Stock Trading Regulatory Frameworks & Compliance 2

Question 1

Which SEC rule requires broker-dealers to disclose payment for order flow arrangements to customers?

Accepted Answer

Rule 606

Answer

SEC Rule 606 mandates quarterly disclosure of order routing practices, including payment for order flow received from market makers.

Question 2

Under FINRA Rule 4370, member firms must establish and maintain which of the following?

Accepted Answer

A business continuity plan

Answer

FINRA Rule 4370 requires member firms to create and maintain a written Business Continuity Plan (BCP) addressing various business disruptions.

Question 3

The Volcker Rule, enacted as part of Dodd-Frank, primarily restricts banks from engaging in which activity?

Accepted Answer

Proprietary trading for their own account

Answer

The Volcker Rule prohibits banks from engaging in short-term proprietary trading of securities for their own profit.

Question 4

A trader who uses material non-public information about a pending merger to profit in the options market violates which primary rule?

Accepted Answer

SEC Rule 10b-5

Answer

SEC Rule 10b-5 broadly prohibits fraud and insider trading, including trading on material non-public information in any security.

Question 5

Under Regulation NMS, the Order Protection Rule (Rule 611) prohibits trade-throughs except in certain exemptions. Which scenario qualifies as an exemption?

Accepted Answer

Intermarket sweep orders (ISOs) sent to multiple venues simultaneously

Answer

Intermarket sweep orders are an explicit Rule 611 exemption, allowing traders to execute at multiple price levels across exchanges simultaneously.

Stock Trading Practice Test

Stock Trading Practice Test

Stock Trading Regulatory Frameworks & Compliance 2