Stock Jobs Stock Market Regulations and Compliance 2

Question 1

What is the 'Pattern Day Trader' rule?

Accepted Answer

A FINRA rule requiring $25,000 minimum equity for accounts making 4+ day trades in 5 days

Answer

FINRA's Pattern Day Trader rule requires anyone who executes 4 or more day trades within 5 business days to maintain at least $25,000 in their margin account.

Question 2

What is 'Regulation Fair Disclosure' (Reg FD)?

Accepted Answer

An SEC rule requiring companies to disclose material information to all investors simultaneously

Answer

Reg FD requires that when a public company discloses material non-public information to certain investors or analysts, it must simultaneously or promptly disclose that information to the public.

Question 3

What is a 'fiduciary duty' in the context of investment professionals?

Accepted Answer

The legal obligation to act in the best interests of clients when managing their investments

Answer

A fiduciary duty requires investment advisers and others to prioritize their clients' best interests above their own, including avoiding conflicts of interest.

Question 4

What is 'Know Your Customer' (KYC) in securities compliance?

Accepted Answer

A regulatory requirement to verify client identity and assess their investment profile before providing services

Answer

KYC regulations require financial firms to verify client identities, understand their financial situation, and assess investment objectives to prevent fraud and ensure suitability.

Question 5

What does the Securities Investor Protection Corporation (SIPC) do?

Accepted Answer

Protects investors if a brokerage firm fails by covering up to $500,000 in missing securities and cash

Answer

SIPC protects customers of failed brokerage firms by covering up to $500,000 (including $250,000 in cash) of missing assets, though it does not cover investment losses.

Stock Jobs Practice Test

Stock Jobs Practice Test

Stock Jobs Stock Market Regulations and Compliance 2