Regulatory Framework Flashcards

Which self-regulatory organization (SRO) has primary responsibility for overseeing broker-dealers in the United States?

Answer: FINRA

FINRA (Financial Industry Regulatory Authority) is the primary SRO responsible for regulating broker-dealers under SEC oversight.

A broker-dealer that holds customer securities and cash is considered a:

Answer: Carrying firm

A carrying firm (also called a clearing firm) maintains custody of customer assets and handles settlement of trades.

Under Regulation T, the Federal Reserve Board sets the initial margin requirement for purchasing equity securities at:

Answer: 50%

Regulation T requires investors to deposit at least 50% of the purchase price of marginable securities at the time of purchase.

The USA PATRIOT Act requires broker-dealers to implement a Customer Identification Program (CIP) primarily to:

Answer: Combat money laundering and terrorism financing

The CIP requirement of the USA PATRIOT Act mandates identity verification of customers to prevent money laundering and terrorism financing.

Which agency has jurisdiction over futures contracts on agricultural commodities?

Answer: CFTC

The Commodity Futures Trading Commission (CFTC) regulates futures and options on commodities, including agricultural products.

A registered representative who moves from one broker-dealer to another must:

Answer: Transfer registration via FINRA's CRD system

Registered representatives transfer their FINRA registrations through the Central Registration Depository (CRD) when changing firms.

Which of the following is NOT a function of the Securities Investor Protection Corporation (SIPC)?

Answer: Insuring against investment losses from market declines

SIPC protects customers when a broker-dealer fails, but it does not protect against investment losses due to market fluctuations.