FINRA Series 9 Exam Prep

Cards · 100

Series 9 Scope of Registration

Authorizes a general securities sales supervisor to supervise options sales activities and personnel.

Registered Options Principal (ROP)

A principal qualified to supervise a firm's options compliance, trading, and account operations.

Options Disclosure Document (ODD)

The OCC disclosure booklet that must be delivered to a customer at or prior to options account approval.

Options Account Agreement Deadline

Must be signed and returned by the customer within 15 calendar days of account approval.

Failure to Return Options Agreement

The firm must prohibit opening options transactions and permit only closing transactions.

Options Account Approval Authority

A branch manager or Series 9 supervisor may approve the account, subject to subsequent ROP review.

Verification of Customer Background

Firm must send background information to the customer within 15 days of approval for verification.

Uncovered Options Approval Standard

Requires specific written supervisory procedures, minimum equity requirements, and ROP approval.

Suitability Rule for Options (FINRA 2111)

Requires reasonable basis, customer-specific, and quantitative suitability before recommending trades.

Supervision of Discretionary Accounts

Requires prior written customer authorization, prior ROP approval, and frequent supervisory reviews.

Discretion as to Time and Price

Valid only for the day given unless written customer authorization grants broader discretion.

Supervisory Branch Inspections Frequency

Offices of Supervisory Jurisdiction (OSJs) and supervisory branches must be inspected at least annually.

Non-Supervisory Branch Inspections

Must be inspected by the broker-dealer at least once every three years.

Options Communications with the Public

Categories include retail communications, correspondence, and institutional communications.

Retail Communication Pre-Approval Rule

A qualified Registered Options Principal must approve retail options communications prior to use.

FINRA Advertising Regulation Filing

Retail communications on options used prior to ODD delivery must be filed with FINRA 10 days before use.

Options Correspondence Definition

Written or electronic communication distributed to 25 or fewer retail investors within 30 days.

Correspondence Supervision Rule

Does not require prior ROP approval if the firm maintains post-use review and supervisory procedures.

Institutional Communication Rule

Communication distributed only to institutional investors; does not require prior ROP approval.

Options Communications Prior to ODD Delivery

Must be limited to general descriptions, avoid performance projections, and offer ODD referral.

Projections in Options Communications

Prohibited from making performance projections, but historical or annualized returns are allowed.

Options Complaint Recordkeeping

Written complaints must be retained at the OSJ for 4 years (FINRA) or 3 years (SEC/Exchange rules).

Options Complaint Reporting

Customer complaints involving options must be reported quarterly to FINRA by the 15th of the next month.

Position Limits

The maximum number of standard options contracts on the same side of the market an investor can hold.

Same Side of the Market

Combines bullish positions (long calls and short puts) or bearish positions (short calls and long puts).

Exercise Limits

The maximum number of contracts on the same side that can be exercised in five consecutive business days.

Aggregation of Accounts for Limits

Accounts under common control or ownership must be aggregated when calculating position limits.

Large Options Position Report (LOPR)

Report filed with FINRA when an account achieves 200 or more options contracts on the same side.

Exercise Cut-Off Time

5:30 p.m. Eastern Time on the third Friday of the expiration month for standard equity options.

Automatic Exercise Threshold

OCC automatically exercises equity options that are in-the-money by $0.01 or more at expiration.

Contrary Exercise Advice (CEA)

Notice submitted by an options holder to exercise an out-of-the-money option or abandon an in-the-money one.

Assignment of Exercise Notices

OCC assigns to clearing firms randomly; firms assign to customers on a random or FIFO basis.

Prohibited Assignment Method

Assigning exercise notices based on contract size or customer relationship is strictly prohibited.

Capping and Pegging

Illegal manipulative practices designed to suppress or elevate an underlying stock's price near expiration.

Front-Running Options Orders

Trading stock or options with advance knowledge of a material, non-public block order is prohibited.

Reg T Initial Margin: Equity Long Options

Must be paid in full; options with 9 months or less to expiration have zero loan value.

Margin Requirement for LEAPS > 9 Months

Can be purchased on margin; the standard Regulation T loan value requirement is 75% of the premium.

Uncovered Equity Call Margin Requirement

Higher of 100% premium + 20% underlying value minus out-of-the-money amount, or premium + 10% underlying.

Covered Call Writing Margin

Requires no additional margin provided the underlying shares are held long and unencumbered.

Debit Spread Margin Requirement

Must be paid in full at the time of trade; margin requirement is the net debit paid.

Credit Spread Margin Requirement

The difference between the strike prices minus the net credit received.

Cash Account Option Limitations

Only long options, fully covered short calls, and cash-secured short puts are allowed.

Cash-Secured Put Requirement

Customer must hold cash or cash equivalents equal to the aggregate exercise value in the account.

Options Trade Confirmation Deadline

Must be sent to the customer at or before the completion of the transaction.

Required Trade Confirmation Disclosures

Must detail underlying asset, strike, expiration, quantity, premium, commission, and capacity.

Options Account Information Change

If financial status changes, amended info must be verified and sent to customer within 30 days.

Supervision of Employee Accounts

Associated persons opening outside options accounts must obtain prior written consent from their employer.

Duplicate Statements for Associated Persons

Executing firm must provide duplicate confirms and statements to the employing firm upon written request.

Options Trading Halts

If trading in the underlying equity security is halted, options trading on that stock halts automatically.

Off-Floor Options Transactions

Options trades must be executed on an exchange unless explicitly permitted under regulatory exemptions.

Supervisory Control System (FINRA Rule 3120)

Requires annual submission of a report detailing the testing and verification of supervisory controls to senior management.

Annual Compliance Meeting (FINRA Rule 3010)

Mandates that all registered personnel participate annually in an interview or meeting discussing compliance issues.

Outside Business Activities (FINRA Rule 3270)

Requires prior written notice to the member firm before an associated person engages in any non-firm business for compensation.

Private Securities Transactions (FINRA Rule 3280)

Requires prior written notice and member firm approval before an associated person participates in securities transactions outside the firm.

Sharing in Customer Accounts (FINRA Rule 2150)

Prohibited unless prior written firm and customer approval is obtained and gains/losses are shared in direct proportion to capital contributed.

Borrowing from or Lending to Customers (FINRA Rule 3240)

Permissible only under specific firm policies, such as family relationships or standard commercial lending arrangements, often requiring prior written notice.

Statutory Disqualification (SD) Options Oversight

Associated persons subject to an SD require heightened supervision under an approved FINRA plan (MC-400).

Continuing Education Firm Element

Requires annual written training plan to cover relevant options regulations, products, and sales practice risks for covered registered persons.

Form U4 Options Disclosure Reporting

Requires prompt amendment within 30 days of reportable customer complaints, settlements, or disciplinary actions involving options.

Form U5 Termination Filing Deadline

Must be filed within 30 calendar days of an associated person's termination, with a copy provided to the individual.

Gifts and Gratuities Limit (FINRA Rule 3220)

Restricts gifts to persons in financial services to $100 per individual per year, including options-related business relations.

Testimonials in Options Communications

Must state that the experience may not represent other customers and that past performance does not guarantee future results.

Historical Performance in Options Communications

Must reflect all relevant fees and commissions, span a balanced time frame, and include prominent risk disclosures.

Educational Options Material Exemption

Allows generalized options educational pieces to be distributed without the ODD if they contain no specific product recommendations.

Electronic Communications Supervision (Lexicon)

Requires supervisory systems to utilize targeted keywords and lexicons to monitor emails and chats for unauthorized options claims.

Interactive vs. Static Social Media Options Content

Static content requires prior principal review, while interactive real-time options posts require post-review supervisory procedures.

Options Telemarketing Call Time Restrictions

Cold calls soliciting options trading are restricted to between 8:00 AM and 9:00 PM in the prospect's local time zone.

Firm-Specific Do-Not-Call List

Options prospects requesting no further contact must be placed on the firm's internal list, maintained for at least five years.

ODD Revision Delivery Requirement

Any revised ODD or supplement issued by OCC must be distributed to all active options customers no later than their next trade confirmation.

Senior Investor Options Account Protections

Authorizes temporary holds on disbursements if financial exploitation or unsuitable options trading is suspected under FINRA Rule 2165.

Trusted Contact Person Requirement (Rule 4512)

Firms must make reasonable efforts to obtain contact details for a trusted contact when opening customer options accounts.

Minimum Equity for Day Trading Options

Pattern day traders must maintain a minimum account equity of $25,000 to trade options on margin.

Pattern Day Trader Margin Call

Must be met within five business days, during which time options day trading buying power is restricted to two times the maintenance excess.

Free-Riding in Options Accounts

Prohibited practice of buying options in a cash account and selling them before paying for the purchase, leading to a 90-day freeze.

Cabinet Trading (Penny Options)

Allows closing transactions in deep out-of-the-money options at an aggregate price of $1 per contract to clear positions.

Fast Market Rules

Allows exchange officials to widen bid-ask spreads and waive standard quote commitments during extreme options market volatility.

Supervision of Cross Transactions

Supervisors must ensure internal crossing of customer options orders complies with exchange auction and priority rules.

Options Trade Error Account (Supervisory Review)

Trades booked to an error account require branch manager or ROP cancellation and correction review and written approval.

Best Execution in Options Orders (FINRA Rule 5310)

Firms must conduct regular and rigorous supervisory reviews of execution quality across various options exchanges.

Payment for Order Flow Disclosures (SEC Rule 606)

Requires quarterly public reports on order routing practices and disclosures on whether the firm accepts payment for options order flow.

Wash Sales Supervision in Options

Requires supervisory surveillance to detect prearranged, non-economic options trades intended to generate artificial tax losses.

Pre-Arranged Trading Prohibition

Supervisors must monitor for synchronized or agreed options transactions between collaborating accounts designed to manipulate price.

Marking the Close in Options

Prohibited manipulation involving options executions near the market close to artificially alter settlement prices or margins.

Supervising Index Options Cash Settlement

Index options settle in cash on the business day following expiration, requiring supervisory tracking of cash distribution.

European-Style Exercise Oversight

Supervisors must verify accounts understand that European-style index options can only be exercised on the expiration date.

VIX Options Settlement Special Opening Quotation (SOQ)

Requires supervision of volatility options expiring on Wednesday mornings based on the calculated opening prices of SPX strips.

FLEX Options Supervisory Oversight

Requires monitoring of non-standardized customized options terms, including strike prices, exercise styles, and expirations.

Ratio Call Writing Margin Rule

The covered portion requires no margin, while the excess uncovered short calls require standard uncovered options margin.

Collar Strategy Margin Requirement

Writing an out-of-the-money call while holding long stock and a long protective put requires reduced or no incremental margin.

Straddle Margin Requirement (Short)

Margin required is the greater requirement of the short put or short call, plus the aggregate premium of the other side.

Box Spread Margin Rules

A synthetic long stock and short stock position in European-style options requires capital based on the net debit or credit spread.

Portfolio Margin Minimum Equity for Options

Requires a minimum account equity of $100,000 for standard retail accounts or $500,000 for prime brokerage accounts.

TIMS Methodology in Portfolio Margin

Uses The Options Clearing Corporation's Theoretical Intermarket Margin System to calculate risk arrays for portfolio margin accounts.

Uncovered Equity Put Cash Requirement

Cash accounts writing cash-secured puts must hold 100% of the aggregate strike value in cash or cash equivalents.

Escrow Receipts for Covered Puts

A letter issued by a bank certifying that cash equal to the aggregate strike price is on deposit to back a written short put.

T+1 Settlement Supervision for Options

Options trades settle regular way on the next business day following the transaction date (T+1).

Exercise Settlement for Equity Options

Physical delivery of the underlying equity resulting from options exercise settles one business day after exercise notice.

Customer Options Order Ticket Timestamping

Must record exact time of order receipt, order entry, and execution or cancellation down to the second.

Supervisory Log for Order Allocations

Post-execution allocations of bundled options orders require prior manager verification to prevent cherry-picking.

Customer Account Statement Frequency for Options

Must be sent monthly if options activity occurs, or at least quarterly if positions are held with no activity.