SIE Knowledge of Capital Markets Question 2: Answer and Explanation

Question: 2

Which of the following best describes the role of self-regulatory organizations (SROs)?

• A. To promote public knowledge of investment principles
• B. To prevent criminals from purchasing securities
• C. To prevent felons from selling securities
• D. To develop and enforce industry standards

Correct Answer: D

Explanation:

D: Promoting public knowledge of investment principles best describes the role of self-regulatory organizations (SROs). Choice A is not a primary role of SROs, although SROs may assist the public in having the facts that would help them apply investment principles. Choice B is not a significant role of SROs, although the Anti-Money Laundering law is intended to reduce, or even prevent, the laundering of terrorist money through investment transactions. Choice C may partly be a result of some activity by SROs, but it is not an absolute mandate for SROs.