Regulatory Framework and Oversight Flashcards

Which US federal agency has primary regulatory authority over securities markets and broker-dealers?

Answer: The SEC (Securities and Exchange Commission)

The SEC is the primary federal regulator of US securities markets and broker-dealers under the Securities Exchange Act of 1934.

What is the purpose of the Securities Exchange Act of 1934?

Answer: To regulate securities trading in secondary markets and broker-dealers

The Securities Exchange Act of 1934 regulates secondary market trading and established the SEC to oversee broker-dealers and exchanges.

FINRA is best described as:

Answer: A self-regulatory organization (SRO) that oversees broker-dealers

FINRA is a self-regulatory organization authorized by Congress to oversee broker-dealers and registered representatives in the US.

Under Regulation Best Interest (Reg BI), broker-dealers must act in whose best interest when making a recommendation?

Answer: The retail customer

Reg BI requires broker-dealers to act in the best interest of the retail customer when making a securities recommendation.

Which legislation created the framework for regulating investment advisers in the United States?

Answer: The Investment Advisers Act of 1940

The Investment Advisers Act of 1940 established the regulatory framework for investment advisers and their registration requirements.

What is the primary purpose of the Securities Investor Protection Corporation (SIPC)?

Answer: To protect customers if a brokerage firm fails financially

SIPC protects customers of failed brokerage firms by covering missing cash and securities up to $500,000, including $250,000 for cash.