SIE practice questionhardPrivate Securities Transactions
Under FINRA Rule 3280, a registered representative wants to participate in a private securities transaction for compensation. After providing written notice to the firm, what must happen?
- AThe firm must approve or disapprove in writing, and if approved, must supervise the transaction as if done through the firm✓ Correct answer
- BThe representative must wait 90 days for automatic approval
- CThe representative may proceed immediately after giving notice
- DFINRA must independently approve each private securities transaction
Explanation
Why A — The firm must approve or disapprove in writing, and if approved, must supervise the transaction as if done through the firm
FINRA Rule 3280 distinguishes between compensated and non-compensated private securities transactions. For compensated transactions, the representative must provide detailed written notice to the firm, and the firm must either approve or disapprove. If approved, the firm must record the transaction on its books and records and supervise it as if it were executed through the firm. This ensures investor protection even for transactions occurring outside normal channels. Silence by the firm does not constitute approval.
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