Trading Jobs Trading Compliance and Regulations 1

Question 1

What is 'insider trading' as defined by the SEC?

Accepted Answer

Trading securities based on material, non-public information in breach of a duty

Answer

Insider trading involves buying or selling securities while in possession of material, non-public information about the company, violating a fiduciary or other duty of trust.

Question 2

What does 'Regulation NMS' govern in US equity markets?

Accepted Answer

Rules for the national market system including order protection and best execution

Answer

Regulation NMS (National Market System) establishes rules for equity trading, including the Order Protection Rule requiring trades be executed at the best available national price.

Question 3

What is 'best execution' in securities trading?

Accepted Answer

The obligation to seek the most favorable terms reasonably available for client orders

Answer

Best execution requires broker-dealers to take reasonable steps to obtain the most favorable terms for their clients when executing orders, considering price, speed, likelihood of execution, and costs.

Question 4

What is 'front-running' in trading?

Accepted Answer

A broker trading for their own account ahead of executing a client's large pending order

Answer

Front-running occurs when a broker trades on their own account knowing about a client's pending large order that will likely move the market, which is illegal.

Question 5

Under SEC Rule 10b-5, what constitutes securities fraud?

Accepted Answer

Any untrue statement or omission of material facts in connection with the purchase or sale of securities

Answer

Rule 10b-5 prohibits making false statements, omitting material facts, or engaging in any scheme to defraud in connection with securities transactions.

Trading Jobs Practice Test

Trading Jobs Practice Test

Trading Jobs Trading Compliance and Regulations 1