SIE: Regulations (FINRA Rules) Exam Practice Questions and Answers | 100% Pass

SIE: Regulations (FINRA Rules) Exam Practice Questions and Answers | 100% Pass What is the U.S. Government agency that has enforcement authority over the U.S. securities markets? - Answer️️ -SEC Both FINRA and the Securities and Exchange Commission (SEC) regulate and have enforcement capability over the U.S. securities markets and market participants. However, the SEC is a government agency, while FINRA is an SRO - a self-regulatory organization under SEC oversight. The Municipal Securities Rulemaking Board is another SRO that creates rules for municipal market participants, but has no enforcement ability - enforcement of MSRB rules is performed by FINRA. The CFTC regulates futures and commodities. Which of the following is an SRO? - Answer️️ -MSRB TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD OWNER: EMILLYCHARLOTTE COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED FIRST PUBLISHED: SEPTEMBER 2024 2/48 Both FINRA and the MSRB are SROs - self-regulatory organizations under SEC oversight. The MSRB write rules for municipal market participants, but it does not enforce those rules. Enforcement of MSRB rules is performed by FINRA for broker- dealers. SIPC is the Securities Investor Protection Corporation, which insures customer accounts at broker-dealers from B/D failure. FDIC (Federal Deposit Insurance Corporation) insures customer accounts at banks from bank failure. FINRA enforces regulations in all of the following markets EXCEPT: - Answer️️ - Futures Market FINRA is the regulator for all of the securities markets - the Primary Market (new issues); the First Market (trades on exchanges); the Second Market (OTC trades of non-exchange listed securities); the Third Market (OTC trades of exchange listed issues) and the Fourth Market (direct trading between institutions on ECNs and ATSs). FINRA has no regulatory authority over the futures markets - that function is performed by the CFTC - the Commodities Futures Trading Commission. TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD OWNER: EMILLYCHARLOTTE COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED FIRST PUBLISHED: SEPTEMBER 2024 3/48 Who does NOT have to be licensed in a broker-dealer? - Answer️️ -Partner who only provides capital Passive owners of broker-dealers, who can be officers, are not required to be licensed. All other officers, traders, and salespersons must be registered and licensed. Salespersons may be compensated based on which of the following? - Answer️️ - Trading commissions paid by the brokerage firm to the representative Broker-dealers earn commissions or mark-ups/mark-downs for execution transactions. Investment Advisers earn fees for rendering advice. Compensation cannot be directly paid by the customer to any salesperson. All compensation must be paid by the salesperson's employer. To take a second job, under FINRA rules, a registered representative must obtain prior written approval from (the): - Answer️️ -Branch Manager For a registered representative to take a second job requires approval of the branch manager under FINRA rules. The manager is acting for the member firm when doing so. There is no requirement to get approval from FINRA or the SEC. What activity undertaken by a registered representative will require written notice to the firm, along with following the firm's instructions covering this activity? - Answer️️ - TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD OWNER: EMILLYCHARLOTTE COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED FIRST PUBLISHED: SEPTEMBER 2024 4/48 Driving for Uber after the markets have closed and securities transactions are not occurring Driving for Uber is work for pay - and to take an outside job, the representative must give notice to the firm, follow the firm's instructions (so if the firm says no, the answer is no), and must and his or her U4 to show this "OBA" - Outside Business Activity. Volunteer work for no pay is not an OBA, unless it places the representative in a control position to direct the management of investment funds. Traveling by a representative does not have to be reported to the firm. Selling investments, whether proprietary (meaning products of that firm) or nonproprietary, (meaning products of other securities issuers) is the job description of a registered representative. A registered representative at a FINRA member firm has been elected to his cooperative apartment building's Board of Directors. Which statement is TRUE? - Answer️️ -This event must be reported to his or her employer Any "OBA" - Outside Business Activity - must be reported to the firm and must be approved by the firm. Furthermore, it must be reported on that registered representative's U4 Form and is disclosed in that individual's BrokerCheck report. TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD OWNER: EMILLYCHARLOTTE COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED FIRST PUBLISHED: SEPTEMBER 2024 5/48 Remember that an individual does not have to be paid for an OBA to exist. If the representative is in the position to steer investment activities of the outside business entity - that makes it an OBA. The fact that the registered representative, on the Board of Directors of the cooperative apartment house, would be in a position to steer the investment activities of the coop's operating and reserve funds - makes this an OBA. Under FINRA rules, the maximum permitted annual gift from a registered representative to another person in the securities business or financial information media is: - Answer️️ -$100 Under FINRA rules, the maximum permitted gift that can be given to another person in the securities business or the financial news media is $100 per person per year. What item given from a mutual fund sponsor to a registered representative is NOT considered to be "non-cash compensation"? - Answer️️ -An expense-paid trip to an educational conference FINRA prohibits registered representatives from accepting a gift in the amount of more than $100, and also prohibits representatives from accepting "non-cash compensation" from someone other than their employer that exceeds this $100 limit. Note that an exception to the prohibition is given to sponsor-held educational seminars. The sponsor can pay for the registered representative's travel, accommodations, and TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD OWNER: EMILLYCHARLOTTE COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED FIRST PUBLISHED: SEPTEMBER 2024 6/48 meals at the conference. However, the conference cannot be promotional - it must be educational. Furthermore, the sponsor cannot pay for friends and family of the registered representative to come along. Which action is permitted under FINRA rules? - Answer️️ -Business entertainment does not fall under the $100 gift limit. Business entertainment is permitted as long as it is not too excessive ($1200 for raw fish seems excessive!) or too frequent and it must comply with the firm's policies and procedures. Business entertainment means that the representative and the customer are together at some type of event. A client of a registered representative refers a new potential customer. This customer is interested in purchasing an oil and gas limited partnership unit. What percentage of the purchase amount can the representative share with t