Core Knowledge and Fundamentals Flashcards

Under FINRA rules, which entity is primarily responsible for overseeing broker-dealers in the United States?

Answer: FINRA, as a self-regulatory organization

FINRA is the self-regulatory organization (SRO) that oversees broker-dealers and registered representatives in the U.S. securities industry.

What is the primary purpose of the Customer Protection Rule (SEC Rule 15c3-3)?

Answer: To safeguard customer funds and securities held by broker-dealers

Rule 15c3-3 requires broker-dealers to maintain customer funds and fully paid securities separate from firm assets to protect customers if the firm fails.

Which of the following best describes a 'market maker' in FINRA terminology?

Answer: A dealer that stands ready to buy and sell a particular security on a continuous basis

A market maker is a dealer firm that continuously quotes bid and ask prices for a specific security, providing liquidity to the market.

Under FINRA Rule 4512, member firms must maintain customer account records for a minimum of how many years?

Answer: 6 years

FINRA Rule 4512 requires customer account records to be kept for at least six years after the account is closed.

What does the term 'nominal yield' refer to in fixed income securities?

Answer: The coupon rate stated on the face of the bond

Nominal yield is simply the coupon rate printed on the bond certificate, expressed as a percentage of face value.

Which type of order instructs a broker to buy or sell a security immediately at the best available current price?

Answer: Market order

A market order is executed immediately at the best available price without any price restrictions.

FINRA's arbitration process is primarily designed to resolve disputes between which parties?

Answer: Customers and broker-dealers, or between broker-dealers

FINRA arbitration resolves disputes between investors and broker-dealers or between industry participants, offering an alternative to litigation.