SIE Overview of the Regulatory Framework Question 15: Answer and Explanation

Question: 15

Which of the following events regarding a member firm results in the firm being subject to discontinuance of that membership, according to FINRA By-laws, Article III, Section 3 and legislation and regulation referenced in that section?

• A. The member is disciplined by a local school board.
• B. The member is cited by a police officer for a misdemeanor.
• C. The member is disciplined by a state securities commission.
• D. The member is fined by the Internal Revenue Service for a non-timely filing of a federal income tax return.

Correct Answer: C

Explanation:

C: Choice C is correct because the FINRA By-laws require member firms to be in good standing with all state securities commission with jurisdiction over the member firm. Choices A, B, and D are incorrect because FINRA By-laws, Article III, Section 3 and legislation and regulation referenced in that section do not address discipline by a local school board, being cited by a police officer for a misdemeanor, or being fined by the IRA.