General Securities Sales Supervisor (Series10) Practice Exam

Under FINRA rules, how should riskless or simultaneous transactions be handled?

1. They are prohibited as a violation of the Conduct Rules

2. They are permitted only if the execution results in a better price for the customer

3. They are permitted if the transaction complies with the 5% Mark-Up Policy

4. They are permitted without any qualifications

The correct answer is: They are permitted if the transaction complies with the 5% Mark-Up Policy

Riskless or simultaneous transactions refer to trades that are executed at the same time, where one side offsets the other, such that there is no risk to the broker-dealer in the transaction. Under FINRA rules, specifically related to these types of transactions, they must comply with certain standards to be considered permissible. The correct handling of these transactions ensures that they align with regulatory guidelines, particularly including the 5% Mark-Up Policy. This policy stipulates that any mark-up, mark-down, or commission charged to a customer cannot exceed 5% of the total transaction price, unless justifiable in the context of market conditions and the specific nature of and service provided in the transaction. This ensures that customers are treated fairly, and that broker-dealers act responsibly with the clients' interests in mind. In contrast, the other options either suggest prohibitions or conditions that do not align with the regulatory framework as effectively. By supporting the adherence to the 5% Mark-Up Policy, the provided answer emphasizes maintaining transparent and equitable practices in transactions, which is a key principle of the financial services industry.