P2U10

• D)
• Explanation

FINRA regulates all matters related to investment banking, trading in the over-the-counter (OTC) markets and some exchange markets, and the conduct of FINRA member firms and associated persons including the promotion of self-discipline among members. It also investigates and looks to resolve grievances between the public and members and between members. The MSRB relies upon FINRA to perform dispute resolution.

• C)
• Explanation

SROs function under the SEC's oversight. Each SRO is accountable to the Commission for enforcing federal securities laws, as well as supervising securities practices within an assigned jurisdiction. These include FINRA, MSRB, and CBOE.

• A)
• Explanation

FINRA does not have arrest or imprisonment authority, but in the event of a violation, FINRA may impose any fitting sanction on the guilty firm or associated person. Customary penalties include censure, suspension, expulsion, and fines, but FINRA is not limited to those. For example, taking the licensing exam is often imposed on associated persons found guilty of a violation.

• C)
• Explanation

The MSRB differs from other regulatory bodies in that it writes its own rules, but by law, it cannot enforce them. Rather, the board must rely entirely upon other designated examining authorities to enforce its rules.

• C)
• Explanation

A jail sentence is not within the jurisdictional powers of FINRA. However, censure (generally meant to mean public disclosure), fines, suspension of the membership of a member or suspension of the registration of an associated person for a definite period, expulsion of the member (canceling the membership of the member), and the barring of an associated person from association with all members (essentially barring one from the industry) are all sanctions under FINRA's Code of Procedure. Additionally, imposition of any other fitting sanction is specified. However, this would not include criminal penalties such as a jail sentence.

• A)
• Explanation

The MSRB regulates all matters related to the underwriting and trading of state and municipal securities but does not have enforcement powers. It depends on other SROs (e.g., FINRA) for the enforcement of its rules.

• B)
• Explanation

The Code of Procedure describes how member violations of the Conduct Rules will be heard and handled.

• A)
• Explanation

Only a court can issue a prison sentence. Each of the remaining answer selections, bar, fine, and censure, are sanctions FINRA could impose under the Code of Procedure.

• B)
• Explanation

FINRA regulates all matters related to investment banking (securities underwriting), trading in the OTC market, trading in NYSE-listed securities, and the conduct of FINRA member firms and associated persons.

• A)
• Explanation

The National Adjudicatory Council (NAC) hears appeals from DOE decisions. An NAC ruling may be appealed to the SEC, then to the appellate courts.

• D)
• Explanation

The Code of Arbitration covers disputes over money between representatives, member firms, banks, and customers.

• B)
• Explanation

The UPC established uniform trade practices and other guidelines for broker-dealers to follow when they do business with other member firms, including transaction settlement, good delivery, ex-dates, trade confirmations, and DK procedures.

• C)
• Explanation

FINRA publishes the Conduct Rules, the UPC, the Code of Procedure, and the Code of Arbitration Procedure to regulate employee conduct and reportable events. There is no Sales Practice Code.

• B)
• Explanation

The Conduct Rules deal with a broker-dealer's (and representative's) relationship with the customer and the public. The Uniform Practice Code deals with interactions with other broker-dealers.

• B)
• Explanation

The Code of Procedure covers improper acts by member firms and representatives.

• D)
• Explanation

FINRA regulates all matters related to investment banking (securities underwriting), trading in the OTC market, trading in NYSE-listed securities, and the conduct of FINRA member firms and associated persons. FINRA also regulates investment companies and limited partnership transactions.

• B)
• Explanation

The Conduct Rules specify trade practices that are fair and ethical when dealing with the public. Events that must be reported are also described.

• C)
• Explanation

Generally speaking, a broker-dealer firm has the customer sign a binding arbitration agreement before opening the account. In the absence of such an agreement, if a dispute cannot otherwise be resolved, the dispute can go to arbitration if the customer wishes it so.

• B)
• Explanation

The MSRB regulates all matters related to the underwriting and trading of state and municipal securities. While they have the authority to write the MSRB rules and regulations, they have no enforcement powers.

• D)
• Explanation

FINRA is considered the primary SRO in the securities industry.

• A)
• Explanation

While the MSRB has rulemaking authority, it has no authority to enforce those rules. The enforcement of the MSRB rules on broker-dealers has been primarily delegated to FINRA. Bank regulatory agencies, such as the Federal Reserve Board (FRB), enforce the MSRB rules on banks who act as municipal dealers.

• C)
• Explanation

The MSRB relies on FINRA and the SEC to enforce its rules for broker-dealers, and banking regulators to enforce their rules for banks.

• D)
• Explanation

The MSRB, NYSE, and CBOE are deemed self-regulatory organizations (SROs) and are on an equal footing with FINRA. All SROs must first petition the SEC for approval of a new rule.

• B)
• Explanation

All broker-dealers in the United States who deal in corporate securities are required to be members of FINRA. The SEC has jurisdiction over all securities business in the United States, but it is not an SRO.

• C)
• Explanation

The MSRB makes regulations for broker-dealers and banks buying and selling municipal securities but does not have authority over the municipalities.

• B)
• Explanation

The Conduct Rules deal with a broker-dealer's (and representative's) relationship with the customer and the public. The Uniform Practice Code deals with interactions with other broker-dealers.