Series 99 Regulatory Compliance & Reporting 3 — Questions and Answers
Question 1: Under the Bank Secrecy Act, a Currency Transaction Report (CTR) must be filed for cash transactions exceeding:
- $5,000
- $7,500
- $10,000 (Correct answer)
- $25,000
Correct answer: $10,000
The BSA requires financial institutions to file a CTR for any cash transaction exceeding $10,000 in a single business day.
Question 2: Which SEC rule establishes the Customer Protection Rule requiring broker-dealers to maintain customer funds and securities separately from firm assets?
- Rule 15c3-1
- Rule 15c3-3 (Correct answer)
- Rule 17a-5
- Rule 10b-5
Correct answer: Rule 15c3-3
SEC Rule 15c3-3, the Customer Protection Rule, requires broker-dealers to safeguard customer funds and securities by keeping them separate from the firm's own assets.
Question 3: When must a broker-dealer file an amended Form BD to update registration information?
- Within 15 days of the change (Correct answer)
- Within 30 days of the change
- Annually at renewal
- Only upon regulatory request
Correct answer: Within 15 days of the change
FINRA and SEC rules require broker-dealers to file an amended Form BD within 30 days—but FINRA specifically requires updates within 30 days; however the standard is 30 days for most changes and promptly for certain material changes. The standard answer for most regulatory changes is 30 days.
Question 4: Under FINRA Rule 4370, firms must establish and maintain a Business Continuity Plan (BCP). How often must the BCP be reviewed?
- Monthly
- Quarterly
- Annually (Correct answer)
- Every two years
Correct answer: Annually
FINRA Rule 4370 requires firms to review their BCPs at least annually and update them as necessary to ensure they remain current.
Question 5: A registered representative submits a trade that creates a position violating Regulation T margin requirements. Operations must issue a margin call within:
- Same business day
- 1 business day (Correct answer)
- 3 business days
- 5 business days
Correct answer: 1 business day
When a Regulation T margin call is triggered, the firm must issue the call by the close of the next business day following the trade.
Question 6: Which regulatory body has primary oversight responsibility for enforcing anti-money laundering (AML) rules for broker-dealers?
- SEC only
- FINRA only
- FinCEN only
- Both FinCEN and FINRA (Correct answer)
Correct answer: Both FinCEN and FINRA
AML compliance for broker-dealers is overseen by both FinCEN (which issues the rules under the BSA) and FINRA (which examines for compliance).
Question 7: Under FINRA Rule 2010, which of the following scenarios would most likely constitute a violation of just and equitable principles of trade?
- A firm executing a customer order at NBBO
- A registered rep charging a disclosed commission above average
- A principal approving trades without reviewing them (Correct answer)
- A firm using a third-party clearing agreement
Correct answer: A principal approving trades without reviewing them
A principal who approves trades without actually reviewing them violates just and equitable principles of trade by failing to exercise proper supervisory oversight.
Series 99 Regulatory Compliance & Reporting 3
Under the Bank Secrecy Act, a Currency Transaction Report (CTR) must be filed for cash transactions exceeding: