Series 7 Exam Question 151: Answer and Explanation

Question: 151

Which of the following are subject to the FINRA 5 percent markup policy?

I. Principal transactions

II. Agency transactions

III. Riskless transactions

IV. Proceeds transactions

• A. I and III
• B. II, III, and IV
• C. I, III, and IV
• D. I, II, III, and IV

Correct Answer: D

Explanation:

D. All of the choices listed are subject to the FINRA 5-percent markup policy (or 5-percent policy). This means that under normal circumstances, where you have an average-sized trade and you don't have to jump through hoops to execute the transaction, you shouldn't charge more than 5 percent to execute the trade. Now certainly, if the trade is extremely small, you would be able to charge a higher percentage so that your firm doesn't lose money. Also, if a trade is extremely large, 5 percent would be considered excessive.