SIE practice questionmediumPersonal Trading
Which of the following best describes a firm's obligation regarding the personal trading activities of its associated persons?
- APersonal trading is only restricted for senior executives
- BFirms must prohibit all personal trading by associated persons
- CFirms have no obligation to monitor personal trading of employees
- DFirms must establish policies and procedures to monitor personal trading and prevent conflicts of interest✓ Correct answer
Explanation
Why D — Firms must establish policies and procedures to monitor personal trading and prevent conflicts of interest
Broker-dealers are required to have policies and procedures in place to monitor the personal securities trading of their associated persons. This includes requirements for employees to disclose brokerage accounts, pre-clear certain trades, and report transactions. The goal is to prevent conflicts of interest such as front-running customer orders or trading on material non-public information. Firms do not have to ban all personal trading, but they must have adequate oversight and controls in place.
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 Regulatory Framework questions
- A compliance officer discovers that a registered representative purchased shares of a company one day before the firm…
- A dispute arises between two FINRA member firms regarding a trade settlement. Under FINRA rules, how must this dispute…
- What does the term SRO stand for within the securities industry?
- If a registered person's registration has been terminated for more than two years, what must occur before they can…