Securities Regulations & Compliance Flashcards

Under the Securities Exchange Act of 1934, what is the primary regulatory body overseeing broker-dealers in the US?

Answer: SEC

The SEC (Securities and Exchange Commission) is the primary federal regulator overseeing broker-dealers under the Securities Exchange Act of 1934.

Which rule requires broker-dealers to maintain records of all customer transactions for at least 3 years?

Answer: Rule 17a-3

SEC Rule 17a-3 mandates that broker-dealers maintain records of customer transactions, orders, and account information for a minimum of 3 years.

What is the minimum net capital requirement concept that prevents broker-dealers from operating with excessive debt relative to assets?

Answer: Net capital rule

The net capital rule (SEC Rule 15c3-1) limits the amount of debt a broker-dealer may incur relative to its liquid assets.

A broker-dealer that holds customer securities and cash must comply with which rule regarding segregation of customer assets?

Answer: Rule 15c3-3

SEC Rule 15c3-3 (the Customer Protection Rule) requires broker-dealers to segregate customer cash and securities from the firm's own assets.

FINRA Rule 4370 requires member firms to maintain written business continuity plans addressing which scenario?

Answer: Significant business disruptions

FINRA Rule 4370 requires all member firms to have written Business Continuity Plans (BCPs) that address how the firm will operate during significant business disruptions.

Under Regulation Best Interest (Reg BI), broker-dealers must act in the best interest of which party when making a securities recommendation?

Answer: The retail customer

Reg BI requires broker-dealers to act in the best interest of the retail customer at the time a recommendation is made, prioritizing the customer over the firm's interests.