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FINRA SIE Rules Exam 224 Questions with Verified Answers,100% CORRECT
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FINRA SIE Rules Exam 224 Questions with Verified Answers
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FINRA SIE Rules Exam 224 Questions with Verified AnswersWhat is the U.S. Government agency that has enforcement authority over the U.S.
securities markets? - CORRECT ANSWER SEC
Both FINRA and the Securities and Exchange Commission (SEC) regulate and have
enforcement capability over the U.S. securities markets and market participants.
However, the SEC is a government agency, while FINRA is an SRO - a self-
regulatory organization under SEC oversight.
The Municipal Securities Rulemaking Board is another SRO that creates rules for
municipal market participants, but has no enforcement ability - enforcement of
MSRB rules is performed by FINRA.
The CFTC regulates futures and commodities.
Which of the following is an SRO? - CORRECT ANSWER MSRB
Both FINRA and the MSRB are SROs - self-regulatory organizations under SEC
oversight. The MSRB write rules for municipal market participants, but it does not
enforce those rules. Enforcement of MSRB rules is performed by FINRA for
broker-dealers.
SIPC is the Securities Investor Protection Corporation, which insures customer
accounts at broker-dealers from B/D failure.
FDIC (Federal Deposit Insurance Corporation) insures customer accounts at banks
from bank failure.
FINRA enforces regulations in all of the following markets EXCEPT: - CORRECT
ANSWER Futures Market
,FINRA is the regulator for all of the securities markets - the Primary Market (new
issues); the First Market (trades on exchanges); the Second Market (OTC trades of
non-exchange listed securities); the Third Market (OTC trades of exchange listed
issues) and the Fourth Market (direct trading between institutions on ECNs and
ATSs).
FINRA has no regulatory authority over the futures markets - that function is
performed by the CFTC - the Commodities Futures Trading Commission.
Who does NOT have to be licensed in a broker-dealer? - CORRECT ANSWER
Partner who only provides capital
Passive owners of broker-dealers, who can be officers, are not required to be
licensed. All other officers, traders, and salespersons must be registered and
licensed.
Salespersons may be compensated based on which of the following? - CORRECT
ANSWER Trading commissions paid by the brokerage firm to the representative
Broker-dealers earn commissions or mark-ups/mark-downs for execution
transactions. Investment Advisers earn fees for rendering advice.
Compensation cannot be directly paid by the customer to any salesperson. All
compensation must be paid by the salesperson's employer.
To take a second job, under FINRA rules, a registered representative must obtain
prior written approval from (the): - CORRECT ANSWER Branch Manager
For a registered representative to take a second job requires approval of the
branch manager under FINRA rules. The manager is acting for the member firm
when doing so. There is no requirement to get approval from FINRA or the SEC.
What activity undertaken by a registered representative will require written
notice to the firm, along with following the firm's instructions covering this
activity? - CORRECT ANSWER Driving for Uber after the markets have closed and
securities transactions are not occurring
,Driving for Uber is work for pay - and to take an outside job, the representative
must give notice to the firm, follow the firm's instructions (so if the firm says no,
the answer is no), and must and his or her U4 to show this "OBA" - Outside
Business Activity.
Volunteer work for no pay is not an OBA, unless it places the representative in a
control position to direct the management of investment funds. Traveling by a
representative does not have to be reported to the firm. Selling investments,
whether proprietary (meaning products of that firm) or nonproprietary, (meaning
products of other securities issuers) is the job description of a registered
representative.
A registered representative at a FINRA member firm has been elected to his
cooperative apartment building's Board of Directors. Which statement is TRUE? -
CORRECT ANSWER This event must be reported to his or her employer
Any "OBA" - Outside Business Activity - must be reported to the firm and must be
approved by the firm. Furthermore, it must be reported on that registered
representative's U4 Form and is disclosed in that individual's BrokerCheck report.
Remember that an individual does not have to be paid for an OBA to exist. If the
representative is in the position to steer investment activities of the outside
business entity - that makes it an OBA. The fact that the registered representative,
on the Board of Directors of the cooperative apartment house, would be in a
position to steer the investment activities of the coop's operating and reserve
funds - makes this an OBA.
Under FINRA rules, the maximum permitted annual gift from a registered
representative to another person in the securities business or financial
information media is: - CORRECT ANSWER $100
Under FINRA rules, the maximum permitted gift that can be given to another
person in the securities business or the financial news media is $100 per person
per year.
, What item given from a mutual fund sponsor to a registered representative is
NOT considered to be "non-cash compensation"? - CORRECT ANSWER An
expense-paid trip to an educational conference
FINRA prohibits registered representatives from accepting a gift in the amount of
more than $100, and also prohibits representatives from accepting "non-cash
compensation" from someone other than their employer that exceeds this $100
limit.
Note that an exception to the prohibition is given to sponsor-held educational
seminars. The sponsor can pay for the registered representative's travel,
accommodations, and meals at the conference. However, the conference cannot
be promotional - it must be educational. Furthermore, the sponsor cannot pay for
friends and family of the registered representative to come along.
Which action is permitted under FINRA rules? - CORRECT ANSWER Business
entertainment does not fall under the $100 gift limit. Business entertainment is
permitted as long as it is not too excessive ($1200 for raw fish seems excessive!)
or too frequent and it must comply with the firm's policies and procedures.
Business entertainment means that the representative and the customer are
together at some type of event.
A client of a registered representative refers a new potential customer. This
customer is interested in purchasing an oil and gas limited partnership unit. What
percentage of the purchase amount can the representative share with the
referring client as a finder's fee? - CORRECT ANSWER 0%
Registered representatives cannot share commissions, sales charges, or pay
referral fees, to anyone other than another registered person at the same
member firm.
A registered representative at another member firm has a client who wishes to
buy a Direct Participation Program (DPP) unit, a product that is not offered
through his firm. He has a friend that is a registered representative at another
member firm where DPPs are sold, and offers to refer the prospective client in
exchange for a small fee. Which statement is TRUE? - CORRECT ANSWER This is
prohibited
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