Free FINRA Series 7 (General Securities Representative) Processing Transactions Practice Questions

Choice D is correct because a crossed market occurs when the national best bid on one exchange exceeds the national best offer (ask) on another exchange. This creates an anomaly where a buyer is willing to pay more than a seller is asking, indicating a breakdown in normal price discovery. Regulation NMS prohibits trade-throughs and requires market centers to prevent crossed and locked markets through their quotation practices.

Choice C is correct because in a principal transaction, the broker-dealer acts as a dealer, buying from or selling to the customer from the firm's own inventory (proprietary account). The firm earns a markup or markdown rather than a commission.

B is correct. A customer settlement triggers a Form U4 disclosure for the registered person only when the payment attributable to that person is $15,000 or more; a $10,000 settlement falls below that threshold and does not require a U4 amendment, so this statement is inaccurate (the dollar amount and the supposed obligation are both wrong). The remaining statements are correct: arbitration awards are final and binding with very limited grounds for court appeal, member firms report written customer complaints to FINRA through quarterly statistical filings, and a predispute arbitration agreement channels most public-customer disputes into arbitration rather than the courts.