Chapter 2- Overview of Regulation

Question 1

RESPONSIBLE FOR SUPERVISING REGISTERED REPRESENTATIVES

Answer 1

principal

Question 2

CONTROLS THE MONEY SUPPLY AND INTEREST RATES

Answer 2

federal reserve board

Question 3

INSURES BANK DEPOSITORS

Answer 3

FDIC

Question 4

ENFORCE THE UNIFORM SECURITIES ACT

Answer 4

blue sky regulation

Question 5

Penny Stock Reform Act of 1990

Answer 5

• Regulates solicited sales of penny stocks (i.e., unlisted equities priced below $5.00 per share)
• Firms must establish suitability, approval, and disclosure procedures

Question 6

Insider Trading and Securities Fraud Enforcement Act 1988

Answer 6

• Insiders include corporate officers and directors; owners of more than 10% of a
  company’s common equity
• The use of material, non-public information is prohibited
• Both tippers and tippees may be in violation

Question 7

Investment Company Act of 1940

Answer 7

Identifies three types of investment companies:

1. Management Companies
2. Unit Investment Trusts
3. Face Amount Certificate Companies

Question 8

SECURITIES ACT OF 1933

Answer 8

Established full and fair disclosure rules for new offerings

Question 9

INVESTMENT ADVISERS ACT OF 1940

Answer 9

Uses an A-B-C test to determine whether an entity is subject

Question 10

SECURITIES EXCHANGE ACT OF 1934

Answer 10

Requires registration of registered representatives and broker-dealers

Question 11

USA PATRIOT ACT OF 2001

Answer 11

Responsible for implementing AML rules

Question 12

FINRA code of arbitration

Answer 12

Provides the method
for resolving disputes
(typically monetary)
between members,
including those that
involve public
customers

Question 13

The ___ formulates and interprets its rules, but does not enforce them

The ___ provides a trading venue for ETFs

FINRA is responsible for enforcing ____ ___

Answer 13

MSRB; CBOE; MSRB rule