General Securities Sales Supervisor (Series10) Practice Exam

What percentage difference in reported trades is likely to indicate an "obvious error" under FINRA rules?

1. 5% difference

2. 10% difference

3. 25% difference

4. 50% difference

The correct answer is: 10% difference

A 10% difference in reported trades is considered an indicator of an "obvious error" under FINRA rules. This threshold is established to help ensure the integrity and accuracy of trade reporting in the securities industry. A difference of this magnitude suggests that there may have been a mistake in the reporting process, whether due to clerical errors, miscommunication, or other factors. The reason for setting the threshold at 10% specifically is to strike a balance between allowing some tolerance for minor discrepancies while identifying more significant errors that could impact market fairness and transparency. Such a standard allows firms to investigate and rectify the reporting of trades that may lead to market confusion or misrepresentation of trading activity. In contrast, differences below this percentage are likely viewed as normal variances that might occur in the course of trading operations. The higher options, such as 25% or 50%, would signify more severe discrepancies that might warrant scrutiny, but they exceed the threshold established by FINRA for an obvious error.