Stock Trading Professional Standards & Competencies 2

Question 1

A trader learns that a corporate executive is about to announce a merger that will significantly boost the stock price. Trading on this information before the announcement is an example of:

Accepted Answer

Insider trading

Answer

Insider trading involves buying or selling securities based on material non-public information, which is illegal under SEC regulations.

Question 2

Under FINRA Rule 4511, how long must broker-dealers retain customer account records?

Accepted Answer

6 years

Answer

FINRA Rule 4511 requires broker-dealers to retain most books and records for a minimum of six years.

Question 3

Which regulatory body oversees the conduct of registered investment advisers managing assets above $110 million?

Accepted Answer

SEC

Answer

The SEC has jurisdiction over investment advisers with assets under management exceeding $110 million, while smaller advisers are regulated at the state level.

Question 4

A portfolio manager consistently allocates the best trade executions to their personal account ahead of client accounts. This practice is called:

Accepted Answer

Cherry-picking

Answer

Cherry-picking occurs when a trader selectively assigns profitable trades to personal accounts while allocating losing trades to client accounts, violating fiduciary duty.

Question 5

The CFA Institute's Code of Ethics requires members to place whose interests first?

Accepted Answer

Their clients' interests

Answer

The CFA Institute Code of Ethics mandates that members place client interests above their own and their employer's interests.

Stock Trading Practice Test

Stock Trading Practice Test

Stock Trading Professional Standards & Competencies 2