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Official Practice ProblemFINRA Series 7 Blueprint: Function 3
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Question #s7-prep2-s7-q-117Function 3Fundamental

Securities Act 1934

What is the purpose of a Rule 10b5-1 trading plan?

Correct Choice: B

10b5-1 plans: Established when clean (no MNPI), specifies trades in advance, 90-day cooling-off for officers/directors.

Complete Analysis & Legal Rationale

Rule 10b5-1 trading plans provide an affirmative defense against insider trading liability. If an insider establishes a written trading plan when they do not possess MNPI, and the plan specifies the trades in advance, they can execute the trades even if they later acquire MNPI.

Distractor Autopsy (Why Other Options Are Traps)

FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:

Choice AIncorrect
Concept Trap

Does not match the governing concept in the explanation.

Choice BCorrect
None

Matches the verified teaching point in the explanation.

Choice CIncorrect
Concept Trap

Does not match the governing concept in the explanation.

Choice DIncorrect
Concept Trap

Does not match the governing concept in the explanation.

Authorities & References:

Official Standard: Secondary-market / antifraud framework including Section 10(b) (verify current text).

Official SourceSEC Securities Exchange Act of 1934 — Securities Exchange Act of 1934

Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.

Official SourceFINRA FINRA Series 7 Content Outline — General Securities Representative Examination (Series 7) Content Outline
🏛️

Regulatory Authority & Citations: Primary Legal Sources

Verified citations governing Question #s7-prep2-s7-q-117 (FINRA Series 7 Content Outline)

To pass the FINRA Series 7, candidates must understand not just the calculation formulas, but the exact federal securities acts, SRO rulebooks, and statutory frameworks that enforce them. Review the primary authority records below:

SECSecurities Exchange Act of 1934— Securities Exchange Act of 1934

Secondary-market / antifraud framework including Section 10(b) (verify current text).

Read SEC Official Rule
FINRAFINRA Series 7 Content Outline— General Securities Representative Examination (Series 7) Content Outline

Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.

Read FINRA Official Rule

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