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Securities Regulations & Compliance Flashcards

6 cards from real Stock Broker 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 Regulations & Compliance flashcards as text

  1. What is the 'know your customer' (KYC) obligation primarily designed to prevent?

    Answer: Money laundering and fraud

    KYC obligations require broker-dealers to verify customer identities and understand their financial profiles primarily to prevent money laundering, fraud, and terrorist financing.

  2. A registered representative who recommends unsuitable investments to a customer may violate which FINRA rule?

    Answer: FINRA Rule 2111

    FINRA Rule 2111 (Suitability) requires that recommendations be suitable for the customer based on their investment profile, including risk tolerance and financial situation.

  3. What does 'churning' refer to in the context of broker-dealer regulations?

    Answer: Excessive trading in a customer account to generate commissions

    Churning is the prohibited practice of excessively trading in a customer's account primarily to generate commissions for the broker, regardless of the customer's investment objectives.

  4. Under FINRA rules, what is the maximum annual contribution an employee of a member firm may give to a municipal securities issuer official who can influence the firm's business?

    Answer: $250

    MSRB Rule G-37 and FINRA's pay-to-play rules limit contributions to $250 per official per year by individuals who can vote in elections where the official appears.

  5. Which act requires broker-dealers to file Suspicious Activity Reports (SARs) for transactions that may involve money laundering?

    Answer: Bank Secrecy Act

    The Bank Secrecy Act (BSA) requires broker-dealers to file SARs for transactions of $5,000 or more that involve potential money laundering or other financial crimes.

  6. What is the purpose of FINRA's arbitration forum for disputes between customers and broker-dealers?

    Answer: To provide an alternative to court litigation for resolving disputes

    FINRA's arbitration forum provides a faster, less expensive alternative to civil court litigation for resolving disputes between investors and broker-dealers or their registered representatives.

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Sources & references

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  1. finra.org — Test delivery, eligibility, fees, exam format, passing score, score release, score validity, test dates, retake policy, renewal · verified Oct 2026