Unit 9 - The Government Regulators Flashcards

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1
Q

This act was created under the Securities Exchange Act of 1934. It 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 this. It regulates all exchanges and trading markets. It has regulatory authority over licensing of securities representatives, a role that has been delegated to FINRA.

A

Securities and Exchange Commission (SEC)

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2
Q

What is a BD subject to if they do not comply with rules from the SEC?

A
  1. Censure
  2. Limits on activities, functions or operations
  3. Suspension of its registration
  4. Revocation of registration
  5. A fine
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3
Q

This act is concerned with secondary markets. It is designed to provide a fair market place for all investors. It was written in conjunction with the Securities Act of 1933.

A

Securities Exchange Act of 1934

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4
Q

What falls under the 1934 act?

A
  1. Regulation of insider transactions, short sales and proxies
  2. Regulation of client accounts
  3. A customer protection rule
  4. A net capital rule and financial responsibility for broker-dealers
  5. Reporting requirements for issuers
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5
Q

True or False: 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 BDs financial standing, business or conduct.

A

True

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6
Q

The mission of this network if 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.

A

Financial Crimes Enforcement Network (FinCEN)

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7
Q

This is the primary tax enforcement agency of the federal government. It has significant power to investigate potential tax evasion. It does not make the law, but its enforcement of the law is seen as a vital national interest.

A

The IRS

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8
Q

This supervises nearly 1,400 national banks, federal savings associations, and federal branches and agencies of foreign banks operating in the US. It ensures 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 law and regulations. It serves as a direction of the Federal Deposit Insurance Corporation and member of the Financial Stability Oversight Council and the Federal Financial Institutions Examination Council.

A

The Comptroller

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9
Q

Which Act is this?

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

A

Securities Act of 1933

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10
Q

Which Act is this?

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

A

Securities Exchange Act of 1934

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11
Q

Which Act is this?

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

A

Investment Company Act of 1940

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12
Q

Which Act is this?

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

A

Investment Advisers Act of 1940

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13
Q

Which Act is this?

Covers the protection thresholds for customers in the event of a BDs bankruptcy

A

Securities Investor Protection Act of 1970 (SIPA)

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14
Q

Which Act is this?

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

A

Insider Trading and Securities Fraud Enforcement Act of 1988

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15
Q

Which Act is this?

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

A

The USA Patriot Act

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16
Q

This Act established the Federal Reserve System as the central bank of the US to provide the nation with a safe, more flexible and more stable monetary and financial system.

A

Federal Reserve Act of 1913.

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17
Q

This consists of 12 regional Federal Reserve Banks and hundreds of national and state banks that belong to the system. It determines monetary policy and takes action to implement its policies. It determines how much money is available for businesses and consumers to spend.

A

Federal Reserve Board (FRB)

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18
Q

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

A

Securities Investor Protection Corporation (SIPC)

19
Q

All BDs registered with the SEC must be SIPC members except

A
  1. Banks that deal exclusively in municipal securities
  2. Firms that deal exclusively in the US government securities
  3. Firms that deal exclusively in redeemable investment company securities
20
Q

For SIPC, a customer is defined as

A

Anyone who has cash or securities in the possession of a BD.

21
Q

Once a trustee is appointed in a SIPC, the member firms is

A

Prohibited from engaging in business as a BD. It is prohibited from attempting to conceal assets, file false statements, or alter securities records to defraud the trustee or SIPC.

22
Q

The basic coverage under SIPC is no more than

A

$500,000 per separate account, not per separate customer.

23
Q

Of the basic coverage under SIPC, of the $500,000, SIPC covers no more than ____ in cash.

A

$250,000 in cash

24
Q

Separate capacity is determined by

A

How an account is titled to determine if it represents a separate account for SIPC.

25
Q

___ and ____ accounts for the same customer are combined or the purposes of determining SIPC coverage

A

Cash and margin

26
Q

Only the ____ in margin account is covered, not the full market value for SIPC.

A

Equity

27
Q

____ and _____ ____ contracts are not covers by SIPC.

A

Commodities and commodities futures

28
Q

BDs must include their ____ _____ on all advertising by may not imply that SIPC coverage is more than it actually is or that it benefits are unique to only that BD.

A

SIPC membership

29
Q

SIPC more not appear ____ than the firms own name on a disclosure.

A

Larger

30
Q

All member firms must ___ __ ____ on their premises that indicates SIPC membership.

A

Post a sign

31
Q

SIPC members must provide ___ ___ to customers that they may obtain information about SIPC, including the SIPC brochure.

A

Written disclosure

32
Q

When does the SIPC disclosure need to be made to new customers?

A

At the time an account is opened and to all customers at least once per year.

33
Q

Creating during the Great Depression of the 1930s, this act was created. It is an independent agency of the US federal government that preserves public confidence in the banking system by insuring deposits. 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.

A

Federal Deposit Insurance Corporation (FDIC)

34
Q

This provides deposit insurance guaranteeing the safety of a depositors accounts in member banks up to $250,000 for each deposit ownership category in each insured bank.

A

FDIC

35
Q

The FDIC covers the traditional types of bank deposit accounts including

A

Checking and Savings accounts, money market deposit accounts and certificates of deposits (CD) and self directed IRA accounts.

36
Q

FDIC does not cover deposits such as

A

Mutual funds, annuities, life insurance policies and stocks and bonds

37
Q

FDIC ownership categories are

A

Per owner per account

38
Q

SIPC coves

A

Per separate account

39
Q

This Act is a template for state securities laws. The states adopt the template in order to create uniform securities laws at the state level. All states have adopted this Act.

A

The Uniform Securities Act of 1956

40
Q

What is a provision of the USA?

A

Each state have a state securities administrator

41
Q

Who chooses the securities administrator?

A

The state

42
Q

What do administrators have authority over?

A

Registration of securities, broker-dealers, investment advisers and representatives.

43
Q

This association represents state and provincial securities regulators in the US, Canada and Mexico. It has no specific regulatory authority. It often produces guidelines that the state administrators use in the enforcement of state regulations. It has members that are the equivalent to state administrators from Canada and Mexico

A

The North American Securities Administrators Association (NASAA)