Series 24 — General Securities Principal — All Questions

Under FINRA Rule 5310, a firm handling a customer order must use reasonable diligence to:

• a.Obtain the best execution, seeking the most favorable price under prevailing conditions✓
• b.Execute the order only on the firm's own trading desk
• c.Delay the order until the end of the trading day
• d.Match the order against the firm's proprietary position first

The best execution rule requires firms to use reasonable diligence to obtain the most favorable terms reasonably available for a customer order. Firms must conduct regular and rigorous reviews of execution quality and may not simply route to their own desk if better prices exist elsewhere.

A market maker in an equity security is obligated to:

• a.Buy shares only when the price is rising
• b.Guarantee customers a profit on every trade
• c.Publish firm two-sided quotations and stand ready to buy and sell✓
• d.Report trades once per week

A market maker holds itself out as continuously willing to buy and sell and must display firm two-sided (bid and ask) quotations. This provides liquidity and continuous pricing. Trades must be reported promptly, generally within a short time after execution.

The Manning rule generally prohibits a firm from:

• a.Charging any markup on a principal trade
• b.Making a market in more than one security
• c.Displaying a customer limit order to the public
• d.Trading ahead of a customer limit order for its own account without filling the customer at the same or better price✓

The Manning rule protects customer limit orders: a firm may not trade for its own account at a price that would satisfy the customer's limit order without also executing that customer order at the same or a better price. This prevents the firm from profiting at the customer's expense.

Entering matched orders to create the false appearance of active trading in a security is:

• a.A permitted market-making technique
• b.A manipulative practice prohibited under the Securities Exchange Act✓
• c.Required by Regulation M during a distribution
• d.Allowed if disclosed to customers afterward

Wash trades and matched orders that fabricate the appearance of trading activity are manipulative and prohibited under the Securities Exchange Act and Rule 10b-5. They deceive other market participants and cannot be cured by later disclosure.