SIE Understanding Trading, Customer Accounts and Prohibited Activities Question 30: Answer and Explanation

Question: 30

Which of the following FINRA Rules requires a broker-dealer to disclose to a customer when the broker-dealer participates in the transaction by arranging for a security to be purchased at a lower price and sold to the customer at a higher price?

• A. FINRA Rule 2121 – Fair Prices and Commissions
• B. FINRA Rule 2122 – Charges for Services Performed
• C. FINRA Rule 2124 – Net Transactions with Customers
• D. FINRA 5210 – Publication of Transactions and Quotations

Correct Answer: C

Explanation:

C: Choice C is correct because the purchase of the security at one price and selling to the customer at a different price is known as a net transaction. Choices A, B, and D are incorrect because those rules do not deal with compensation for net transactions with customers.