Discuss Finra SIE Exam Topic 3 Question 25

A registered representative (RR) intends to enter into an arrangement for compensation with an unaffiliated entity to participate in the sale of promissory notes to the general public. Which of the following statements is true?

AThis is a permissible arrangement, and the RR is only required to notify his firm.

BThe RR must receive written approval from his firm prior to entering into this arrangement.

CThe RR is required to notify his firm regarding this arrangement if compensation received is directly related to transactions.

DThe RR is not required to provide prior notice to his firm as promissory notes are not considered securities.

Suggested Answer: B

Step by Step

Private Securities Transactions: Under FINRA Rule 3280, RRs must obtain written approval from their employing firm before participating in the sale of securities outside the firm.

Promissory Notes: These are typically considered securities, requiring prior approval.

Incorrect Options:

A & C: Notification alone is insufficient; written approval is required.

D: Promissory notes are generally treated as securities under federal law.

FINRA Rule 3280 (Private Securities Transactions): FINRA Rule 3280.

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17 comments · newest first

Geoffrey 2 months ago

Definitely! B feels safest to me.

Alyce 2 months ago

I feel like this is a tricky question.

Amie 2 months ago

Exactly! B ensures compliance with regulations.

Flo 2 months ago

D seems wrong. Promissory notes are often treated as securities.

Gussie 2 months ago

True, but if it's directly related, B covers it.

Brunilda 2 months ago

But what about C? Notification is still important.

Cheryl 3 months ago

I agree, B makes sense. Protects the firm.

Janey 3 months ago

I think B is the right answer. Written approval is crucial.

Iluminada 3 months ago

Just to clarify, RRs need to follow firm policies for outside compensation.

Jennie 3 months ago

I disagree, D can't be true. Promissory notes are often treated as securities.

Nickie 3 months ago

Wait, are promissory notes really not considered securities? That seems off.

Kiley 3 months ago

I think C makes sense too, especially if there's compensation involved.

Bette 4 months ago

B is definitely the right choice. Approval is a must!

Tammy 4 months ago

I thought promissory notes were considered securities in many cases, so I don't think D is right. It seems like the RR should notify the firm regardless.

Angella 4 months ago

I practiced a similar question, and I feel like the rules around promissory notes can be tricky. I want to say option B is correct, but I’m not completely confident.

Vanesa 4 months ago

I'm not entirely sure, but I remember something about needing to notify the firm if the compensation is tied to transactions. Could that be option C?

Annice 4 months ago

I think the RR definitely needs to get written approval from the firm before entering into any compensation arrangement. That sounds like the safest route.

Finra SIE Exam - Topic 3 Question 25 Discussion