Chapter 1 Practice Question Answers
- 1. Answer: B. Multiple accounts owned by the same person may be separated for coverage purposes if the accounts are considered to be held by separate customers. If a customer has both a cash and margin account, the accounts are combined for coverage purposes.
- 2. Answer: B. While the MSRB drafts rules and regulations governing the behavior of municipals broker-dealers and municipal advisors, it does not have the authority to enforce them. MSRB rules for broker-dealers are generally enforced by the SEC and FINRA. The Comptroller of the Currency enforces MSRB rules for national banks and their subsidiaries and for foreign banks. The FDIC enforces MSRB rules for state and local banks that are not part of the Federal Reserve System. The Federal Reserve Board enforces rules applying to state and local banks that are part of the Federal Reserve System.
- 3. Answer: D. If an SIPC member firm fails, the customers get back all securities that are registered in their names and those securities that are in the process of being registered. The firm’s customer assets are then divided among customers in proportion to the size of their remaining claims. If these funds are not sufficient to satisfy the claims, SIPC will supplement up to $500,000 per customer, including up to $250,000 in cash (this has increased recently from a maximum of $100,000 cash).