SEC Phase 1 key terms

The U.S. federal regulator created by the Securities Exchange Act of 1934 to oversee securities markets, protect investors, and enforce federal securities laws through rulemaking and examination.

The first major federal securities law, requiring that offers and sales of securities be registered unless an exemption applies and imposing liability for material misstatements or omissions in registration statements.

The statute governing secondary trading markets, creating the SEC and requiring periodic reporting, proxy rules, and registration of broker-dealers and exchanges.

The federal law regulating persons who, for compensation, advise others about securities, imposing fiduciary duties, registration, disclosure, and recordkeeping obligations on advisers.

The statute that regulates pooled investment vehicles such as mutual funds, governing their structure, disclosure, custody, and affiliated-transaction restrictions.

A self-regulatory organization for broker-dealers, operating under SEC oversight to write and enforce rules on sales practices, supervision, registration, and conduct.

A private membership body, such as an exchange or FINRA, that writes and enforces rules for its members under delegated authority and SEC oversight.

The Municipal Securities Rulemaking Board, which writes rules for municipal securities dealers and advisers; those rules are enforced by FINRA and bank regulators rather than the MSRB itself.

A firm that buys and sells securities for its own account or on behalf of customers and must register with the SEC and join an SRO such as FINRA.

A person or firm that, for compensation, engages in the business of advising others about securities; registration thresholds and duties depend on assets under management and client type.

The obligation to act in the client's best interest, placing the client's interests ahead of one's own and including duties of care and loyalty.

The requirement that a recommended securities transaction or strategy be reasonable for the customer given their investment profile, including objectives, risk tolerance, and financial circumstances.

An SEC rule requiring broker-dealers to act in the retail customer's best interest when recommending securities, with obligations of disclosure, care, conflict of interest, and compliance.

The process of collecting and verifying information about a client's identity, finances, and investment objectives before opening an account or making recommendations.

Programs and procedures designed to detect and report money laundering, including customer due diligence, monitoring, and suspicious activity reporting.

A required written program for verifying the identity of each customer at account opening, collecting name, date of birth, address, and identification number.

A confidential filing made to authorities when a firm detects transactions that may involve money laundering, fraud, or other illegal activity; tipping off the subject is prohibited.

The disclosure document filed with the SEC before a public offering, describing the issuer, its business, financials, and the securities being sold.

The formal offering document that must be delivered to investors in a registered offering, containing information needed to make an informed investment decision.

A preliminary prospectus used during the waiting period before a registration statement becomes effective; it lacks a final offering price and is marked as not yet effective.

The ongoing obligation of public companies to file annual, quarterly, and current reports with the SEC so investors receive timely material information.

Information a reasonable investor would consider important in deciding whether to buy or sell a security; trading on it before public disclosure can constitute insider trading.

Trading securities while in possession of material nonpublic information in breach of a duty, or communicating such information to another person who trades.

An internal information barrier separating departments, such as investment banking from research or trading, to prevent misuse of confidential information.

Situations where a firm's or representative's personal or business interests could improperly influence advice or recommendations given to clients.

The act of providing clients and the market with complete, accurate, and timely information about risks, fees, conflicts, and material facts.

The registration and disclosure document investment advisers file with regulators, describing their business, services, fees, and conflicts; Part 2 is delivered to clients.

The uniform application used to register associated persons of broker-dealers and advisers, disclosing employment history and any reportable disciplinary events.

The uniform termination notice filed when a registered person leaves a firm, stating the reason for termination and any conduct concerns.

A legal bar preventing a person with certain criminal, regulatory, or disciplinary history from associating with a regulated firm absent a granted waiver.

The duty to seek the most favorable terms reasonably available for customer orders, considering price, speed, likelihood of execution, and order size.

Rules governing how customer orders are received, prioritized, executed, and allocated, including prompt execution and prohibitions on trading ahead of customers.

Trading for one's own account ahead of a known customer order to profit from the expected price impact, which is prohibited.

Conduct intended to deceive or defraud investors by controlling or artificially affecting the price or volume of a security, such as wash trades.

A legal provision allowing securities to be offered or sold without full registration, such as private placements or limited intrastate offerings.

An investor meeting income, net worth, or professional certification thresholds, permitting participation in certain unregistered offerings.

A firm's written standards of conduct covering integrity, confidentiality, personal trading, and reporting violations, often required by regulation.

Internal rules limiting employee securities transactions to prevent conflicts, including pre-clearance, blackout periods, and reporting of holdings.

The policies, procedures, training, testing, and oversight a firm maintains to detect and prevent violations of laws and internal rules.

The obligation of firms and managers to reasonably oversee representatives' conduct, review communications, and address red flags of misconduct.