Securities Industry Essentials (SIE) ExamOverview of Regulatory FrameworkHard
A broker-dealer firm's compliance officer is educating new registered representatives (RRs) about the importance of maintaining client confidentiality and protecting sensitive customer information. Which regulation specifically mandates that financial institutions develop policies and procedures to protect the privacy of customer financial information?
- ASecurities Act of 1933
- BUSA PATRIOT Act
- CSarbanes-Oxley Act (SOX)
- DRegulation S-P (Privacy of Consumer Financial Information)
Show answer & explanationAnswer & explanation
Correct answer: D. Regulation S-P (Privacy of Consumer Financial Information)
Regulation S-P, promulgated by the SEC under the Gramm-Leach-Bliley Act, specifically requires financial institutions, including broker-dealers, to adopt policies and procedures to protect the privacy of customer financial information and to provide privacy notices.
Why the other options are wrong
- A. The Securities Act of 1933 regulates the primary market and new issues, not customer privacy.
- B. The USA PATRIOT Act focuses on anti-money laundering and combating terrorist financing.
- C. SOX primarily focuses on corporate governance and accounting standards for public companies.
Regulation S-P
Regulation S-P requires financial institutions, including broker-dealers, to establish policies and procedures to protect the privacy of customer financial information and to provide customers with privacy notices that explain the institution's information-sharing practices.
- Protects customer financial information privacy.
- Requires privacy notices to customers.
- Mandates opt-out provisions for sharing non-public personal information.
- Implemented under the Gramm-Leach-Bliley Act.
Memory trick: Regulation S-P: 'Secure Private' client data, or face the music.