Free S-12 Code of Ethics Questions and Answers

Question 1

What is the primary function of a Self-Regulatory Organization (SRO) in the securities industry?

Accepted Answer

To regulate the activities of its members to ensure compliance with securities laws

Answer

To issue bonds and securities to raise capital

Answer

To act as a government agency overseeing stock exchanges

Answer

To provide legal advice to public companies

Question 2

Which of the following is an example of a Self-Regulatory Organization?

Accepted Answer

FINRA (Financial Industry Regulatory Authority)

Answer

Federal Reserve

Answer

U.S. Department of Justice

Answer

Securities and Exchange Commission (SEC)

Question 3

What role does FINRA play in regulating broker-dealers?

Accepted Answer

It develops and enforces rules governing securities transactions

Answer

It enforces federal securities laws and handles criminal investigations

Answer

It issues initial public offerings (IPOs)

Answer

It sets interest rates for securities

Question 4

Which of the following is NOT a function of an SRO?

Accepted Answer

Setting monetary policy for the financial industry

Answer

Establishing rules for fair and ethical trading practices

Answer

Conducting investigations into potential violations of securities laws

Answer

Administering exams for individuals working in the securities industry

Question 5

Which of the following best describes the relationship between the SEC and SROs?

Accepted Answer

The SEC oversees and approves the rules set by SROs

Answer

The SEC operates directly as the regulatory body for financial markets

Answer

SROs independently regulate financial markets without SEC oversight

Answer

The SEC provides funding to SROs