Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Investments (securities) > Unit 9 > Flashcards

Unit 9 Flashcards

You may prefer our related Brainscape-certified flashcards:
SIE Exam flashcards
1
Q

What is the Securities and Exchange Commission (SEC)?

A

Created under the Securities Exchange Act of 1934, the Securities and Exchange Commission (SEC) is the securities industry’s primary regulatory body. BDs that transact securities business with customers or with other BDs must apply and receive registration from the SEC.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the role of Securities and Exchange Commission (SEC)?

A

regulates all exchanges and trading markets. The SEC also has regulatory authority over licensing of securities representatives, a role it has delegated to FINRA.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Some additional areas that fall under the 1934 SEC act

A

■ regulation of insider transactions, short sales, and proxies;
■regulation of client accounts;
■a customer protection rule;
■a net capital rule and financial responsibility for broker-dealers;
■and reporting requirements for issuers (e.g., annual reports).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is considered as misrepresentation as it relates to the BD and SEC act?

A

Although a BD must register with the SEC, the BD may not claim that this registration in anyway implies that the SEC has passed upon or approved the BD’s financial standing, business, or conduct.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the various branches of the US treasury?

A

Financial Crimes Enforcement Network (FinCEN)
Internal Revenue Service (IRS)
Office of the Comptroller of the Currency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is a BD subjected to if they do not comply with SEC rules?

A

■ censure;
■ limits on activities, functions, or operations;
■ suspension of its registration (or one of its associated person’s license to do business);
■ revocation of registration; and/or a fine.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the role of Financial Crimes Enforcement Network (FinCEN)?

A

is to safeguard the financial system from illicit use, to combat money laundering, and to promote national security through the collection, analysis, and dissemination of financial intelligence.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What/Who is the Internal Revenue Service (IRS) ?

A

is the primary tax enforcement agency of the federal government

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the role of the Internal Revenue Service (IRS)?

A

they have significant power to investigate potential tax evasion. As part of licensing, most financial services companies (including BDs) are required to provide the IRS with customer and firm information on demand.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Describe the Office of the Comptroller of the Currency

A

supervises nearly 1,400 national banks, federal savings associations, and federal branches and agencies of foreign banks operating in the United States

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the role of Office of the Comptroller of the Currency?

A

is to ensure that national banks and federal savings associations operate in a safe and sound manner, provide fair access to financial services, treat customers fairly, and comply with applicable laws and regulations. Also serves as a director of the Federal Deposit Insurance Corporation and member of the Financial Stability Oversight Council and the Federal Financial Institutions Examination Council.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What’s the Securities Investor Protection Act of 1970 (SIPA) Purpose?

A

Covers the protection thresholds for customers in the event of a BD’s bankruptcy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What’s the The USA PATRIOT Act (Partially based on the Bank Secrecy Act of 1970) Purpose?

A

Covers anti-money laundering (AML) policies and procedures that must be followed by financial firms

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q 
The Federal Reserve Board was established by 
A. the Securities Act of 1933. 
B. the Uniform Securities Act. 
C. the Federal Reserve Act of 1913. 
D. the Trust Indenture Act.
A

C

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What’s the Insider Trading and Securities Fraud Enforcement Act of 1988 Purpose?

A

Defines penalties for the misuse of material, nonpublic information by both firms and individuals

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q 
The FDIC insures customer assets held at 
A. banks. 
B. broker-dealers. 
C. depositary trusts. 
D. investment advisers
A

A

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q 
In order to register a broker-dealer firm to do business in a state, you would register with 
A. the SEC. 
B. the administrator. 
C. NASAA. 
D. FINRA.
A

B

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What’s the Securities Exchange Act of 1934 Purpose?

A

Governs trading markets for existing securities and registration requirements of BDs, BD employees, and exchanges

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

The SEC has the power to do all of the following except
A. revoke a registration.
B. arrest those in violation of the regulations.
C. impose fines.
D. limit a firm’s activity.

A

B

20
Q 
The SEC is the primary federal securities industry regulator in the United States. It was created by 
A. the Securities Act of 1933. 
B. the Securities Exchange Act of 1934. 
C. the Investment Advisers Act of 1940. 
D. the Uniform Securities Act.
A

B

21
Q

What’s the Investment Company Act of 1940 Purpose?

A

Governs the regulation of packaged products such as mutual funds, closed-end funds, and unit investment trusts

22
Q

Financial activities and large cash transactions are reported to which of the following federal agencies? A. SEC B. OCC C. Federal Reserve D. FinCEN

A

D

23
Q

What is North American Securities Administrators Association?

A

represents state and provincial securities regulators in the United States, Canada, and Mexico. NASAA has no specific regulatory authority, but it is still a major force in state securities regulations

24
Q

What’s the Investment Advisers Act of 1940 Purpose?

A

Governs the regulation of firms that earn fees for providing investment advice

25
Q

What is the role of North American Securities Administrators Association?

A

The association often produces guidelines that the state administrators use in the enforcement of state regulations. Note that NASAA also has members that are the equivalent to state administrators from Canada and Mexico.

26
Q

Describe the Federal Reserve Board (FRB)

A

The Federal Reserve Act of 1913 established the Federal Reserve System as the central bank of the United States to provide the nation with a safer, more flexible, and more stable monetary and financial system.

27
Q

What’s the Securities Act of 1933 Purpose?

A

Governs the new issuance (primary) market, which involves the money-raising activities of issuers

Requires issuers to register their securities when selling to the public

28
Q

What does the Federal Reserve Act of 1913 entail?

A

The law sets out the purposes, structure, and functions of the system, as well as outlines aspects of its operations and accountability.

29
Q

Describe the Securities Investors Protection Corporation (SIPC)

A

created under the Securities Investor Protection Act of 1970. The corporation is a nonprofit membership organization. SIPC members pay assessments into a general insurance fund that is used to meet customer claims in the event of a BD bankruptcy.

30
Q

All BDs registered with the SEC must be SIPC members except

A

■ banks that deal exclusively in municipal securities
■ firms that deal exclusively in U.S. government securities; and
■ firms that deal exclusively in redeemable investment company securities.

31
Q

If SIPC determines that the member has failed or is in imminent danger of failing, it may

A

petition a federal court to take action by appointing a trustee to liquidate the firm and protect its customers. A customer can be broadly defined as anyone who has cash or securities in the possession of a BD.

32
Q

What is the role of Federal Reserve Board (FRB)?

A

determines monetary policy and takes actions to implement its policies

33
Q

What is the basic coverage under SIPC ?

A

is no more than $500,000 per separate account, not per separate customer. Of that $500,000 total, SIPC covers no more than $250,000 in cash.

34
Q

How is SIPC Coverage determined?

A

Cash and margin accounts for the same customer are combined. However, only the equity in a margin account is covered, not the full market value.

35
Q

If a BD fails, any customer with claims in excess of SIPC coverage limits becomes a __________________ for the uncovered amount.

A

general creditor of the BD

It should also be noted here that commodities and commodities futures contracts are not covered by SIPC, nor are futures contracts or losses related to currencies, because they are not considered securities.

36
Q

True or False
Regarding disclosures, BDs must include their SIPC membership on all advertising but may not imply that SIPC coverage is more than it actually is or that its benefits are unique to only that BD

A

True

37
Q

What is the The Uniform Securities Act (1956)?

A

is a template for state securities laws. The federal government requests that the states adopt the template in order to create uniform securities laws at the state level

38
Q

How is the state administrators selected?

A

whether by appointment or election, is left to the states

39
Q

What is the role of state administrators?

A

have significant authority within their states regarding the registration of securities, broker-dealers, investment advisers, and representatives.

40
Q

When was the Federal Deposit Insurance Corporation (FDIC) created and why?

A

Created during the Great Depression of the 1930s in response to widespread bank failures and massive losses to bank customers

41
Q

Describe the difference between FIDC and SIPC?

A

The FDIC ownership categories are per owner per account (a joint account with two owners would be covered up to $250,000 per owner). The SIPC covers per separate account. Each account, no matter how many people are on the account, is covered up to the $500,000. However, accounts with differing registrations, say an individual account, a joint account, and an IRA, would each be covered up to $500,000, even though the same person owns all three accounts.

42
Q

What is the Federal Deposit Insurance Corporation (FDIC) ?

A

is an independent agency of the U.S. federal government that preserves public confidence in the banking system by insuring deposits.

43
Q

Gabriel Jones has $200,000 deposited with an FDIC member bank. Gabriel and Lisa Jones have $450,000 deposited in a joint account at the same bank. Titled differently, each of these accounts is recognized as a separate account and each is entitled to FDIC insurance. If the bank were to fail

A

Gabriel’s individual account would be covered in full, and the Jones’s joint account would be covered up to $450,000 ($225,000 for Gabe and $225,000 for Lisa).

44
Q

What types of bank deposit accounts do the FDIC cover?

A

checking and savings accounts, money market deposit accounts and certificates of deposit (CDs), and self-directed IRA accounts.

45
Q

How are the funds provided for Federal Deposit Insurance Corporation ?

A

The funds for the agency are provided in the same way as the funds for a private insurance company; premiums are paid by all participating institutions.

46
Q

What type of investment products does the FDIC cover?

A

Investment products that are not deposits, such as mutual funds, annuities, life insurance policies, and stocks and bonds, are not covered by FDIC deposit insurance.

47
Q

Describe the FDIC deposit insurance

A

guaranteeing the safety of a depositor’s accounts in member banks up to $250,000 for each deposit ownership category in each insured bank.

Investments (securities) (15 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions