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.