SIE Chapter 2
what is FINRA
The Financial Industry Regulatory Authority; created by the merger of the NASD and NYSE regulatory authorities
which federal law created the NASD
The Maloney Act of 1938
what is the SRO for municipal securities
The Municipal Securities Rulemaking Board (MSRB)
The Maloney Act of 1938 is credited with creating which SRO
The NASM. In 2007, the regulatory units of the NASD and NYSE merged to create FINRA
what is SIPC
Securities Investor Protection Corporation. SIPC protects separate customers in the event of BD bankruptcy.
Identify the acronym: SEC
Securities and Exchange Commission
Identify the acronym; SRO
Self-Regulatory Organization (such as FINRA)
what Act governs private, qualified retirement accounts
The Employee Retirement Security Act of 1974
Identify the acronym: FDIC
The Federal Deposit Insurance Corporation
what organization is responsible for implementing monetary policy in the United States
The Federal Reserve Board
what is the SRO for corporate securities
The Financial Industry Regulatory Authority (FINRA)
True or False: Jim's joint account with his wife is considered a separate customer by SIPC.
True Jim's cash and margin account are combined for coverage, but Jim's joint account with his spouse is separate.
True or False: MSRB rules regulate the municipal activities of BDs, banks, and the employees of these institutions.
True The MSRB also regulates municipal advertising.
SIPC provides coverage of $____________ of which no more than $___________ can be cash.
$500,000 $250,000
list four categories of FINRA rules
1. Conduct Rules 2.Uniform Practice Code 3. Code of Procedure 4. Code of Arbitration
The IC Act of '40 required a fund with more than ________ shareholders to register with the SEC
100
what amount of coverage is provided by FDIC
4250,000 per depositor, per bank
Who is subject to The Insider Trading Act?
Anyone who minuses non-public information
industry disputes are handled through ____________
Arbitration
Who enforces MSRB rules?
BD Enforcement: SEC or FINRA and Bank Dealer Enforcement: FRB, FDIC, or the Comptroller of the Currency
what actions may the hearing panel take regarding rule violations?
Censure, fine, suspension, request to re qualify, or expulsion of the respondent
Identify the acronym: COP
Code of Procedure
the ___________ covers disciplinary actions by FINRA against member firms and their employees
Code of Procedure
Identify the acronym: ERISA
Employee Retirement Security Act
name some Self_Regulatory Organizations (SROs)
FINRA, MSRB, CBOE, and other exchanges
True or False: SIPC is backed by the full faith and credit of the US government
False
True or False: SIPC provides coverage for market losses.
False SIPC protects against BD bankruptcy
True or False: The Code of Procedure ca be used by a customer against a member firm to resolve a monetary dispute.
False this situation would be handled under the Code of Arbitration
True or False: A penny stock has a bid price of less than $1.00 per share?
False a penny stock id an unlisted security whose bid price is less than $5.00 per share
True or False: Rule violations are handled by the Code of Arbitration
False rule violations are covered by the Code of Procedure
True or False: The Investment Company Act if 1940 required mutual fund managers to register
False. The Investment Advisers Act of 1940 is the Act that required money managers to register
True or False: Decisions arising fro arbitration may be appealed to the federal court system.
False. decisions are binding on both parties and may NOT be appealed
the ______________ is the SRO for there OTC market
Financial Industry Regulatory Authority (FINRA)
Identify the acronym: RR
Registered Representative
Ben's margin account has a market value of $800,000 and a debit balance of $350,000. How much SIPC coverage is provided
In a margin account, SIPC covers the net equity (market value minus debit). In the example, $450,000
Identify the acronym: IC Act of '40
Investment Company Act of 1940
does SIPC insure client assets
No. SIPC protects against firm bankruptcy
does SIPC protect customers from market losses
No. SIPC protects customers from losses due to BD bankruptcy
Define penny stock
Non-exchange traded securities that are priced at less than $5 per share
Identify the acronym: NASAA
North American Securities Administrators Association
___________ of a broker-dealer are responsible for supervising registered employees
Principals
Jim's cash account contains $275,000 of cash and $185,000 of securities. How much SIPC coverage is provided
SIPC coverage is provided for $250,000 if the cash and the full $185,000 of securities
how is the FDIC different from SIPC
SIPC does not insure bank deposits. Instead, it insures BD clients against the loss of securities due to BD bankruptcy
The Securities Exchange Act of 1934 regulates the ________ _________
Secondary Market
which Act created SIPC
Securities Investor Protection Act of 1970 (SIPA)
Identify the acronym: SIPC
Securities Investor Protection Corporation
____________ protects customers from BD bankruptcy
Securities Investor Protection Corporation (SIPC)
Identify the acronym: TCPA
Telephone Consumer Protection Act (of 1991)
what is the SRP for exchange-traded options?
The Chicago Board Options Exchange (CBOE)
Which federal law governs the registration of new issues?
The Securities Act of 1933
which federal las created the SEC?
The Securities Exchange Act of 1934
which federal law governs the registration of RRs and their firms
The Securities Exchange Act of 1934
under which federal law are firms, RRs, and exchanges registered
The Securities and Exchange Act of 1934
from what do Self Regulatory Organisations (SROs) derive their power
The Securities and Exchange Commission (SEC)
what US Government agency, created by the '34 Act, enforces securities laws?
The Securities and Exchange Commission (SEC)
what is NASAA's primary responsibility
To establish and modify the Uniform Securities Act (USA), which is the basis for most states' securities laws
Tom has an individual account and a joint account with the same BD. How much SIPC coverage is provided
Toe will have $1 million of coverage, since each account is covered separately
True or False: The Investment Company Act of 1940 required mutual funds to register.
True
Tim has both a cash and margin account with the same BD. If BD bankruptcy occurs, how are Tim's accounts handled?
Tim's accounts are combined for SIPC coverage purposes
Identify the acronym: WSP
Written Supervisory Procedures
what is the name that's given to a broker-dealer's internal policies and procedures?
Written Supervisory Procedures (WSP)
what is a member firm
a broker-dealer that is a member of FINRA
define wrap account
a managed account that charges clients an annual fee to cover trading, research, and advisory services
describe a wrap account
an account that charges the client a single fee that covers transaction execution and account management
who is responsible for the formulation and interpretation of rules for the municipal industry
the MSRB
True or False: SIPC provides coverage for both commodities and futures accounts
false
give some examples of what SIPC does NOT cover
fraud, futures contracts, and commodities
customers become ____________ if their cash or securities positions exceed SIPC coverage
general creditors
what Act prevents terrorists from laundering money
the USA PATRIOT Act
trading on material, non-public information is considered_____________
insider trading
what are joint accounts considered by SIPC
joint account are considered separate from individual accounts
what is the role of an SRO
maintain fair and orderly securities markets and establish rules and regulations for protecting investors
The Securities Act of 1933 regulates ___________
new issues
is SIPC part of the U.S. Government?
no. it is a non-profit entity funded by assessments on BD members
does the MSRB have the authority to enforce its own rules
no. the MSRB has no enforcement authority
True or False: The FDIC is backed by the full faith and credit of the US government
true
True or False: The MSRB has no authority or control over municipal issuers.
true
what will SIPC cover in a customer's margin account
only the customer's equity (securities clear of any outstanding loan)
what types of industry issues are handels under the Code of Procedure (COP)
rule violations
does SIPC protect separate customers or separate accounts
separate customers. A customer with both a cash and margin account with a BD would be covered once
If Mary has a cash account as well as an IRA account, what coverage will SIPC provide?
the cash account is one customer and the IRA (which is a trust) is a second customer. so, $500,000 for each customer
For SIPC purposes, what happens to securities that are able to be specifically identified as belonging to a client
they are distributed to the client without regard to the dollar amount limit
If a BD goes bankrupt, what happens to securities registered in the customer's name?
they are returned to the customer without regard to SIPC limitations
hos is SIPC funded
through assessments on BDs that are SIPC members
what is FINRA's primary objective
to adopt, administer, and enforce rules in the securities industry
what is the purpose of the Federal Deposit Insurance Corporation?
to guarantee the safety of cash deposited in FDIC member banks against bak failure
what is the purpose of the FDIC?
to insure bank deposits and also to examine and supervise financial institutions for safety and soundness.
