What is the securities industry's primary regulatory body? Which act is it created under?
SEC, Securities Exchange Act of 1934
Who must apply and be approved for registration with the SEC?
brokers dealers who transact securities with customers or with other broker dealers
The SEC regulates ALL exchanges and trading markets. True or false?
true
After a broker dealer registered with the SEC, can they claim that this registration implies that the SEC has passed upon or approved the broker dealer's financial standing/business/conduct? Yes or No
NO
What are 5 consequences a broker dealers might face if they do not comply with SEC rules?
censure, limits on activities/functions/operations, suspension of registration, revocation of registration, fine
What does SROs stand for, and under which organization is it under?
self regulatory organizations, SEC's oversight
Each SRO is accountable to the SEC for which 2 responsibilities?
enforce federal securities laws, supervise securities practices within an assigned jurisdiction
1 of the 3 SRO is FINRA. what does it stand for and what is its jurisdiction?
financial industry regulatory authority, jurisdiction in all matters related to investment banking (securities underwriting), trading in the OTC market, trading in NYSE traded securities, conduct of FINRA member firms and persons
Besides the 4 main jurisdictions of FINRA, FINRA also regulates _______ and ______.
investment companies, limited partnership transactions
Name 4 purposes of FINRA
promote IB and securities business, provide medium for communication, enforce rules to prevent fraud, promote self-discipline by investigating and resolving grievances between public and members
1 of the 3 SRO is CBOE. what does it stand for and what is its jurisdiction?
Chicago Board Options Exchange, matters relating to trading standardized options and related contracts listed on that exchange
1 of the 3 SRO is MSRB. what does it stand for and what is its jurisdiction?
Municipal Securities Rulemaking Board, matters relating to underwriting and trading of STATE and MUNICIPAL securities
Does the MSRB have enforcement power?
No (it depends on FINRA for enforcement)
MSRB regulates but does NOT have enforcement power. True or false?
true
Does the MSRB have regulatory power over the municipalities who issue municipal securities?
no
What is the executive department that oversee the collection of taxes?
U.S. Department of Treasury (IRS)
Who in the U.S. Department of Treasury is a member of the cabinet?
Secretary of the Treasury
the collection of taxes and enforcement of tax laws is a function of which bureau within the USDT?
Internal revenue service (IRS)
Name an example of a state securities association that provide insights to SEC and SROs in their rulemaking process
North American Securities Administrators Association (NASAA)
Name some things the NASAA do
advocate pro-investor policies, provide investor education, and offer resources
What does FRB stand for and what does it consist of?
federal reserve board, 12 regional federal reserve banks and hundreds of nation and state banks
Name 2 main responsibilities of FRB
determine monetary policies and their implementation
which entity regulates the U.S. money supply?
FRB
The FRB acts as an agent of the U.S. treasury. True or false?
True
which entity clears fund transfers throughout the system?
FRB
Why are decisions from FRB critical to U.S. economy?
because it determines how much money is available for businesses and consumers to spend
What does SIPC stand for and under which act was it created?
securities investor protection corporation, Securities Investor Protection Act of 1970
say 3 words to describe the SIPC
nonprofit membership organization
How does the SIPC work?
SIPC members pay assessments into a general insurance fund that is used to meet customer claims in the event of a broker dealer bankruptcy
All broker dealers registered with the SEC must be SIPC members except 3. Name them
banks that deal exclusively in municipal securities, firms that deal exclusively in US government securities, firms that deal exclusively in redeemable investment company securities
If SEC or SRO finds indications that a broker dealer is in financial difficulty, which entity will be notified immediately?
SIPC
If SIPC determines that the member has failed or is in imminent danger of failing, it may petition a federal court to take action by doing what?
appointing a trustee to liquidate the firm and protect its customer
Under SIPC, what is defined as customer?
anyone who has cash or securities in the possession of a broker dealer
Upon receipt of SIPC's petition, what will a court do?
issue a protective decree if the broker dealer is in fact insolvent and will then promptly appoint a trustee for liquidation of the business
After receiving SIPC's petition, a court has decided to appoint a trustee to liquidate the firm. The member firm is then prohibited from what?
engage in business as a broker dealer, attempt to conceal assets, file false statements, alter securities to defraud the trustee or SIPC
What is the basic coverage of SIPC?
$500,000 per customer
the basic coverage of SIPC is $500,000 per customer, per account, true or false?
false, $500,000 per customer for all accounts
Of the $500,000 per customer SIPC basic coverage, how much is in cash?
$250,000
Cash and margin accounts for the same customer are combined for the purposes of determining SIPC coverage. However, only the _______ in a margin account is covered, NOT the full market value.
equity
When the broker dealer fails and a customer has claims in excess of SIPC coverage (above $500,000), what happens in that case?
the customer becomes a general creditor of the broker dealer for the uncovered amount
what are 4 things that are NOT covered by SIPC?
commodities, commodity futures contracts, future contracts and losses related to currencies
what are NOT considered as securities?
commodities, commodity futures contracts, future contracts and losses related to currencies
Can the term SIPC appear larger than the firm's name?
no
Do broker dealers have to include their SIPC membership on all advertising AND on their premises?
yes
what can a broker dealer NOT do in terms of SIPC advertisement?
cannot imply that SIPC coverage is more than it actually is or that its benefits are unique to only that broker dealer
What disclosure MUST be made to new customers at the time an account is opened and to all customers at least once each year thereafter
SIPC (saying that info can be obtained from SIPC)
What does FDIC stand for and when was it created?
federal deposit insurance corporation, during the Great Depression of 1930s
What is the main purpose of the FDIC?
preserve public confidence in the banking system by insuring deposits
How are the funds for the FDIC provided?
in the same way as the funds for a private insurance company. premiums are paid by all participating institutions
In the event of the failure of a member financial institution, the FDIC usually do what?
sell customer deposits and loans of the failed institution to another institution. this way, the depositors become customers of the new institution
the FDIC provides deposit insurance guaranteeing the safety of a depositor's accounts in member banks up to how much for each deposit ownership CATEGORY in each insured bank?
$250,000
FDIC covers traditional types of bank deposit accounts. Name some
checking, savings, money market deposit accounts, certificates of deposit (CD), self directed IRA
What products does the FDIC NOT covered?
investment products like mutual funds, annuities, life insurance policies, stocks and bonds