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SRO Questions and Correct Answers
Which of the following statements regarding Self-Regulatory
Organizations (SROs) is NOT true?
[A] SROs are supported by their own member firms.
[B] SROs pay dividends to employees.
[C] SROs allow member firms to vote.
[D] SROs set rules, regulations, and penalties. Ans: [B] -
Since most SRO's are non-profit and not publicly-traded, they do
NOT pay dividends to anyone. SROs do set rules, allow members to
vote, and are supported by their own member firms.
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, 2 | Page
Which of the following statements pertaining to written
communications to the public by a registered representative is
FALSE?
[A] The member firm must have in place written supervisory
procedures on communications with the public.
[B] If a firm or individual is considered registered by a regulatory
agency, it is acceptable for that firm or individual to state that
they are considered qualified or approved by the regulatory
agency.
[C] Registered representatives and firms are prohibited from gua
Ans: [B] -
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, 3 | Page
All but B are true. An individual or his or her member firm may
never state that they have been approved or qualified by a
regulatory agency.
All of the following are likely violations of FINRA rules EXCEPT:
[A] Selling a customer's blue chip stocks and buying high yield
bonds
[B] Short-term trading in mutual funds
[C] Recommending penny stocks to customers whose investment
objective is current income
[D] Handling a large number of accounts on a discretionary basis
Ans: [D] -
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All but "D" are violations of fair dealings with customers. Selling
blue chip stocks to purchase much riskier investments such as
high yield bonds is not suitable. Mutual funds are intended for
long-term trading. Penny stocks are high risk investments and
don't pay dividends. Having a large number of discretionary
accounts is not a violation.
If an RR wants to invest in a Private Securities offering, the branch
manager should advise the RR that
[A] The BOM must review the offering memorandum for the
offering.
[B] The RR must provide the firm with a written notice detailing
the proposed transaction.
[C] Investments may be made as long as duplicate statements of
the activity are provided to the member firm.
© 2025 All rights reserved
SRO Questions and Correct Answers
Which of the following statements regarding Self-Regulatory
Organizations (SROs) is NOT true?
[A] SROs are supported by their own member firms.
[B] SROs pay dividends to employees.
[C] SROs allow member firms to vote.
[D] SROs set rules, regulations, and penalties. Ans: [B] -
Since most SRO's are non-profit and not publicly-traded, they do
NOT pay dividends to anyone. SROs do set rules, allow members to
vote, and are supported by their own member firms.
© 2025 All rights reserved
, 2 | Page
Which of the following statements pertaining to written
communications to the public by a registered representative is
FALSE?
[A] The member firm must have in place written supervisory
procedures on communications with the public.
[B] If a firm or individual is considered registered by a regulatory
agency, it is acceptable for that firm or individual to state that
they are considered qualified or approved by the regulatory
agency.
[C] Registered representatives and firms are prohibited from gua
Ans: [B] -
© 2025 All rights reserved
, 3 | Page
All but B are true. An individual or his or her member firm may
never state that they have been approved or qualified by a
regulatory agency.
All of the following are likely violations of FINRA rules EXCEPT:
[A] Selling a customer's blue chip stocks and buying high yield
bonds
[B] Short-term trading in mutual funds
[C] Recommending penny stocks to customers whose investment
objective is current income
[D] Handling a large number of accounts on a discretionary basis
Ans: [D] -
© 2025 All rights reserved
, 4 | Page
All but "D" are violations of fair dealings with customers. Selling
blue chip stocks to purchase much riskier investments such as
high yield bonds is not suitable. Mutual funds are intended for
long-term trading. Penny stocks are high risk investments and
don't pay dividends. Having a large number of discretionary
accounts is not a violation.
If an RR wants to invest in a Private Securities offering, the branch
manager should advise the RR that
[A] The BOM must review the offering memorandum for the
offering.
[B] The RR must provide the firm with a written notice detailing
the proposed transaction.
[C] Investments may be made as long as duplicate statements of
the activity are provided to the member firm.
© 2025 All rights reserved
