S-12 Regulatory Framework and Oversight 2 — Questions and Answers
Question 1: Which of the following is NOT a self-regulatory organization (SRO) in the US securities industry?
- FINRA
- MSRB (Municipal Securities Rulemaking Board)
- CFTC (Correct answer)
- NYSE
Correct answer: CFTC
The CFTC (Commodity Futures Trading Commission) is a federal government agency, not an SRO.
Question 2: The 'pattern day trader' rule requires a minimum account equity of:
- $10,000
- $25,000 (Correct answer)
- $50,000
- $100,000
Correct answer: $25,000
FINRA Rule 4210 requires pattern day traders to maintain at least $25,000 in equity in their margin accounts.
Question 3: Regulation S-P primarily deals with which aspect of broker-dealer compliance?
- Margin requirements
- Privacy of consumer financial information (Correct answer)
- Short sale reporting
- Anti-money laundering procedures
Correct answer: Privacy of consumer financial information
Regulation S-P requires broker-dealers to adopt privacy policies and safeguard nonpublic personal information of customers.
Question 4: Under FINRA rules, a registered representative who becomes subject to a statutory disqualification is:
- Automatically fined $10,000
- Subject to enhanced supervision requirements or potential bar from the industry (Correct answer)
- Required to retake all licensing exams
- Only prohibited from trading equities
Correct answer: Subject to enhanced supervision requirements or potential bar from the industry
A statutory disqualification triggers a FINRA review process that may result in enhanced supervision, a conditional approval, or bar from the industry.
Question 5: What is the maximum period for which a FINRA arbitration award can be appealed to federal court?
- 30 days
- 90 days
- 3 months after the award
- Varies by state law, generally up to 3 months (Correct answer)
Correct answer: Varies by state law, generally up to 3 months
The time limit to vacate a FINRA arbitration award in federal court varies by state law but is generally around 3 months from award delivery.
Question 6: The Bank Secrecy Act (BSA) requires broker-dealers to file a Suspicious Activity Report (SAR) within how many days of detecting a suspicious transaction?
- 15 days
- 30 days (Correct answer)
- 60 days
- 90 days
Correct answer: 30 days
The BSA requires broker-dealers to file a SAR within 30 calendar days of detecting a suspicious transaction or activity.
S-12 Regulatory Framework and Oversight 2
Which of the following is NOT a self-regulatory organization (SRO) in the US securities industry?