Unit 10 - The Self-Regulatory Organizations

Question 1

What is the purpose of self-regulators?

Answer 1

For the industry to take a hand at policing itself.

Question 2

This regulates all matters related to investment banking (securities underwriting), trading in the OTC market, trading in exchange-listed securities, and the conduct of FINRA member firms and associated persons

Answer 2

FINRA

Question 3

These are the objectives of what regulator?

1. Promote the investments banking and securities business, standardize principles and practices, promote high standards of commercial honor, and encourage the observance of federal and state laws
2. provide a medium for communication among its members and between its members, the government, and other agencies
3. Adopt, administer and enforce rules designed to prevent fraudulent and manipulative practices, as well as to promote just and equitable principles of trade
4. Promote self discipline amount members and investigate and resolve grievances between the public and member and between members.

Answer 3

FINRA

Question 4

What are the four sections of FINRA?

Answer 4

1. Conduct Rules
2. Code of Procedure (COP)
3. Uniform Practice Code (UPC)
4. Code of Arbitration (COA)

Question 5

This establishes the relationship between firms and their customers. The rules cover areas such as fair dealing with customers, compensation-related issues, standards for communications, and various sales practice violations.

Answer 5

Conduct Rules

Question 6

This cover the enforcement of FINRA rules and details the punishment of members who violate the Conduct Rules.

Answer 6

Code of Procedure

Question 7

The ___ investigates suspected violations. It will hold a hearing to determine the outcome of any violations.

Answer 7

Department of Enforcement (DOE)

Question 8

FINRA may do what to a member firm or an associated person upon a finding of violation?

Answer 8

1. Suspend, expel or bar from membership
2. Impose fines
3. Censure
4. Any other action deemed appropriate

Question 9

FINRA does not have ___ powers.

Answer 9

Arrest

Question 10

The COP may be appealable to the ______, then to the SEC, and from there to the appellate courts.

Answer 10

National Adjudicatory Council (NAC)

Question 11

These rules cover technical aspects of trading and payment for securities transactions. Some examples are good delivery of securities, the payment procedures for dividends on common stocks, and interest on bonds.

Answer 11

Uniform Practice Code (UPC)

Question 12

This is a FINRA-run dispute resolution process to settle monetary disputes. The goal is to provide a faster and cheaper resolution versus going through the traditional court system. The decisions are final and binding.

Answer 12

Code of Arbitration (COA)

Question 13

If a customer is involved in a monetary dispute with a BD, the customer must

Answer 13

Agree to arbitration

Question 14

BD firms apply for membership o FINRA, and, if granted, they agree to abide by FINRA’s rules and regulations. These are often called

Answer 14

Member firms

Question 15

A FINRA member firm may only do business with another FINRA member firm unless it meets one of the exceptions, which include:

Answer 15

1. A bank in the underwriting of a municipal issue

2. A foreign firm that is a member of its nation’s FINRA equivalent.

Question 16

FINRA has been delegated authority by the

Answer 16

SEC

Question 17

This is the primary industry (SRO) regulator for underwriting and trading of state and municipal securities. It writes the rules but does not have enforcement powers - it depends on other regulators for the enforcement of its rules. It has no regulator power over the municipalities that issue municipal securities.

Answer 17

Municipal Securities Rulemaking Board (MSRB)

Question 18

MSRB rules are enforces on the banking industry primarily through

Answer 18

The comptroller of the currency, The Federal Reserve and the FDIC.

Question 19

MSRB rules on securities firms are enforces primarily by

Answer 19

The SEC and FINRA

Question 20

____ ____ and ____ ____ are examples of non-debt municipal securities covered by the MSRB.

Answer 20

529 plans and ABLE accounts

Question 21

MSRB has not enforcement power regarding

Answer 21

Its municipal securities rules. The rules will be enforced by FINRA.

Question 22

The exchanges are also

Answer 22

Regulators

Question 23

This regulates trading activity that occurs on the exchange and have some authority over the securities that are listed on the exchange, as well as the issuers of those securities. They have the power to remove a listed security (delisting) as well as suspending trading on a listed security.

Answer 23

The exchange

Question 24

What is the exchange model used on the exam?

Answer 24

NYSE