Free FINRA Series 7 (General Securities Representative) Processing Transactions Practice Questions
Trade execution and settlement on the FINRA Series 7 exam covers order types (market, limit, stop), trade reporting, T+1 settlement cycles, delivery requirements, corporate actions (dividends, splits), and regulatory compliance for securities transactions.
Sample Questions
Question 1
Easy
Under Regulation NMS, a crossed market occurs when:
Solution
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.
Question 2
Medium
Which of the following best describes a principal transaction?
Solution
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.
Question 3
Hard
A registered representative is reviewing how customer complaints, arbitration, and Form U4 reporting fit together. All of the following statements are accurate EXCEPT:
Solution
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.