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Exam Code: QV12DA
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NEW QUESTION: 1
For each of the following statements, select Yes if the statement is true. Otherwise, select No. Each correct selection is worth one point.
NEW QUESTION: 2
GoForBroke Broker-Dealers has distributed a list of ten mutual funds that it suggests are top-notch funds worthy of recommendation by GoForBroke's agents. Coincidentally, all the funds on this list also happen to be those that execute the majority of their trades through GoForBroke.
Is GoForBroke in violation of any FINRA rules?
A. Yes. GoForBroke is prohibited from selling shares of mutual funds that execute their trades through the broker-dealer. This rule is in place to avoid conflicts of interest.
B. Yes. By distributing a list naming specific funds that coincidentally all happen to execute a lot of trades through GoForBroke, the broker-dealer is violating FINRA's anti-reciprocal rule.
C. No. As long as the list consists of more than five funds, GoForBroke has not violated any FINRA rules.
D. No. GoForBroke only distributed a list of fund names; it did not offer its agents any form of additional compensation for selling the funds on that list.
Explanation: Yes. By distributing a list naming specific funds that coincidentally all happen to execute a lot of trades through GoForBroke, the broker-dealer is violating FINRA's anti-reciprocal rule. Even though GoForBroke does not appear to be offering its agents any additional compensation for selling shares of these funds, it is promoting them above other funds that aren't conducting as many trades through the broker-dealer. Recommendations should be based on a specific client's needs, not on the money the fund generates for the broker-dealer. There is no rule that prohibits a broker-dealer from selling shares of mutual funds that execute their trades through them.
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