SIE practice questionhardRegulation SHO
Under SEC Regulation SHO, before selling a stock short, a broker-dealer must:
- AObtain written permission from the stock's issuer
- BNotify FINRA at least 24 hours before the short sale
- CDeposit 100% of the sale proceeds in escrow
- DLocate shares that can be borrowed to deliver on settlement (locate requirement)✓ Correct answer
Explanation
Why D — Locate shares that can be borrowed to deliver on settlement (locate requirement)
Regulation SHO requires broker-dealers to have reasonable grounds to believe the security can be borrowed (located) for delivery by the settlement date before accepting a short sale order. This 'locate requirement' prevents naked short selling. Reg SHO also includes the close-out requirement, which mandates that fails to deliver must be closed out within specified timeframes. There is no requirement to get issuer permission, escrow funds, or notify FINRA in advance.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Trading & Settlement questions
- After executing a trade for a customer, a broker-dealer must send a trade confirmation by:
- Which of the following would be considered material, non-public information (MNPI)?
- Under FINRA's best execution rule, a broker-dealer is required to:
- The Employee Retirement Income Security Act (ERISA) applies to which of the following?