Securities Industry Essentials (SIE) ExamOverview of Regulatory FrameworkHard
A broker-dealer firm discovers that one of its registered representatives (RRs) previously had their securities license revoked by another regulatory authority due to a felony conviction related to financial fraud. This situation would most likely result in:
- AThe RR being required to complete additional continuing education.
- BThe RR being subject to 'statutory disqualification' by FINRA.
- CA mandatory re-testing requirement for the RR.
- DA temporary suspension of the RR's license pending appeal.
Show answer & explanationAnswer & explanation
Correct answer: B. The RR being subject to 'statutory disqualification' by FINRA.
A felony conviction for financial fraud, or having a securities license revoked by another regulatory authority, typically results in statutory disqualification, which prevents an individual from being associated with a FINRA member firm.
Why the other options are wrong
- A. Additional CE is insufficient for such a serious offense; disqualification is the likely outcome.
- C. Re-testing is not the primary consequence for statutory disqualification; exclusion is.
- D. Statutory disqualification is generally a permanent bar, not a temporary suspension.
Statutory Disqualification
Statutory disqualification is a regulatory status that prohibits an individual from associating with a FINRA member firm due to certain serious past misconduct, such as felony convictions or violations of securities laws.
- Triggered by specific serious events (e.g., felony, securities fraud).
- Prevents association with a FINRA member firm.
- Can be permanent, though waivers are sometimes possible under strict conditions.
Memory trick: Felony Fraud Fails FINRA's Firm Fit.