Seeks Business for the Broker-Dealer from Customers and Potential Customers - 50%
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Contacts current and potential customers in person and by telephone, mail and electronic means; develops promotional and advertising materials and seeks appropriate approvals to distribute marketing materials |
- Knowledge of:
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Standards and required approvals of public communications
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Types of communications (e.g., retail, institutional, correspondence)
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Limitations on marketing and advertising for private vs. public offerings
- FINRA Rule
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2210 – Communications with the Public
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Describes investment product offerings and services to current and potential customers with the intent of soliciting business |
- Knowledge of:
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Types of securities offerings (e.g., primary, private placement, private investment in public equity (PIPE))
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Private offerings exemptions from registration and classes of securities
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Special issues dealing with electronic offerings
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Methods of distribution (e.g., firm, stand by, all-or-none (AON), best efforts, mini-max)
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Determination of qualified institutional buyer (QIB) or accredited investor status
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Feasibility study and due diligence
- Components of due diligence (e.g., financial, industry and operational data; management and employee relations; research; product development and expansion)
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Mechanics of distribution
- Role of placement agent and dealer manager (e.g., contractual obligation to issuer (firm commitment, best efforts), establishment of offering period, gathering of indication of interest (IOI), distribution of private placement memorandum and proceeds, appointment of selling group, selling group agreement)
- Obligations and liabilities of placement agents and selling group members
- Components of spread (e.g., dealer manager fee, selling group commission, compensation in the form of warrants of stock)
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Pricing of the issue
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Prohibited compensation practices associated with unregistered introducer or finder
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Regulation A offerings (e.g., purpose, limitation on size of offering, limitation on time period)
- FINRA Rule
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5123 – Private Placements of Securities
- SEC Rules and Regulations
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Securities Act of 1933
- Section 2 – Definitions
- Section 3(a) – Exempted Securities
- Section 3(b) – Additional Exemptions
- Section 4 – Exempted Transactions
- Section 5 – Prohibitions Relating to Interstate Commerce and the Mails
- Section 12 – Civil Liabilities Arising in Connection with Prospectuses and Communications
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Securities Exchange Act of 1934
- Section 13 – Periodical and Other Reports
- Section 15 – Registration and Regulation of Brokers and Dealers
- 3a4-1 – Associated Persons of an Issuer Deemed Not To Be Brokers
- 10b-3 – Employment of Manipulative and Deceptive Devices by Brokers or Dealers
- 10b-9 – Prohibited Representations in Connection with Certain Offerings
- 15c2-4 – Transmission or Maintenance of Payments Received in Connection with Underwritings
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Investment Company Act of 1940
- Section 3c-7 – Exemption
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Regulation A – Conditional Small Issues Exemption
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Regulation A-R – Special Exemptions
- 134 – Communications Not Deemed a Prospectus
- 135 – Notice of Proposed Registered Offerings
- 135a – Generic Advertising
- 137 – Publications or Distributions of Research Reports by Brokers or Dealers That Are Not Participating in an Issuer’s Registered Distribution of Securities
- 138 – Publications or Distributions of Research Reports by Brokers or Dealers About Securities Other Than Those They Are Distributing
- 139 – Publications or Distributions of Research Reports by Brokers or Dealers Distributing Securities
- 144A – Private Resales of Securities to Institutions
- 147 – Intrastate Sales Exemption
- 153a – Definition of "Preceded by a Prospectus" as Used in Section 5(b)(2) of the Act, in Relation to Certain Transactions Requiring Approval of Security Holders
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Regulation D – Rules Governing the Limited Offer and Sale of Securities Without Registration Under the Securities Act of 1933
- 500 – Use of Regulation D
- 501 – Definitions and Terms Used in Regulation D
- 502 – General Conditions to be Met
- 503 – Filing of Notice of Sale
- 504 – Exemption for Limited Offerings and Sales of Securities Not Exceeding $5,000,000
- 506 – Exemption for Limited Offers and Sales Without Regard to Dollar Amount of Offering
- 507 – Disqualifying Provision Relating to Exemptions under Rules 504 and 506
- 508 – Insignificant Deviations from a Term, Condition or Requirement of Regulation D
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Regulation S – Rules Governing Offers and Sales Made Outside the United States Without Registration Under the Securities Act of 1933
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Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives - 18%
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Informs customers of the types of accounts and provides disclosures regarding various account types and restrictions |
- Knowledge of:
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Requirements for opening customer accounts
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Legal, regulatory and ERISA requirements
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Account registration changes and internal transfers
- FINRA Rules
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2268 – Requirements When Using Predispute Arbitration Agreements for Customer Accounts
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4512 – Customer Account Information
- Employee Retirement Income Security Act of 1974 (ERISA) |
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Obtains and updates customer information and documentation, including required legal documents and identifies and escalates suspicious activity |
- Knowledge of:
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Identification of potential investors and confidentiality agreement
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Customer screening (e.g., customer identification program (CIP), know your customer (KYC), articles of incorporation)
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Account authorizations (e.g., power of attorney (POA), trust documents, corporate resolutions)
- Account and supplementary documentation
- Documentation of customer authorization (e.g., full, limited)
- Documentation necessary for electronic private placement offerings
- Qualified institutional buyer (QIB) certification letter
- Subscription agreement
- Investor questionnaire
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Information security and privacy regulations (e.g., initial privacy disclosures to customers, opt-out notices, disclosure limitations, exceptions)
- FINRA Rule
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2090 – Know Your Customer
- SEC Rules and Regulations
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Regulation S-P – Privacy of Consumer Financial Information and Safeguarding Personal Information
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Makes reasonable efforts to obtain customer investment profile information including, but not limited to, the customer's other security holdings, financial situation and needs, tax status and investment objectives |
- Knowledge of:
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Essential facts regarding customers and customer relationships
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Financial factors relevant to assessing a customer’s investment profile
- Security holdings, other assets and liabilities, annual income, net worth, tax considerations
- Other considerations (e.g., age, marital status, dependents, employment, investment experience, home ownership and financing, employee stock options, insurance, liquidity needs)
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Investment objectives (e.g., preservation of capital, income, growth, speculation)
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Tax consequences of securities transactions (e.g., holding period, basis, dividends, interest income)
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Verification of investor accreditation and sophistication
- FINRA Rule
- SEC Rules and Regulations
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Securities Exchange Act of 1934
- 15l-1 – Regulation Best Interest
- 17a-14 – Form CRS, for Preparation, Filing and Delivery of Form CRS
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Obtains supervisory approvals required to open accounts |
- Knowledge of:
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Required review, approvals and documentation for account opening and maintenance
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Physical receipt, delivery and safeguarding of cash or cash equivalents, checks and securities
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Circumstances for refusing or closing accounts
- FINRA Rules
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3110 – Supervision
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3120 – Supervisory Control System
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Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records - 26%
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Provides customers with information about investment strategies, risks and rewards, and communicates relevant market, investment and research data to customers |
- Knowledge of:
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Fair and balanced communications with respect to the characteristics and risks of investment products
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Appropriate disclosure information and other potential conflicts of interest
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Requirement to furnish most recent report of the firm's financial condition
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Reviews and analyzes customers' investment profiles and product options to determine that investment recommendations meet applicable standards |
- Knowledge of:
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Best interest obligations and suitability requirements
- Ability to understand risks of the underlying investment
- Alignment of investment objective of product with investor profile
- Composition and diversification of investor’s current portfolio
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Product options
- Equity and debt instruments in the context of private placements
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Appropriate mix of conservative and speculative securities in a portfolio derived from customer's ability to risk loss of principal and income
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Concentration of investment in a small number of issues versus diversification
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Concentrated portfolios or portfolios heavily invested in speculative securities require an ability to hold securities during market fluctuations and also require significant investment management talents
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Other risk factors and portfolio policies
- FINRA Rules
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2090 – Know Your Customer
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2111 – Suitability
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2121 – Fair Prices and Commissions
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5122 – Private Placements of Securities Issued by Members
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5240 – Anti-Intimidation/Coordination
- SEC Rules and Regulations
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Securities Exchange Act of 1934
- 15l-1 – Regulation Best Interest
- 17a-14 – Form CRS, for Preparation, Filing and Delivery of Form CRS
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Provides required disclosures regarding investment products and their characteristics, risks, services and expenses |
- Knowledge of:
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Risk and the construction of investment portfolio
- Definition of purchasing power risk and its effect on the constant dollar value of income and principal in different types of investments
- Balanced portfolio of bonds, preferred, common and convertible issues provides downside protection and potential inflation hedge
- Marketability of securities in the portfolio and customer liquidity needs
- Taxability of securities in the portfolio and customer tax bracket
- Callability of securities in the portfolio and the importance of call protection given customer investment objectives
- Convertibility of securities in the portfolio, the value of the conversion feature and the effect of potential forced conversions on customer objectives
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Appropriate mix of maturity schedules on debt obligations derived from customer's ability to risk loss of principal and income
- FINRA Rules
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2122 – Charges for Services Performed
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2165 – Financial Exploitation of Specified Adults
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2232 – Customer Confirmations
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Communicates with customers about account information, processes requests and retains documentation |
- Knowledge of:
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Books and records
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Regulation FD
- FINRA Rules
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2273 – Educational Communication Related to Recruitment Practices and Account Transfers
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4510 – Books and Records Requirements
- SEC Rules and Regulations
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Securities Exchange Act of 1934
- 17a-3 – Records To Be Made by Certain Exchange Members, Brokers and Dealers
- 17a-4 – Records To Be Preserved by Certain Exchange Members, Brokers and Dealers
- 17a-8 – Financial Recordkeeping and Reporting of Currency and Foreign Transactions
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Regulation FD – Disclosure Requirements
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Obtains and Verifies Customers’ Purchase Instructions and Agreements; Processes, Completes and Confirms Transactions - 6%
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Processes and confirms customers’ transactions pursuant to regulatory requirements |
- Knowledge of:
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Required subscription agreements or internal documents
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Retention of subscription agreement
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Payment and contractual settlement for private placement securities
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Transaction disclosure requirements
- FINRA Rules
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2140 – Interfering with the Transfer of Customer Accounts in the Context of Employment Disputes
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2232 – Customer Confirmations
- SEC Rules and Regulations
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Securities Exchange Act of 1934
- 10b-10 – Confirmation of Transactions
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Informs the appropriate supervisor and assists in the resolution of discrepancies, disputes, errors and complaints |
- Knowledge of:
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Requirements for addressing customer complaints and consequences of improper handling of complaints
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Methods of formal resolution (e.g., arbitration, mediation, litigation)
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Form U4 reporting requirements
- FINRA Rules
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4513 – Records of Written Customer Complaints
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4530 – Reporting Requirements
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8000 Series – Investigations and Sanctions
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12000 Series – Code of Arbitration Procedure for Customer Disputes
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13000 Series – Code of Arbitration Procedure for Industry Disputes
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14000 Series – Code of Mediation Procedure
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To achieve the professional designation of FINRA Private Securities Offerings Representative Exam from the FINRA, candidates must clear the Series 82 Exam with the minimum cut-off score. For those who wish to pass the FINRA Private Securities Offerings Representative certification exam with good percentage, please take a look at the following reference document detailing what should be included in FINRA PR Exam preparation.
