1.1.2 Self-regulatory Organizations (SROs) Flashcards
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John, a new compliance officer at a brokerage firm, is preparing a training session on SROs for his colleagues. What should he emphasize as the primary purpose of an SRO like FINRA?
A. Maximizing the profits of member firms.
B. Ensuring fair and honest markets.
C. Marketing member firms to the public.
D. Providing technological solutions for trading platforms.
B) Ensuring fair and honest markets.
Explanation: The primary purpose of Self-regulatory Organizations like FINRA is to protect investors by maintaining fair and honest trading practices. This helps ensure the integrity of the markets.
XYZ Securities is planning to expand its operations to include municipal bond trading. Which SRO should XYZ Securities ensure they are compliant with in terms of specific regulations governing municipal securities?
A. CBOE
B. FINRA
C. MSRB
D. SEC
C. MSRB
Explanation: The Municipal Securities Rulemaking Board (MSRB) establishes rules governing firms that engage in underwriting, trading, and selling municipal securities. Compliance with MSRB regulations is essential for any firm dealing with municipal bonds.
ABC Brokerage, a member of FINRA, has been accused of violating trading practices. Which of the following is a likely action that FINRA might take?
A. Impose trading sanctions and fines
B. Direct payment of damages to affected customers
C. Provide legal representation to the accused firm
D. Take the matter to the state court
A. Impose trading sanctions and fines
Explanation: FINRA has the authority to enforce trading compliance and impose sanctions, fines, and disciplinary actions on its member firms that violate its rules or federal securities laws.
Which of the following best describes the purpose and mission of a Self-regulatory Organization (SRO) like FINRA?
A. Protecting investors and ensuring market integrity by regulating broker-dealers
B. Providing financial assistance to investors in bankruptcy cases
C. Offering legal advice to broker-dealers on securities-related matters
D. Conducting monetary policy to stabilize the economy
A. Protecting investors and ensuring market integrity by regulating broker-dealers
Explanation: The primary mission of SROs like FINRA is to protect investors by maintaining fair and honest markets, which involves regulating activities of broker-dealers and enforcing compliance with securities laws
1.1.2 Self-regulatory Organizations (SROs)
A new options trading platform wishes to commence operations in the U.S. Under which SRO’s jurisdiction should the platform ensure compliance specifically for options trading?
A. CBOE
B. FINRA
C. MSRB
D. NASDAQ
A. CBOE
Explanation: The Chicago Board Options Exchange (CBOE) is the specific SRO that governs the options markets, setting and enforcing standards and regulations for options trading platforms and activities.
1.1.2 Self-regulatory Organizations (SROs)
Which SRO would be responsible for disciplining a brokerage firm if it engaged in unethical practices while dealing with corporate bonds?
A. CBOE
B. FINRA
C. MSRB
D. SIPC
B. FINRA
Explanation: FINRA has jurisdiction over all types of securities firms and brokers in the U.S., including those dealing with corporate bonds. It is responsible for regulatory oversight, rulemaking, and disciplinary actions related to brokerage firms and their activities in corporate securities.
1.1.2 Self-regulatory Organizations (SROs)
An investment firm has been found to have discrepancies in its trading records. Which SRO is primarily responsible for conducting an investigation into this firm?
A. CBOE
B. FINRA
C. MSRB
D. NYSE
B. FINRA
Explanation: FINRA is responsible for overseeing brokerage firms and ensuring their compliance with ethical trading practices and accurate record-keeping.
1.1.2 Self-regulatory Organizations (SROs)
When a broker-dealer wants to initiate municipal securities dealings, to which SRO must it report and adhere to guidelines specifically for these securities?
A. CBOE
B. FINRA
C. MSRB
D. SEC
C. MSRB
Explanation: The MSRB specifically regulates firms involved in underwriting, trading, and selling municipal securities, setting rules that these firms must follow.
1.1.2 Self-regulatory Organizations (SROs)
A firm engaged in options trading on the NASDAQ has committed several minor regulatory infractions. Who would most likely handle these infractions?
A. CBOE
B. FINRA
C. MSRB
D. NASDAQ
D. NASDAQ
Explanation: As the NASDAQ oversees the operations and compliance of its trading platform, it would handle infractions related to options trading conducted on its system.
1.1.2 Self-regulatory Organizations (SROs)
Which SRO would a new futures exchange in the U.S. most likely need to register with for regulatory oversight?
A. CFTC
B. FINRA
C. MSRB
D. SEC
A. CFTC
Explanation: The Commodity Futures Trading Commission (CFTC) oversees the U.S. derivatives markets, including futures, swaps, and certain types of options.
1.1.2 Self-regulatory Organizations (SROs)
A broker-dealer is accused of fraudulent practices in the equities market. What is the most likely course of action by FINRA?
A. Providing a bailout fund to the broker-dealer
B. Conducting an audit and possibly imposing penalties
C. Referring the case directly to the U.S. Congress
D. Issuing new stock to compensate the victims
B. Conducting an audit and possibly imposing penalties
Explanation: FINRA would likely conduct an audit and, if necessary, impose penalties or sanctions on the broker-dealer for fraudulent practices.
1.1.2 Self-regulatory Organizations (SROs)
Which SRO has the authority to set rules for corporate bond trading among its members?
A. CBOE
B. FINRA
C. MSRB
D. NYSE
B. FINRA
Explanation: FINRA has comprehensive authority over all types of securities trading among its member firms, including corporate bonds.
1.1.2 Self-regulatory Organizations (SROs)
For compliance in options trading, which SRO’s rules must be adhered to by a member firm?
A. CBOE
B. FINRA
C. MSRB
D. NASDAQ
A. CBOE
Explanation: The Chicago Board Options Exchange (CBOE) sets and enforces rules specifically for options trading.
1.1.2 Self-regulatory Organizations (SROs)
A financial advisor at a broker-dealer has been charged with unethical practices related to the sale of municipal bonds. Which SRO would handle this case?
A. CBOE
B. FINRA
C. MSRB
D. SEC
C. MSRB
**Explanation: **The MSRB, which regulates municipal securities, would handle cases involving unethical practices related to the sale of these securities.
1.1.2 Self-regulatory Organizations (SROs)
Who is responsible for regulating the conduct of firms that trade government securities?
A. Federal Reserve
B. FINRA
C. MSRB
D. Treasury Department
B. FINRA
Explanation: FINRA oversees the conduct of all securities firms operating in the U.S., including those trading government securities.
1.1.2 Self-regulatory Organizations (SROs)
