Unit 9 - The Government Regulators

Question 1

This act was created under the Securities Exchange Act of 1934. It is the securities industry’s primary regulatory body. BDs that transact securities business with customers or with other BDs must apply and receive registration from this. It regulates all exchanges and trading markets. It has regulatory authority over licensing of securities representatives, a role that has been delegated to FINRA.

Answer 1

Securities and Exchange Commission (SEC)

Question 2

What is a BD subject to if they do not comply with rules from the SEC?

Answer 2

1. Censure
2. Limits on activities, functions or operations
3. Suspension of its registration
4. Revocation of registration
5. A fine

Question 3

This act is concerned with secondary markets. It is designed to provide a fair market place for all investors. It was written in conjunction with the Securities Act of 1933.

Answer 3

Securities Exchange Act of 1934

Question 4

What falls under the 1934 act?

Answer 4

1. Regulation of insider transactions, short sales and proxies
2. Regulation of client accounts
3. A customer protection rule
4. A net capital rule and financial responsibility for broker-dealers
5. Reporting requirements for issuers

Question 5

True or False: Although a BD must register with the SEC, the BD may not claim that this registration in anyway implies that the SEC has passed upon or approved the BDs financial standing, business or conduct.

Answer 5

True

Question 6

The mission of this network if to safeguard the financial system from illicit use, to combat money laundering, and to promote national security through the collection, analysis, and dissemination of financial intelligence.

Answer 6

Financial Crimes Enforcement Network (FinCEN)

Question 7

This is the primary tax enforcement agency of the federal government. It has significant power to investigate potential tax evasion. It does not make the law, but its enforcement of the law is seen as a vital national interest.

Answer 7

The IRS

Question 8

This supervises nearly 1,400 national banks, federal savings associations, and federal branches and agencies of foreign banks operating in the US. It ensures that national banks and federal savings associations operate in a safe and sound manner, provide fair access to financial services, treat customers fairly and comply with applicable law and regulations. It serves as a direction of the Federal Deposit Insurance Corporation and member of the Financial Stability Oversight Council and the Federal Financial Institutions Examination Council.

Answer 8

The Comptroller

Question 9

Which Act is this?

Governs the new issuance (primary) market, which involves the money raising activities of issuers

Requires issuers to register their securities when selling to the public

Answer 9

Securities Act of 1933

Question 10

Which Act is this?

Governs trading markets for existing securities and registration requirements of BDs, BD employees and exchanges.

Answer 10

Securities Exchange Act of 1934

Question 11

Which Act is this?

Governs the regulation of packaged products such as mutual funds, closed end funds and unit investment trusts.

Answer 11

Investment Company Act of 1940

Question 12

Which Act is this?

Governs the regulation of firms that earn fees for providing investment advice

Answer 12

Investment Advisers Act of 1940

Question 13

Which Act is this?

Covers the protection thresholds for customers in the event of a BDs bankruptcy

Answer 13

Securities Investor Protection Act of 1970 (SIPA)

Question 14

Which Act is this?

Defines penalties for the misuse of material, nonpublic information by both firms and individuals

Answer 14

Insider Trading and Securities Fraud Enforcement Act of 1988

Question 15

Which Act is this?

Covers anti-money laundering policies and procedures that must be followed by financial firms

Answer 15

The USA Patriot Act

Question 16

This Act established the Federal Reserve System as the central bank of the US to provide the nation with a safe, more flexible and more stable monetary and financial system.

Answer 16

Federal Reserve Act of 1913.

Question 17

This consists of 12 regional Federal Reserve Banks and hundreds of national and state banks that belong to the system. It determines monetary policy and takes action to implement its policies. It determines how much money is available for businesses and consumers to spend.

Answer 17

Federal Reserve Board (FRB)

Question 18

This was created under the Securities Investor Program Act of 1970. It is a nonprofit membership organization. The members pay assessments into a general insurance fund that is used to meet customer claims in the event of a BD bankruptcy.

Answer 18

Securities Investor Protection Corporation (SIPC)

Question 19

All BDs registered with the SEC must be SIPC members except

Answer 19

1. Banks that deal exclusively in municipal securities
2. Firms that deal exclusively in the US government securities
3. Firms that deal exclusively in redeemable investment company securities

Question 20

For SIPC, a customer is defined as

Answer 20

Anyone who has cash or securities in the possession of a BD.

Question 21

Once a trustee is appointed in a SIPC, the member firms is

Answer 21

Prohibited from engaging in business as a BD. It is prohibited from attempting to conceal assets, file false statements, or alter securities records to defraud the trustee or SIPC.

Question 22

The basic coverage under SIPC is no more than

Answer 22

$500,000 per separate account, not per separate customer.

Question 23

Of the basic coverage under SIPC, of the $500,000, SIPC covers no more than ____ in cash.

Answer 23

$250,000 in cash

Question 24

Separate capacity is determined by

Answer 24

How an account is titled to determine if it represents a separate account for SIPC.

Question 25

___ and ____ accounts for the same customer are combined or the purposes of determining SIPC coverage

Answer 25

Cash and margin

Question 26

Only the ____ in margin account is covered, not the full market value for SIPC.

Answer 26

Equity

Question 27

____ and _____ ____ contracts are not covers by SIPC.

Answer 27

Commodities and commodities futures

Question 28

BDs must include their ____ _____ on all advertising by may not imply that SIPC coverage is more than it actually is or that it benefits are unique to only that BD.

Answer 28

SIPC membership

Question 29

SIPC more not appear ____ than the firms own name on a disclosure.

Answer 29

Larger

Question 30

All member firms must ___ __ ____ on their premises that indicates SIPC membership.

Answer 30

Post a sign

Question 31

SIPC members must provide ___ ___ to customers that they may obtain information about SIPC, including the SIPC brochure.

Answer 31

Written disclosure

Question 32

When does the SIPC disclosure need to be made to new customers?

Answer 32

At the time an account is opened and to all customers at least once per year.

Question 33

Creating during the Great Depression of the 1930s, this act was created. It is an independent agency of the US federal government that preserves public confidence in the banking system by insuring deposits. The funds for the agency are provided in the same way as the funds for a private insurance company; premiums are paid by all participating institutions.

Answer 33

Federal Deposit Insurance Corporation (FDIC)

Question 34

This provides deposit insurance guaranteeing the safety of a depositors accounts in member banks up to $250,000 for each deposit ownership category in each insured bank.

Answer 34

FDIC

Question 35

The FDIC covers the traditional types of bank deposit accounts including

Answer 35

Checking and Savings accounts, money market deposit accounts and certificates of deposits (CD) and self directed IRA accounts.

Question 36

FDIC does not cover deposits such as

Answer 36

Mutual funds, annuities, life insurance policies and stocks and bonds

Question 37

FDIC ownership categories are

Answer 37

Per owner per account

Question 38

SIPC coves

Answer 38

Per separate account

Question 39

This Act is a template for state securities laws. The states adopt the template in order to create uniform securities laws at the state level. All states have adopted this Act.

Answer 39

The Uniform Securities Act of 1956

Question 40

What is a provision of the USA?

Answer 40

Each state have a state securities administrator

Question 41

Who chooses the securities administrator?

Answer 41

The state

Question 42

What do administrators have authority over?

Answer 42

Registration of securities, broker-dealers, investment advisers and representatives.

Question 43

This association represents state and provincial securities regulators in the US, Canada and Mexico. It has no specific regulatory authority. It often produces guidelines that the state administrators use in the enforcement of state regulations. It has members that are the equivalent to state administrators from Canada and Mexico

Answer 43

The North American Securities Administrators Association (NASAA)