Securities Licensing Test Flashcards
6 cards from real Investment practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Securities Licensing Test flashcards as text
Which organization regulates futures and commodity trading in the United States?
Answer: CFTC
The Commodity Futures Trading Commission (CFTC) is the federal agency that regulates futures and options markets in the United States.
To trade futures contracts professionally, which license is typically required?
Answer: Series 3
The Series 3 (National Commodity Futures Examination) is required for individuals who solicit or accept orders for commodity futures contracts.
What is the purpose of the 'know your customer' (KYC) rule in securities regulation?
Answer: To ensure representatives understand client financial situations before making recommendations
KYC requires securities professionals to gather sufficient information about a client's financial situation and investment objectives to make suitable recommendations.
Under SEC rules, which form must be provided to retail investors by investment advisers to disclose services, fees, and conflicts?
Answer: Form ADV Part 2
Form ADV Part 2 (the 'brochure') must be delivered to clients and discloses an adviser's services, fees, strategies, and conflicts of interest.
What is a 'churning' violation in securities regulation?
Answer: Excessive trading in a client's account to generate commissions
Churning refers to the illegal practice of a broker executing excessive trades in a client's account primarily to generate commissions rather than to serve the client's interests.
Which act governs the registration of securities offerings and requires a prospectus for new issues?
Answer: Securities Act of 1933
The Securities Act of 1933 governs the primary market for new securities issuances and requires issuers to provide investors with a prospectus.