SIE Understanding Trading, Customer Accounts and Prohibited Activities Question 48: Answer and Explanation

Question: 48

Which of the following resulted in corporate stock and corporate bonds settling more quickly?

• A. SEC rule in 2017 called "T+2"
• B. SEC Regulation T
• C. Consumer Credit Protection Act of 1968 (CCPA)
• D. Sarbanes-Oxley (SOX) Act of 2002

Correct Answer: A

Explanation:

A: Choice A is correct because the SEC changed the standard trading schedule, called "regular way" settlement, from "trade plus three [days]" (T+3) to "trade plus two [days]" (T+2). This was in recognition that technology advances made the shorter time frame attainable, and the exchanges and investors would benefit from the shorter settlement time. Choice B is incorrect because Regulation T governs details around cash accounts and how much investors may borrow from a broker or dealer in order to purchase securities. The limit is fifty percent (50%). The remainder must be paid from the investor's own funds. Choice C is incorrect because the Consumer Credit Protection Act of 1968 (CCPA) initiated protection for consumers from improper loan practices by such lenders as banks and credit card companies by providing better disclosure. Choice D is incorrect because the purpose of the Sarbanes-Oxley (SOX) Act of 2002 was to require accurate corporate financial reporting.