Securities Regulations & Compliance Flashcards

A broker-dealer must file a Form U4 with FINRA when a registered representative does which of the following?

Answer: Is subject to a customer complaint or regulatory action

Form U4 must be updated to disclose material events including customer complaints, regulatory actions, criminal charges, and other reportable events involving a registered representative.

Under SEC Regulation S-P, broker-dealers must provide customers with privacy notices describing how the firm handles which type of information?

Answer: Non-public personal information

Reg S-P requires broker-dealers to provide customers with clear privacy notices explaining how the firm collects, uses, and shares non-public personal information (NPI).

What is the purpose of FINRA Rule 3110, which requires member firms to establish supervisory systems?

Answer: To detect and prevent violations of securities laws and firm policies

FINRA Rule 3110 requires member firms to establish and maintain a supervisory system designed to ensure compliance with applicable securities laws, regulations, and FINRA rules.

Which regulation governs the extension of credit by broker-dealers to customers purchasing securities on margin?

Answer: Regulation T

Regulation T, issued by the Federal Reserve, governs how much credit broker-dealers may extend to customers for purchasing securities, setting the initial margin requirement.

A broker who front-runs a large customer order by trading for his own account first is violating which prohibition?

Answer: Front-running prohibition under FINRA Rule 5270

FINRA Rule 5270 prohibits member firms from trading for their own account ahead of a customer block order to take advantage of the anticipated price movement.

Under FINRA Rule 2010, members must observe 'high standards of commercial honor and just and equitable principles of trade,' which is also known as what?

Answer: The just-and-equitable rule or standards of commercial honor

FINRA Rule 2010 is the foundational ethical conduct rule requiring members to observe high standards of commercial honor and just and equitable principles of trade in all dealings.