Securities Trader Representative (Series 57) Practice Exam

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A FINRA member engaging in stabilizing activity must notify which entity?

Nasdaq Market Operations
FINRA Corporate Financing Department
The SEC
The market on which the stabilizing transactions will be effected

The correct answer is: The market on which the stabilizing transactions will be effected

The requirement for notifying the market on which stabilizing transactions will be effected stems from the need for transparency and proper communication within the marketplace. Stabilizing transactions, which are designed to support the price of a new issue and prevent its decline in the secondary market, must be reported to the trading venue to ensure that all market participants are aware of potential price manipulation. This notification is crucial because stabilizing activities can influence how the market perceives an issued security. By informing the relevant market, the member ensures that there is full disclosure regarding the trading activity associated with the security, helping to maintain market integrity and fostering a level playing field for all investors involved. This is especially significant for trading venues like exchanges or other platforms where the securities are listed or traded, as they need to monitor any activities that may influence price movements. While notifying other entities such as the SEC or industry-specific departments might also be relevant in different contexts, the most direct requirement in relation to stabilizing activity is to inform the market where those transactions are taking place. This focus on market notification underscores the importance of regulatory compliance and ethical trading practices within the securities landscape.