FREE S-12 Code of Ethics Questions and Answers

To issue bonds and securities to raise capital

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

To act as a government agency overseeing stock exchanges

To provide legal advice to public companies

Correct! Wrong!

SROs ensure that their members comply with federal securities laws and regulations, but they are not government entities.

Federal Reserve

FINRA (Financial Industry Regulatory Authority)

U.S. Department of Justice

Securities and Exchange Commission (SEC)

Correct! Wrong!

FINRA is a non-governmental organization that regulates broker-dealers and other members of the securities industry.

It enforces federal securities laws and handles criminal investigations

It develops and enforces rules governing securities transactions

It issues initial public offerings (IPOs)

It sets interest rates for securities

Correct! Wrong!

FINRA ensures that broker-dealers adhere to rules designed to protect investors and maintain fair markets.

Establishing rules for fair and ethical trading practices

Conducting investigations into potential violations of securities laws

Setting monetary policy for the financial industry

Administering exams for individuals working in the securities industry

Correct! Wrong!

SROs do not control monetary policy; that is the role of central banks, such as the Federal Reserve.

The SEC oversees and approves the rules set by SROs

The SEC operates directly as the regulatory body for financial markets

SROs independently regulate financial markets without SEC oversight

The SEC provides funding to SROs

Correct! Wrong!

While SROs have regulatory authority, the SEC provides oversight to ensure that SRO rules are consistent with federal securities laws.