UNIT 10 CHECKPOINT EXAM Flashcards
Bob’s Discount Brokerage has applied for FINRA membership and was denied. Bob wants to appeal this decision. The first appeal goes to
A) the courts.
B) the NAC.
C) the SEC.
D) the DOE.
B) the NAC.
Explanation
Appeals on FINRA decisions first go to an internal group called the National Adjudicatory Council. NAC decisions may be appealed up to the SEC, and then the courts.
Louise Ripley is a customer of Seacoast Securities, Inc., a FINRA member firm. While she was away on a long trip, several limit and stop orders were executed. She believes that these orders were not executed properly and cost a significant loss. She has requested that Seacoast make financial amends. Seacoast maintains that it performed correctly and as instructed by Louise. An arbitration panel found Seacoast at fault in one instance and awarded Louise $2,000. Seacoast maintains they did nothing incorrectly. How long does the firm have to file an appeal?
A) 30 days
B) There is no appeal in an arbitration hearing
C) 90 days
D) 60 days
B) There is no appeal in an arbitration hearing
Explanation
There is no appeal to an arbitration award. Such awards must be paid within 30 days.
The authorities delegated to FINRA by the SEC include all of these except
A) establishing initial margin requirements.
B) establishing membership requirements.
C) establishing testing and standards for associates of broker-dealers.
D) investigating complaints.
A) establishing initial margin requirements.
Explanation
The initial margin requirement is set by the Federal Reserve under Regulation T. FINRA creates and administers securities licensing requirements (e.g., the SIE), sets its own membership requirements, and may investigate complaints from customers.
An exchange has some degree of regulatory authority over all of the following except
A) dealers in the third market.
B) floor traders.
C) exchange members.
D) designated market makers.
A) dealers in the third market.
Explanation
Firms that make a market, in listed stocks in the OTC market, are under FINRA oversight. Those who do transactions on the floor are under the exchanges regulations.
Investigations and hearings into alleged violations of FINRA’s Code of Procedure are performed by
A) the Arbitration Panel.
B) the National Adjudicatory Council.
C) the Department of Enforcement.
D) the Division of Engagement.
C) the Department of Enforcement.
Explanation
This is the job of the Department of Enforcement (DOE). DOE decisions may be appealed to the NAC. Code of Procedure violations do not go to the arbitration panel. There is no Division of Engagement.
FINRA is the primary regulator in the United States for
I. broker-dealers
II. registered representatives
III. bankers
IV. the SEC
A) I and IV
B) I and II
C) II and III
D) I and III
B) I and II
I. broker-dealers
II. registered representatives
Explanation
FINRA oversees broker-dealers and their associated persons, like registered representatives. FINRA’s authority is delegated from the SEC, and they do not regulate banks, though they do regulate broker-dealers that are owned by banks. Investment banking activities performed by broker-dealers do fall under FINRA’s jurisdiction.
All of these are rules set down by an exchange except
A) order priority.
B) capital requirements for members.
C) revoking a corporate charter.
D) listing and delisting of a security.
C) revoking a corporate charter.
Explanation
A corporate charter is granted by a government entity, usually the state. An exchange can not revoke it. However, a firm whose corporate charter has been revoked will likely see a delisting shortly thereafter.
In which circumstances may a FINRA member firm conduct securities business with a nonmember broker-dealer?
A) If the nonmember broker-dealer is a foreign firm and properly registered in their home jurisdiction
B) If the broker-dealer is temporarily suspended and any transaction is related to ongoing business
C) If the broker-dealer is a Canadian firm without regard to registration
D) Under no circumstances
A) If the nonmember broker-dealer is a foreign firm and properly registered in their home jurisdiction
Explanation
The properly registered foreign member exception is one of the few exceptions to the rule. A suspended member is also treated as a nonmember.
All of these enforce MSRB rules except
A) the Federal Reserve Board.
B) FINRA.
C) the MSRB Enforcement Department.
D) the Securities Exchange Commission.
C) the MSRB Enforcement Department.
Explanation
MSRB has no enforcement department. FINRA and the SEC enforce MSRB rules for broker-dealers, and the Fed and the Office of the comptroller do so for banks.
MSRB rules apply to all of the following except
A) municipal dealers.
B) FINRA member firms performing trades with municipal bonds.
C) municipalities.
D) investment bankers.
C) municipalities.
Explanation
The MSRB has no authority over municipal governments. They do make rules for underwriters (investment bankers) bringing municipal bonds to market, and municipal bond trading for both dealers and brokers acting on a customer’s behalf.
