SIE EXAM 2024 LATEST UPDATE!!
Federal Reserve Board - ANSWER Founded on December 23rd 1913, to oversee
financial panics. Independent of direct political influence. Federal Reserve Act was
passed to stabilize prices, maximize employment, moderate long term interest.
FINRA vs MSRB - ANSWER FINRA oversees brokerage firms and their associated
persons.
MSRB- regulates the municipal securities market including dealers, municipal advisers,
and issuers.
Municipal Securities Rulemaking Board
Structure of the Fed - ANSWER The Board of Governors/The Federal Open Market
Commitee/ Twelve Regional Federal Reserve Banks/Member banks throughout the
United States. Made up of the Federal Reserve Board FRB which is appointed by the
US president and 12 regional Federal Reserve Banks which supervise private
commercial banks.
FOMC (Federal Open Market Committee) - ANSWER a body that consists of the seven
members of the board of governors and the twelve presidents of the regional Federal
Reserve Banks. Not all of the twelve presidents have a vote at any given time.
Department of the Treasury - ANSWER Collects, borrows, spends, and prints money
Roles and Responsibilities of the FED - ANSWER Strengthening the US standing in the
World Economy/ Maintaining a balance between the private interests of banks and the
centralized responsibilities of the government, including supervising and protecting the
credit rights of consumers/ ensuring the financial system's stability and mitigating
systemic risk within the financial markets.
Federal Deposit Insurance Corporation (FDIC) - ANSWER an agency created in 1933 to
insure individuals' bank accounts, protecting people against losses due to bank failures.
Extends to checking and saving accounts, money market accounts, Certificates of
Deposit, and IRAs but not annuities, mutual funds, life insurance policies, bonds or
stocks. Covers up to 250,000 dollars per individual.
State (Blue-Sky) Regulation - ANSWER Established under the Uniform Securities Act
(USA) - Each state has the authority to impose additional requirements for both issuers
and financial intermediaries. Requires that private investment funds register in their
home state and every state where they conduct business.
North American Securities Administrators Association (NASAA) - ANSWER Established
in 1919 in Kansas, 67 securities administrators from all over North America are
responsible for licensing securities firms, investment professionals, and other tasks.
,Protects clients who seek investment advice or deal with securities such as a small
business who wants to review financial offerings .
Securities Act of 1933 - ANSWER The first major law regarding the sale of securities. It
required that companies register their securities sold to the public with the SEC and that
investment bankers must provide full and accurate information related to new securities
issues to potential investors. Stipulates that companies must provide a description of
the security being offered, description of the company's business and properties, and
Financial statements that have been certified by independent accountants.
Securities Exchange Act of 1934 - ANSWER An act that regulates the trading of
securities such as stocks and bonds in the secondary market. Purpose was to promote
financial transparency and accuracy while reducing the incidence of fraud and market
manipulation. Established the SEC led by five commissioners appointed by the
president. These five are split into divisions including division of trading and markets,
investment management, corporation finance, enforcement, economic and risk analysis.
Investment Advisers Act of 1940 - ANSWER Legislation governing who must register
with the SEC as an investment adviser. Prohibits advisers from engaging in front-
running and churning practices. Entities that are excluded are Banks and bank holding
companies, Lawyers, accountants, engineers, and teachers, Brokers and dealers,
Publishers, Government securities advisers, credit rating agencies, family offices.
Securities Investors Protection Act (SIPA) - ANSWER Non-profit organization
established by Congress to safeguard the customers of brokerage firms that become
insolvent by utilizing multiple bodies including the SEC, self-regulating organizations,
and the securities investor protection corporation (SIPC).
SIPC Coverage - ANSWER $500,000 per customer of which no more than $250,000 in
cash per account. (only the equity in margin accounts, not the full market value). Some
examples include Joint Accounts, Corporate accounts, Individual accounts, Trust
Accounts, Roth IRAs and Traditional IRAs, Accounts held by a legal guardian or estate
executor.
Penny Stock Reform Act of 1990 - ANSWER regulates the solicited sales of certain low-
priced securities to potential new customers. A penny stock is a stock that trades below
5$ a share or stocks that don't meet the NYSE official listing standards.
Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA) - ANSWER
The act aims to increase the liability penalties to all involved parties for insider trading.
The Investment Company Act of 1940 - ANSWER Its chief aim is to safeguard investors
by making them aware of the risks of purchasing and holding securities.
Telephone Consumer Protection Act of 1991 - ANSWER A federal law that places
restrictions on telephone solicitation of business.
, Financial Industry Regulatory Authority (FINRA) - ANSWER a self-regulatory
organization and the largest non-governmental regulator of securities firms in the US;
registers and provides qualification exams to industry professionals, writes rules for
trading, educates the investing public, provides trade reporting, resolves disputes
between customers and firms
Important FINRA rules - ANSWER Rule 2266 - SIPC Info, this rule requires SIPC
member firms to provide written notice to customers about SIPC protections.
Rule 2269- Disclosure of Participation or Interest in Primary or Secondary Distribution,
rule requires firm to disclose any participation or interest in a primary or secondary
distribution of securities to customers.
Rule 5250- Payments for Market Making, prohibits firms from accepting payments from
issuers or promoters.
Uniform Practice Code (UPC) - ANSWER It standardizes practices, customs, trading
techniques, and operational and settlement issues as much as possible. Such as Trade
terms, payment and delivery, dividend and interest payments, reclamations, exchange
of confirmations.
Code of Procedure (COP) - ANSWER FINRA's formal procedure for handling trade
practice complaints involving violations of the Conduct Rules. The Department of
Enforcement is the first body to hear and judge complaints.
Municipal Securities Rulemaking Board (MSRB) - ANSWER A self-regulatory
organization that regulates the issuance and trading of municipal securities. The Board
functions under the Securities and Exchange Commission's supervision; it has no
enforcement powers. Related item(s): Securities Acts Amendments of 1975.
Chicago Board Options Exchange (CBOE) - ANSWER regulates all matters related to
trading standardized options and related contracts listed on that exchange. Does not
trade US and European Stocks or International exchange products directly.
Investors - ANSWER Can Invest in mutual funds, bonds, stocks, ETFs, foreign
exchange, precious metals like silver and gold, and real estate.
Venture Capitalists - ANSWER invest in start-ups and small businesses. Seek an equity
stake in return for their investment and help grow the company
Angel Capitalists - ANSWER Provide capital to entrepreneurs and start-ups when the
risk is high, i.e., in the early stages
Institutional Investors - ANSWER Large organizations - such as pension funds, mutual
funds, and insurance companies - that invest their own funds or the funds of others
