire's U4 form. A comprehensive review of the information must take place within 30 days of the form being submitted to FINRA. Fingerprint cards may be submitted in hard copy or electronically. The candidate's fingerprints will be submitted to the FBI for review. If after three good faith attempts to submit fingerprints the FBI determines that the fingerprints are ineligible or cannot be read, the candidate will not be asked to submit a fourth set of fingerprints and the FBI will conduct a name check to search the candidate's history. Any applicants who have answered yes to any of the questions on the form regarding their background must give a detailed explanation in the Disclosure Reporting Pages (DRPs) attached to the form.

The applicant is not required to provide information regarding his or her:

Marital status.

Educational background.

Income or net worth.

Information regarding the employee's finances that is disclosed on Form U4 includes whether the associated person has ever declared bankruptcy and if the person has any civil judgments or liens placed against them. Any development that would cause an answer on the associated person's U4 to change requires that the member update the U4 within 30 days of when the member becomes informed of the event. In the case of an event that could cause the individual to become statutorily disqualified, such as a felony conviction or misdemeanor involving cash or securities, the member must update the associated person's U4 within 10 business days of learning of the event. Additionally, broker dealers are required to perform background checks on its employees every 5 years to ensure that no judgements, liens or disclosable events have gone unreported by the registered person. Registered persons who fail to disclose an unsatisfied judgements or liens are subject to significant regulatory action that could result in the person being barred from the industry in extreme cases.

RESIGNATION OF A REGISTERED REPRESENTATIVE

If a registered representative voluntarily resigns or has his or her association with a member firm terminated for any reason, the member must fill out and submit a Uniform Termination Notice for Securities Industry Registration, known as Form U5. The member must submit the U5 to FINRA within 30 days of the termination. The member firm is also required to give a copy of the U5 to the representative upon termination. The member must also state the reason for the termination, either voluntary or for cause. An associated person's registration is nontransferable. A representative may not simply move the registration from one firm to another. The employing firm that the representative is leaving must fill out and submit a U5 to FINRA, which terminates the representative's registration. The new employing firm must fill out and submit a new U4 to begin a new registration for the associated person with the new employer. The new employer is required to obtain a copy of the U5 form filed by the old employing member either from the employee or directly from FINRA within 60 days of submitting the new U4. The previous employer is not required to provide a copy to the new member firm. If the new employing member asks the associated person for a copy of the U5, the person has two business days to provide it. If the member requests a copy of the U5 from an agent who has not received a copy of the U5 from the old employer, the agent must promptly request it from his or her old employer and provide it to the new employer within two business days of receipt. Should an agent's previous employer discover facts that would alter the information on Form U5, the previous employer must file an amended Form U5 within 30 days and provide a copy to the former employee. A representative who leaves the industry for more than 24 months is required to requalify by exam. During a period of absence from the industry of 2 years or less, FINRA retains jurisdiction over the representative in cases involving customer complaints and violations.

TAKENOTE!

A firm may not allow an inactive agent to park his or her license with the firm and may not maintain an inactive agent's license on the books simply to ensure that the agent does not have to requalify by exam. The one exception to the rule is for agents in the military who are called to active duty. While on active duty, the agent's registration and continuing education requirements will be tolled until the agent returns. The agent who returns from active duty will have 90 days from the end of active duty to reenter the industry. Once the 90 days have lapsed, the 24-month window begins. During active duty the agent may continue to receive commissions but may not contact customers.

REGISTRATION EXEMPTIONS

The following individuals are exempt from registration:

Clerical personnel

Nonsupervising officers and managers not dealing with customers

Non-U.S. citizens working abroad

Floor personnel

Nonregistered personnel may:

Offer to send literature to prospective customers.

Invite current or prospective customers to attend firm-sponsored events.

Invite prospective customers to speak with a registered representative.

Discuss account information with existing customers.

Nonregistered personnel may not:

Receive compensation other than salary or hourly wage.

Solicit orders or new accounts.

Discuss investment products or services offered by the firm.

Qualify prospective customers by discussing the individual's financial information.

All NYSE member firms that allow nonregistered personnel to have contact with existing or potential customers must train the personnel as to the limits on what may be discussed with existing or potential customers.

FOREIGN BROKER DEALERS

As the financial markets continue to become more global in scope, more and more broker dealers are conducting international securities transactions. Foreign broker dealers that maintain offices within the United States must register as broker dealers in the United States. If the foreign broker dealer does not maintain an office in the United States but does solicit and execute orders from U.S. investors, the firm must register in the United States. If the firm only executes unsolicited orders or issues research reports that are distributed by a U.S. broker dealer, the firm need not register. The U.S. broker dealer distributing the foreign broker dealer's research must accept responsibility for the content of the report, and all orders must be directed to the U.S. broker dealer. Foreign broker dealers that do not maintain offices in the United States but who transact business with institutional clients do not have to register. If an employee of a foreign broker dealer comes to the United States to speak with clients or potential clients, that employee should be chaperoned by a registered representative if that person is not registered in the United States.

COMPENSATION PAID TO UNREGISTERED PERSONS

No member shall pay directly or indirectly any commissions, concessions, discounts, or fees to any person or entity without the person or entity being duly registered. A member may pay a foreign national person or entity a finder's fee for business introduced to the member, provided the member has made a diligent effort to be assured that the compensation received by the finder will not subject the finder to registration and such finder would not be subject to statutory disqualification. Additionally, the customers introduced by the finder must be foreign nationals or entities domiciled abroad. The customers must be given a written disclosure of the compensation arrangement and all confirmations must note the compensation arrangement with the finder. The finder's agreement must be made available for inspection by FINRA and maintained on the member's books.

RETIRING REPRESENTATIVES/CONTINUING COMMISSIONS

A retiring representative may continue to receive commissions on the business that he or she has built over a career if a contract is in place before the representative's retirement. A retiring representative may continue to receive commissions on old business only and may not receive commissions on any new business and may not receive finder's fees. If the retired representative dies, the representative's beneficiary may continue to receive the commissions that were due the representative.

PERSONS INELIGIBLE TO REGISTER

Individuals applying for registration must meet the association's requirements in the following areas:

Training

Competence

Experience

Character

Anyone who fails to meet the association's or exchange's requirements in any of the above listed areas may not become registered. An individual may also be disqualified by statute or through rules for any of the following:

Expulsion, suspension, or disciplinary actions by the Securities and Exchange Commission (SEC) or any foreign or domestic SRO.

The individual caused the expulsion or suspension of a broker dealer or principal.

The individual made false or misleading statements on the application for registration on Form U4 or Form BD.

Felony conviction or misdemeanor involving securities, bribery, falsification of reports, perjury, or any other felony within the last 10 years.

Court injunction or order barring the individual.

A member firm may seek to maintain the employment of or to initially hire a person who has been statutorily disqualified by filing an appeal to FINRA's registration and disclosure (RAD) department. The appeal may be decided by the department or referred to the National Adjudicatory Counsel (NAC). A hearing may be held by the Statutory Disqualification Committee and appealed to the NAC. The position being applied for under the appeal may only be clerical in nature and may not entail the duties of a registered agent.

A member firm may seek to maintain the employment of or to initially hire a person who has been statutorily disqualified by filing an appeal to FINRA's registration and disclosure (RAD) department. The appeal may be decided by the department or referred to the National Adjudicatory Counsel (NAC). A hearing may be held by the Statutory Disqualification Committee and appealed to the NAC. The position being applied for under the appeal may only be clerical in nature and may not entail duties of a registered agent.

A person who has been convicted of a felony that occurred less than 10 years ago may apply for a waiver to FINRA or the broker dealer's self-regulatory organization. If a waiver is granted the SRO must notify the SEC of the granting of such waiver. The SEC may overturn or object to the waiver being granted. If the waiver is granted the person covered by the waiver will be subject to heightened supervisory procedures.

TAKENOTE!

A person who was convicted of a felony more than 10 years ago is always required to disclose it on form U4.

TAKENOTE!

Being charged with any felony, such as a DUI, is reportable on Form U4. But not all felonies will result in an applicant being disqualified.

DISCIPLINARY ACTIONS AGAINST A REGISTERED REPRESENTATIVE

If another industry regulator takes disciplinary action against a representative, the employing member firm must notify FINRA. Actions by any of the following should be immediately disclosed to the association:

The SEC

An exchange or association

A state regulator

A clearing firm

A commodity regulatory body

Also immediately reportable to FINRA are any of the following:

A customer complaint alleging theft, forgery, or misappropriation of customer assets

Indictment, conviction, or plea of guilty or no contest to a criminal matter

If the agent becomes a respondent or defendant in a matter in excess of $15,000 or if the firm becomes a respondent or defendant in a matter in excess of $25,000

An agent is disciplined by the employing member firm or commissions are withheld from an agent, or the agent is fined in either case in amounts in excess of $2,500

FINRA defines immediate notification for the above listed matters as being within 10 days. All disclosures must include the type of action brought as well as the name of the party bringing the actions and the name of the representative involved. The firm will make the disclosure on Form U4. FINRA will submit disciplinary actions that are taken by FINRA on Form U6 and they will be recorded on the employee's record. All disciplinary actions as well as final arbitration awards, along with a record of the agent's registrations and employment history, are available through FINRA's BrokerCheck program. FINRA members are required to regulate the activities of its associated people and must disclose to the association any action that the member takes against a registered representative. Should a registered representative feel that the information disclosed through the BrokerCheck program is inaccurate the representative may request an amendment to the disclosure by filling out and submitting a BrokerCheck comment form. Additionally, should the CRD contain information that is deemed to be inaccurate, factually impossible or otherwise false that information may be expunged and permanently removed from the agent's record.

TERMINATION FOR CAUSE

A member may terminate a registered representative for cause if the representative has:

Violated firm policy.

Violated the rules of FINRA, the SEC, or any other industry regulator.

Violated state or federal securities laws.

A firm may not terminate a representative who is the subject of investigation by any securities industry regulator until the investigation is completed.

OUTSIDE EMPLOYMENT

If a registered representative wants to obtain employment outside of his or her position with a member firm, the registered representative must first provide written notification to the employing member firm. The member firm may reject or limit the representative's outside employment. Exceptions to this rule are if the registered representative is a passive investor in a business or if the representative owns rental property. All other outside business activities must be disclosed to the member firm. If the member is a NYSE member, it must provide the representative with prior written approval before the representative engages in any outside activity.

PRIVATE SECURITIES TRANSACTIONS

A registered representative may not engage in any private securities transactions without first obtaining the broker dealer's prior written approval. The registered representative must provide the employing firm with all documentation regarding the investment and the proposed transaction. An example of a private securities transaction would be if a representative helped a startup business raise money through a private placement. If the representative is going to receive compensation, the employing member firm must supervise the transaction as if the firm itself executed the transaction. If a representative sells investment products that the employing member does not conduct business in without the member's knowledge, then the representative has committed a violation known as selling away. An exception to this is if the representative is helping an immediate family member to raise money and the representative receives no compensation for his or her role in the private transaction. In this case, the notification and permission of the member are not required.

GIFT RULE

Broker dealers may not pay compensation to employees of other broker dealers. If a broker dealer wants to give a gift to an employee of another broker dealer, it must:

Be valued at less than $100 per person per year.

Be given directly to the employing member firm for distribution to the employee.

Have the employing member's prior approval for the gift.

The employing member must obtain a record of the gift, including the name of the giver, the name of the recipient, and the nature of the gift. These rules have been established to ensure that broker dealers do not try to influence the employees of other broker dealers. An exception to this rule would be in cases where an employee of one broker dealer performs services for another broker dealer under an employment contract. The following are also excluded from the $100 limit:

Occasional meals

Business-related travel

Lucite prospectus and awards

Occasional tickets to sporting events

A key to determine if tickets are a gift or entertainment is if the person providing the tickets attends the event. If the person attends it is considered entertainment. Records of gifts and employment contracts must be retained for 3 years. Prior FINRA approval is not required for employment contracts between members. The gift rule also applies to gifts given to or received from customers of the firm or agent. In the case of a mutual fund holding a seminar, the mutual fund may pay for registered representative's travel-related expenses and the seminar must be held at a reasonable location. Spouses of agents are allowed to attend; however, the mutual fund may only pay for the travel expenses of the agent. The agent's expenses may not be paid for by