FINRA Quality Assurance and Improvement 3

Question 1

Which of the following is a key component of a risk-based supervisory approach endorsed by FINRA?

Accepted Answer

Allocating greater supervisory attention to higher-risk activities, accounts, and personnel

Answer

A risk-based approach concentrates supervisory resources where risk is greatest, allowing firms to more efficiently prevent and detect violations.

Question 2

A firm's quality assurance review finds that a branch manager has been approving his own trades without independent supervisory review. Under FINRA rules, this situation violates which principle?

Accepted Answer

The prohibition against self-supervision of producing branch managers

Answer

FINRA rules prohibit producing branch managers from supervising their own activities; an independent supervisor must review a producing manager's trades and business practices.

Question 3

What does FINRA's concept of 'supervisory control system' require firms to establish?

Accepted Answer

Policies and procedures to supervise the activities of supervisors and test the effectiveness of supervisory procedures

Answer

A supervisory control system requires firms to establish procedures that test and verify their supervisory systems are functioning as intended, including oversight of supervisors themselves.

Question 4

Under FINRA Rule 3120, who is responsible for certifying the firm's supervisory control system annually?

Accepted Answer

A senior officer of the firm (CEO or equivalent)

Answer

FINRA Rule 3120 requires a senior officer of the firm, typically the CEO, to annually certify that the firm has in place a reasonably designed supervisory control system.

Question 5

A quality assurance review reveals that customer suitability reviews are not being documented at the point of sale. Which corrective action aligns BEST with FINRA's expectations?

Accepted Answer

Implement a system requiring real-time documentation and train staff on proper procedures

Answer

FINRA expects firms to implement prospective controls—such as systems requiring real-time documentation and staff training—to ensure ongoing compliance with suitability requirements.

(FINRA) FINRA Exams Practice Test

(FINRA) FINRA Exams Practice Test

FINRA Quality Assurance and Improvement 3