Series 99 Regulatory Compliance & Reporting — Questions and Answers
Question 1: What is the role of FINRA?
- Print checks
- Regulate broker-dealers (Correct answer)
- Audit schools
- Issue credit cards
Correct answer: Regulate broker-dealers
FINRA, the Financial Industry Regulatory Authority, is a self-regulatory organization (SRO) that oversees the U.S. brokerage industry. Its primary role is to protect investors by ensuring that the securities industry operates fairly and honestly. FINRA achieves this by writing and enforcing rules governing broker-dealers, examining firms for compliance, and disciplining those who violate rules.
Question 2: Why submit regulatory reports?
- Ensure compliance (Correct answer)
- Advertise services
- Create newsletters
- Notify media
Correct answer: Ensure compliance
Submitting regulatory reports is a critical function for financial firms to demonstrate adherence to laws, rules, and regulations set by bodies like FINRA and the SEC. These reports provide transparency into a firm's operations, financial health, and customer interactions, allowing regulators to monitor for potential misconduct or systemic risks. Failing to submit accurate and timely reports can result in significant penalties and reputational damage.
Question 3: What is a SAR?
- Stock Alert Report
- Service Agreement Record
- Suspicious activity report (Correct answer)
- Sales Adjustment Record
Correct answer: Suspicious activity report
A SAR, or Suspicious Activity Report, is a document that financial institutions are required to file with the Financial Crimes Enforcement Network (FinCEN) when they suspect a transaction or series of transactions may involve money laundering, terrorist financing, or other illicit activities. Filing SARs is a crucial component of anti-money laundering (AML) efforts, helping law enforcement detect and prevent financial crimes.
Question 4: Who must sign off on filings?
- Janitor
- Firm principal (Correct answer)
- Intern
- Investor
Correct answer: Firm principal
A firm principal is a qualified individual within a broker-dealer who holds a specific supervisory registration with FINRA. They are responsible for overseeing the firm's operations, ensuring compliance with securities regulations, and approving various activities, including regulatory filings. Their signature signifies that the filing has been reviewed and approved by a responsible party within the firm.
Question 5: What is the 10-K form?
- Weekly plan
- Internal memo
- Annual report (Correct answer)
- Sales script
Correct answer: Annual report
The 10-K form is an annual report required by the U.S. Securities and Exchange Commission (SEC) that public companies must file. It provides a comprehensive summary of a company's financial performance, including its business operations, financial statements, market risks, and legal proceedings. This detailed report offers investors and the public a thorough look into the company's health and activities over the past year.
Question 6: What helps meet deadlines?
- Marketing plan
- Compliance calendar (Correct answer)
- Employee handbook
- Meeting notes
Correct answer: Compliance calendar
A compliance calendar is an essential tool for financial firms to manage and track their numerous regulatory obligations and deadlines. It outlines all required filings, reports, reviews, and training sessions, ensuring that the firm meets its commitments on time. This proactive approach helps prevent missed deadlines, avoids penalties, and maintains a strong regulatory standing.
Question 7: What is included in AML procedures?
- Loan policies
- Anti-laundering steps (Correct answer)
- Recruiting rules
- Trading strategies
Correct answer: Anti-laundering steps
Anti-Money Laundering (AML) procedures are a set of internal controls and processes that financial institutions implement to detect and prevent money laundering and terrorist financing activities. These steps typically include customer identification programs (CIP), suspicious activity monitoring, and reporting suspicious transactions to authorities. Robust AML procedures are legally mandated and critical for maintaining the integrity of the financial system.
Question 8: Why track communication?
- Customer fun
- Supervision compliance (Correct answer)
- Shorten emails
- Promote products
Correct answer: Supervision compliance
Tracking communication, including emails, instant messages, and phone calls, is a regulatory requirement for broker-dealers to ensure supervision compliance. Regulators mandate that firms retain records of communications to monitor for potential misconduct, misrepresentations, or unauthorized trading activities. This practice helps protect investors and ensures that employees adhere to ethical standards and firm policies.
Question 9: Which agency handles securities fraud?
- FCC
- SEC (Correct answer)
- FDIC
- CIA
Correct answer: SEC
The Securities and Exchange Commission (SEC) is a U.S. federal government agency responsible for protecting investors, maintaining fair and orderly functioning of securities markets, and facilitating capital formation. A key part of its mission involves investigating and prosecuting cases of securities fraud, such as insider trading, Ponzi schemes, and misrepresentation of financial information. The SEC works to ensure transparency and integrity in the financial markets.
Series 99 Regulatory Compliance & Reporting
What is the role of FINRA?