Stock Trading Regulatory Frameworks & Compliance 4

Question 1

The SEC's Market Access Rule (Rule 15c3-5) requires broker-dealers with market access to implement which controls before orders reach an exchange?

Accepted Answer

Pre-trade risk management controls and supervisory procedures

Answer

Rule 15c3-5 mandates that broker-dealers implement pre-trade financial and regulatory risk controls, such as order size limits, to prevent erroneous or manipulative orders from reaching markets.

Question 2

Under the Bank Secrecy Act (BSA), broker-dealers must file a Suspicious Activity Report (SAR) within how many days of detecting suspicious activity?

Accepted Answer

30 calendar days

Answer

BSA regulations require broker-dealers to file a SAR within 30 calendar days of detecting facts that may constitute suspicious activity.

Question 3

Which of the following best describes the SEC's Regulation SHO locate requirement for short selling?

Accepted Answer

Broker-dealers must have reasonable grounds to believe shares can be borrowed before executing a short sale

Answer

Regulation SHO's locate requirement prohibits broker-dealers from accepting short sale orders unless they have first located securities available for borrowing.

Question 4

An investment adviser with $110 million in assets under management must register with which regulatory body?

Accepted Answer

The SEC

Answer

Investment advisers with $110 million or more in AUM are required to register with the SEC rather than with state regulators.

Question 5

What does the term 'Chinese Wall' refer to in the context of securities compliance?

Accepted Answer

Information barriers between a firm's investment banking and trading departments

Answer

A Chinese Wall (information barrier) separates a firm's investment banking division, which handles material non-public information, from its trading and research departments to prevent insider trading.

Stock Trading Practice Test

Stock Trading Practice Test

Stock Trading Regulatory Frameworks & Compliance 4