General Securities Sales Supervisor (Series10) Practice Exam

Under the Insider Trading Act Amendments, who must a broker-dealer have written policies to prevent misuse of material non-public information?

1. Employees of the broker-dealer

2. Associated persons of the broker-dealer

3. Suppliers of the broker-dealer

4. Disinterested parties of the broker-dealer

The correct answer is: Suppliers of the broker-dealer

The requirement for broker-dealers to establish written policies aimed at preventing the misuse of material non-public information primarily extends to associated persons of the broker-dealer. This includes both employees and other individuals who have a direct association with the broker-dealer, such as agents and partners. The framework surrounding insider trading emphasizes the importance of ensuring that all personnel who have access to sensitive information are adequately informed about their responsibilities and the legal implications of mishandling that information. The inclusion of associated persons in the policies is crucial because they potentially have direct access to confidential financial data and may inadvertently or intentionally misuse this information if not properly educated and monitored. Therefore, building these written policies is a part of compliance with the regulations set forth under the Insider Trading Act Amendments, aiming to foster a culture of legal and ethical conduct within the financial services industry. The other options are less relevant as suppliers and disinterested parties do not typically have the same level of access or responsibility regarding non-public information as associated persons do.