Terms

Question 1

What does SEC stand for?

Answer 1

Securities Exchange Commision

Question 2

What does SROs stand for?

Answer 2

Self-regulatory Organizations

Question 3

What are Equities?

Answer 3

Ownership in a company, Ex stocks

Question 4

What are Debt Securities?

Answer 4

Loans issued by corporations or governments. Ex bonds

Question 5

What are Mutual Funds ?

Answer 5

Pooled investment funds managed by professionals

Question 6

What are ETFs?

Answer 6

(exchange trade funds) Investment funds that trade like stocks

Question 7

Options (Calls & Puts)

Answer 7

Contracts giving the right (not obligation) to buy/sell securities at a set price.

Question 8

What does FINRA stand for?

Answer 8

Financial Industry Regulatory Authority

Question 9

True or False: FINRA is a government agency.

Answer 9

False

Question 10

What is the primary purpose of FINRA?

Answer 10

To regulate broker-dealers and protect investors.

Question 11

What does SEC stand for?

Answer 11

Securities and Exchange Commission

Question 12

Fill in the blank: The SEC is responsible for enforcing federal _____ laws.

Answer 12

securities

Question 13

True or False: The SEC oversees FINRA.

Answer 13

True

Question 14

What is a broker-dealer?

Answer 14

A person or firm that buys and sells securities on behalf of clients or for its own account.

Question 15

Multiple choice: Which of the following is a function of a broker-dealer? A) Underwriting new issues B) Trading securities C) Both A and B

Answer 15

C) Both A and B

Question 16

What is a market maker?

Answer 16

A firm or individual that actively quotes two-sided markets in a security, providing liquidity.

Question 17

True or False: Market makers are required to maintain a continuous bid and ask price.

Answer 17

True

Question 18

Fill in the blank: Market makers help ensure _____ in the financial markets.

Answer 18

liquidity

Question 19

What role does the SEC play in relation to broker-dealers?

Answer 19

The SEC regulates and oversees broker-dealers to ensure compliance with securities laws.

Question 20

Multiple choice: Which entity primarily regulates the activities of market makers? A) SEC B) FINRA C) Both A and B

Answer 20

C) Both A and B

Question 21

What is the main regulatory framework that governs broker-dealers?

Answer 21

The Securities Exchange Act of 1934

Question 22

True or False: All broker-dealers are required to register with the SEC.

Answer 22

True

Question 23

What is the difference between a market maker and a broker?

Answer 23

A market maker buys and sells for their own account, while a broker acts on behalf of clients.

Question 24

Fill in the blank: FINRA’s primary role is to protect _____ and promote market integrity.

Answer 24

investors

Question 25

What is the process by which a broker-dealer becomes a member of FINRA?

Answer 25

Application and approval process including meeting specific regulatory requirements.

Question 26

Multiple choice: Which of the following is NOT a function of market makers? A) Providing liquidity B) Setting prices C) Conducting audits

Answer 26

C) Conducting audits

Question 27

True or False: Market makers can also be broker-dealers.

Answer 27

True

Question 28

What are the two types of orders that market makers typically quote?

Answer 28

Bid and ask orders.

Question 29

Fill in the blank: The SEC was established by the _____ Act of 1934.

Answer 29

Securities Exchange

Question 30

What is one major responsibility of FINRA?

Answer 30

Enforcing compliance with its rules and regulations among broker-dealers.

Question 31

Multiple choice: What is the primary goal of the SEC? A) To increase market volatility B) To protect investors C) To reduce trading volume

Answer 31

B) To protect investors

Question 32

True or False: Market makers only operate in the stock market.

Answer 32

False

Question 33

What is the significance of the term 'liquidity' in financial markets?

Answer 33

It refers to the ease with which an asset can be bought or sold in the market without affecting its price.

Question 34

❓What are REITs ?

Answer 34

✅ (Real Estate Investment Trusts) – Companies that own, operate, or finance real estate.

Question 35

❓What is a Market Order?

Answer 35

✅ Order to buy/sell at the best available price.

Question 36

❓What is a Limit Order?

Answer 36

✅ Order to buy/sell at a specific price or better.

Question 37

❓What is a Stop Order?

Answer 37

✅ An order that turns into a market order once a price is reached.

Question 38

Define❓Short Selling

Answer 38

✅ Selling borrowed shares with the expectation of buying them back at a lower price.

Question 39

Define❓Margin Account

Answer 39

✅ A brokerage account that allows investors to borrow money to trade.

Question 40

Define❓Yield

Answer 40

✅ The return an investor receives from an investment.

Question 41

Define❓Dividend

Answer 41

✅ A portion of a company's profits paid to shareholders

Question 42

Define❓Capital Gains

Answer 42

✅ Profits from selling an investment at a higher price

Question 43

Define❓Liquidity Risk

Answer 43

✅ The risk of not being able to sell an investment quickly

Question 44

Define❓ Market Risk

Answer 44

✅ The risk of an investment losing value due to overall market conditions.

Question 45

Define❓ Suitability Rule

Answer 45

✅ Advisors must recommend investments that align with a client's needs and objectives.

Question 46

Define❓ Insider Trading

Answer 46

✅ The illegal practice of trading based on confidential, non-public information.

Question 47

Define❓ AML

Answer 47

✅ (Anti-Money Laundering) Laws that prevent money laundering and financial crimes.

Question 48

Define❓ Know Your Customer (KYC)

Answer 48

✅ A rule requiring financial firms to verify a customer's identity and financial background.

Question 49

Define❓ ODD

Answer 49

✅Options risk Disclosure Document

Question 50

Define❓ ROP

Answer 50

✅ Registered Options Principal

Question 51

Define ❓ NMS

Answer 51

(National Market System) Security → A security listed on a national exchange (like the NYSE or Nasdaq) and subject to SEC's NMS regulations for fair trading and transparency.

Question 52

Regular Way settlement

Answer 52

Settlement that occurs for equity