Trading, Accounts & Prohibited ActsQuestion 279 of 398
Broker-dealers are required to establish, maintain, and enforce written policies to prevent the misuse of material nonpublic information. These are commonly called:
a.Best-execution rules
b.Information barriers (or 'Chinese Walls')
c.Payout grids
d.Prospectus delivery rules
Explanation
Firms must maintain information barriers (historically called 'Chinese Walls') to prevent MNPI from flowing between departments (for example, from investment banking to trading). This is required to control insider trading risk under federal law.
Law Reference: Insider Trading and Securities Fraud Enforcement Act of 1988Practice all 398 questions free — no signup required.
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