Series 7 Exam Question 277: Answer and Explanation

Question: 277

Which of the following disputes must be resolved using the Code of Arbitration?

I. A dispute between a member of FINRA and a registered rep

II. A dispute between a member of FINRA and a customer

III. A dispute between two members of FINRA

IV. A dispute between a bank and a member of FINRA

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

Correct Answer: C

Explanation:

C. As you can see, the one common denominator is that all the answer choices have the word "FINRA" in them, which tells you that being a FINRA member must be pretty important. The Code of Arbitration is mandatory in member-against-member disputes including a member firm and one of its registered reps. However, FINRA has no jurisdiction over banks or over disputes between nonmembers such as customers or issuers; in cases such as these, the nonmember decides whether to use arbitration or a Code of Procedure hearing to settle a dispute.