General Securities Sales Supervisor (Series10) Practice Exam

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Study for the General Securities Sales Supervisor (Series10) exam. Prepare with flashcards and multiple-choice questions, each question has hints and explanations. Get ready for your exam!

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What must a principal of a municipal firm do if they are also a supervisor of a school board whose bonds the firm is trading?

A Report the relationship to FINRA
B Disclose the relationship to customers
C Ensure no personal trading occurs
D Seek approval from regulatory agencies

The correct answer is: B Disclose the relationship to customers

Disclosing the relationship to customers is essential in maintaining transparency and ethical standards in the trading of municipal bonds. When a principal of a municipal firm also supervises a school board that issues bonds, there is a potential conflict of interest. Customers need to be made aware of this connection to ensure they understand the implications and can make informed decisions regarding their investments. By disclosing this relationship, the principal helps to build trust and mitigate any concerns customers may have about the fairness and impartiality of the firm’s trading practices. Transparency is a critical component of compliance with securities regulations and helps to comply with ethical standards expected of financial professionals engaged in municipal securities. The emphasis on disclosure aligns with the principle that clients deserve to be fully informed about any potential conflicts that may affect their investments.