S-12 Regulatory Framework and Oversight 1

Question 1

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

Accepted Answer

The SEC (Securities and Exchange Commission)

Answer

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

Question 2

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

Accepted Answer

To regulate securities trading in secondary markets and broker-dealers

Answer

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

Question 3

FINRA is best described as:

Accepted Answer

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

Answer

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

Question 4

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

Accepted Answer

The retail customer

Answer

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

Question 5

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

Accepted Answer

The Investment Advisers Act of 1940

Answer

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

S-12 Test Practice Test