Series 79 practice questionmediumChinese Walls / Information Barriers
An investment bank maintains a restricted list and a watch list as part of its information barrier policy. When should a security typically be placed on the restricted list rather than the watch list?
- AWhen the bank is providing general investment advice to the issuer
- BWhen the bank is conducting due diligence for a published research report
- CWhen the bank has received nonpublic information through a public source
- DWhen the bank is engaged in a transaction involving MNPI and employees must be restricted from trading the security✓ Correct answer
Explanation
Why D — When the bank is engaged in a transaction involving MNPI and employees must be restricted from trading the security
A security is added to the restricted list when the firm is in possession of MNPI and must restrict trading activity to prevent misuse. The watch list is used for monitoring potential conflicts, not outright trading bans, so options A–C are traps.
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