Unit 9 - The Government Regulators
The FDIC insures customer assets held at A. banks. B. broker-dealers. C. depositary trusts, D. investment advisers,
A. banks.
The SEC has the power to do all of the following except A. revoke a registration. B. arrest those in violation of the regulations. C. impose fines. D. limit a firm's activity
B. arrest those in violation of the regulations.
The Federal Reserve Board was established by A. the Securities Act of 1933. B. the Uniform Securities Act. C. the Federal Reserve Act of 1913. D. the Trust Indenture Act.
C. the Federal Reserve Act of 1913.
Financial activities and large cash transactions are reported to which of the following federal agencies? A. SEC B. OCC C. Federal Reserve D. FinCEN
D. FinCEN
What is the purpose of the Insider Trading and Securities Fraud Enforcement Act of 1988?
Defines penalties for the misuse of material, nonpublic information by both firms and individuals
What else does the Comptroller serve as?
Director of the FDIC and member of the Financial Stability Oversight Council and the Federal Financial Institutions Examination Council
Most financial services companies are required to report suspicious or unusual activity to who?
FinCEN
What is FinCEN?
Financial Crimes Enforcement Network
Of the SIPC basic coverage, how much is covered in cash?
No more than $250K in cash
What is the basic coverage under SIPC per separate customer?
No more than $500K
Under what act was the SIPC established?
The Securities Investor Protection Act of 1970
What is the responsibility of the IRS?
The primary tax enforcement agency of the federal government and have significant power to investigate potential tax evasion
What do state administrators have authority over?
The registration of securities, broker-dealers, investment advisers, and representatives within their states
What is the responsibility of FinCEN?
To safeguard the financial system from illicit use, to combat money laundering, and to promote national security through the collection, analysis, and dissemination of financial intelligence
All BDs registered with the SEC must be SIPC members except:
1. Banks that deal exclusively in municipal securities 2. Firms that deal exclusively in US government securities 3. Firms that deal exclusively in redeemable investment company securities
What are the five things a BD that does not comply is subject to?
1. Censure 2. Limits on activities, functions, or operations 3. Suspension of its registration 4. Revocation of registration 5. A fine
What five areas that fall under the 1934 act?
1. Regulation of insider transactions, short sales, and proxies 2. Regulation of client accounts 3. Customer protection rule 4. A net capital rule and financial responsibility for broker-dealers 5. Reporting requirements for issuers
The SEC is the primary federal securities industry regulator in the United States. It was created by A. the Securities Act of 1933. B. the Securities Exchange Act of 1934. C. the Investment Advisers Act of 1940. D. the Uniform Securities Act.
B. the Securities Exchange Act of 1934.
In order to register a broker-dealer firm to do business in a state, you would register with A. the SEC. B. the administrator. C. NASAA. D. FINRA.
B. the administrator.
What is the financial purpose of the USA Patriot Act?
Covers anti-money laundering (AML) policies and procedures that must be followed by financial firms
What is the purpose of the Securities Investor Protection Act of 1970?
Covers the protection thresholds for customers in the event of a BD's bankruptcy
What is the Office of the Comptroller of the Currency's responsibility?
Ensure that national banks and federal savings associations operate in a safe and sound manner, provide fair access to financial services, treat customer fairly, and comply with applicable laws and regulations
The SEC has regulatory authority over licensing of securities representatives which is delegated to who?
FINRA
True or False: Once a BD is registered with the SEC, the SEC has passed upon and approved the BD's financial standing, business, or conduct
False; this is mispresentation
What is the FDIC?
Federal Deposit Insurance Corporation
What is the FRB?
Federal Reserve Board
What is the purpose of the Securities Act of 1933?
Governs the new issuance (primary) market, which involves the money-raising activities of issuers Requires issuers to register their securities when selling to the public
What is the purpose of the Investment Advisers Act of 1940?
Governs the regulation of firms that earn fees for providing investment advice
What is the purpose of the Investment Company Act of 1940?
Governs the regulation of packaged products such as mutual funds, closed-end funds, and unit investment trusts
What is the purpose of the Securities Exchange Act of 1934?
Governs trading markets for existing securities and registration requirements of BDs, BD employees, and exchanges
What is the IRS?
Internal Revenue Service
What investment products are not covered by the FDIC?
Mutual funds, annuities, life insurance policies, and stock and bonds
What is NASAA?
North American Securities Administrators Association
How are funds for the FDIC provided?
Premiums are paid by all participating institutions
What is the purpose of the FDIC?
Preserve public confidence in the banking system by insuring deposits
What is the purpose of the FRB?
Provide the nation with a safer, more flexible, and more stable monetary and financial system
What is the SEC?
Securities Exchange Commission; the securities industry's primary regulatory body
What is the SIPC?
Securities Investor Protection Corporation
What is the purpose of the Federal Reserve Act of 1913?
Sets out the purposes, structures, and functions of the systems, as well as outlines aspects of its operations and accountability
What is the USA PATRIOT act partially based on?
The Bank Secrecy Act of 1970
The Federal Reserve System was established by which Act?
The Federal Reserve Act of 1913
What happens when a customer has claims in excess of SIPC coverage when a BD fails?
The customer becomes a general creditor
