Chapter 1: Regulation

Question 1

What is the SEC’s primary purpose?

Answer 1

Ensure adherence to rules and regulations the commission makes and enforces

Question 2

MSRB

Answer 2

Municipal Securities Rulemaking Board

Question 3

FINRA oversees…

Answer 3

Brokerage firms and their associated persons

Question 4

MSRB oversees…

Answer 4

Municipal securities market, including dealers, municipal advisers, and issuers

Question 5

When was the Federal Reserve founded?

Answer 5

12/23/1913

Question 6

The Federal Reserve Act was passed to:

Answer 6

Stabilize prices, maximize employment, and moderate long-term interest rates

Question 7

Four primary components of the Federal Reserve

Answer 7

-Board of Governors
-Federal Open Market Committee
-12 Regional Federal Reserve Banks
-Member banks throughout US

Question 8

FDIC

Answer 8

Federal Deposit Insurance Corporation

Question 9

The FDIC was created to…

Answer 9

Foster stability within the financial system while concurrently upholding public confidence and efficacy

Question 10

The FDIC also…

Answer 10

-Provides deposit insurance
-Oversees financial institutions to ensure safety and soundness
-Facilitates the resolution of significant financial organizations
-Administers receiverships

Question 11

The FDIC extends its protections to…

Answer 11

Checking and saving accounts, money market accounts, certificates of deposit, IRA’s, revocable/irrevocable trust accounts, and employee benefit plans

Question 12

What are blue-sky laws?

Answer 12

Anti-fraud regulations at the state level

Question 13

Blue-sky laws vary from state to state but…

Answer 13

Require sellers of new issues to provide in-depth financial details of the entities involved in every deal

Question 14

Blue-sky laws are what require producers to…

Answer 14

Get their licenses

Question 15

NASAA

Answer 15

North American Securities Administrators Association

Question 16

NASAA is a group of securities regulators dedicated to…

Answer 16

Safeguarding investors against fraudulent activities

Question 17

The individuals of NASAA are responsible for…

Answer 17

Licensing securities firms, investment professionals, and other tasks

Question 18

Securities Act of 1933: Goal 1

Answer 18

Establish Laws against misrepresentation and fraudulent activities in the securities market

Question 19

Securities Act of 1933: Goal 2

Answer 19

Ensure transparency in financial statements to help investors make informed decisions

Question 20

What is the primary objective of the Securities Exchange Act of 1934?

Answer 20

Regulate securities trading in the secondary market after their issuance

Question 21

The secondary market is where…

Answer 21

Trading occurs after a company issues assets

Question 22

Investment Advisors Act of 1940

Answer 22

Federal statute established to oversee and govern the operations of investment advisors as defined by law

Question 23

Securities Investors Protection Act (SIPA)

Answer 23

Renew faith in the capital markets among investors and enhance financial obligation prerequisites for registered brokers and dealers

Question 24

Securities Investor Protection Corporation (SIPC)

Answer 24

Nonprofit organization created by Congress to safeguard the customers of brokerage firms that become insolvent

Question 25

Penny Stock Reform Act of 1990

Answer 25

Seeks to prevent fraud in non-exchange listed stocks, known as penny stocks

Question 26

Penny Stock

Answer 26

Stock that trades below $5 per share

Question 27

Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA)

Answer 27

Aims to increase the liability penalties in all involved parties f insider trading

Question 28

Investment Company Act of 1940

Answer 28

Governs the formation and operations of investment companies and sets industry standards

Question 29

Telephone Consumer Protection Act of 1991

Answer 29

Limits the use of telemarketing, including artificial messages, text messages, fax machines, prerecorded messages, and autodialing systems

Question 30

Financial Industry Regulatory Authority (FINRA)

Answer 30

Nongovernmental and independent organization that establishes and enforces rules governing broker-dealers and brokers in the US

Question 31

Uniform Practice Code (UPC)

Answer 31

Set of rules that govern the activities of FINRA member firms and ensures consistent practices in the securities industry

Question 32

Code of Procedure (COP)

Answer 32

FINRA's procedural rules, oversee disciplinary proceedings against FINRA member firms

Question 33

Chicago Board Options Exchange (CBOE)

Answer 33

Facilitates trading activities mainly in options and future products