Q:
A church that a registered representative (RR) attends plans to raise the funds necessary to complete a new building project by offering “church bonds.”  What requirements must the RR fulfil in order to participate, without payment, in the sale of these bonds?
a) Church bonds are only registered with the state and so long as the RR is registered in the state and the church reports the sales, there are no other requirements.
b) The RR must have written permission from the broker-dealer in all cases.
c) The registered representative must notify his firm in writing.
d) Since church bonds are exempt from registration there are no requirements for the RR.
A:
The correct answer is c)
Although church bonds are normally considered to be exempt securities, the RR is obligated, by NASD Rule 3040, to notify his firm in all securities transactions not sponsored by the firm. Failing to do so is called “selling away” a violation of NASD rules. If the RR is being compensated, the firm must approve, and the compensation must go across the firm’s books.

RELATED FAQS

  1. Can a church issue a bond?

    The North American Securities Administrators Association (NASAA) has acknowledged that "church bonds" are allowed to be issued ...
  2. Which of the following, under the NASD Conduct Rules, would constitute a complaint ...

    The correct answer is b. The NASD defines a “complaint” as adverse communications that are in writing. Choices I and III ...
  3. Which of the following signatures are required on a client’s new account form ... ...

    The correct answer is B. While local practices of a broker-dealer might require the client to sign the form, even when opening ...
  4. A registered representative has discovered an article in a major news magazine that ...

    The correct answer is c. The use of magazines, as well as reprints, falls under the NASD rules regarding communications with ...
RELATED TERMS
  1. Registered Representative - RR

    A person who works for a brokerage company that is licensed by ...
  2. Parsonage Allowance

    An allowance designated by a church or other organization for ...
  3. NASD Rule 2790

    A ruling passed by the National Association of Dealers (NASD), ...
  4. Trade Reporting And Compliance Engine - TRACE

    A program developed by the National Association of Securities ...
  5. Rule 147

    A rule that can be used by a company to raise funds without actually ...
  6. Taping Rule

    A rule created by the National Association of Securities Dealers ...
Hot Definitions
  1. Run Rate

    1. How the financial performance of a company would look if you were to extrapolate current results out over a certain period ...
  2. Hard Fork

    A hard fork (or sometimes hardfork) is a radical change to the protocol that makes previously invalid blocks/transactions ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  5. Zero Day Attack

    Zero Day Attack is an attack that exploits a potentially serious software security weakness that the vendor or developer ...
  6. Effective Tax Rate

    The average rate at which an individual or corporation is taxed. The effective tax rate for individuals is the average rate ...
Trading Center