Regulation Quiz

Which of the following Consequences are the most severe for market participants to violate?

• Regulations

• Ethical Principles

• Professional Standards

Answer explanation

Consequences in the violations of ethical principles and professional standards consequences may not be as severe as those for violations of regulations, which carry the force of law.

Which of the following BEST describes a broad objective of regulation in the context of the financial services industry?

• to eliminate financial risk

• to protect consumers

• to enforce corporate polices

Answer explanation

The protection of consumers is a broad objective of regulation in

the context of the financial services industry.

A is incorrect because the reduction of risk may be an objective of regulation, but the elimination of risk in the financial services industry is not possible. C is incorrect because corporate

policies and procedures are set by companies and are intended to ensure good

business practices and compliance with regulation; however, the enforcement of

internal company policies is not an objective of regulation.

Which of the following is the first step in a typical regulatory process?

• Public consultation

• Compliance monitoring

• Perceived Need

This type of Financial Market Regulation states that regulations may dictate some aspects of how a company operates.

• Sales Practice Rules

• Operating Rules

• Trading Rules

TRUE or FALSE.

Companies cannot, in any circumstance, fire employees and managers that fail to comply with regulations, policies, and procedures.

• TRUE

• FALSE

Answer explanation

Companies may fire employees and managers that fail to comply with regulations and policies and procedures.

In the regulatory process, regulators must assess whether firms and individuals are complying with regulations. This step is:

• Implementation

• Enforcement

• Monitoring

Answer explanation

In a typical regulatory process, the step that involves monitoring

firms and individuals for compliance, including such things as examinations and

investigations, is the monitoring step.

Regulations that attempt to prevent market manipulation are examples of:

• trading rules.

• operational rules

• sales practice rules

Answer explanation

Trading rules focus on trading practices in the

market and trading activity of financial participants to ensure fair, organized,

and efficient markets.

An objective of establishing corporate policies and procedures is to:

• promote economic growth and stability.

• ensure compliance with laws and regulations by employees.

• set standards for employee conduct that carry the force of law.

Answer explanation

An objective of establishing corporate policies and procedures is to ensure compliance with laws and regulations by employees.

A is incorrect because promoting economic growth and stability are broad objectives of regulation.

C is incorrect because corporate policies and procedures do not carry the force of law.

TRUE or FALSE.

Regulation can foster capital formation and economic growth.

• TRUE

• FALSE

Answer explanation

Foster capital formation and economic growth is one of the Objectives of Regulation.

Regulatory sanctions against firms include:

• only financial penalties.

• only financial penalties and loss of licenses.

• financial penalties, loss of licenses, and forced closure.

Answer explanation

Companies face regulatory sanctions including fines, loss of licenses, and forced closure.