This question is confusing as the material is not clear

FINRA FINRA SIE
1

legist
legist1636Ă—736 30.9 KB

If there was an option for Legislative, I probably would have chosen that, as the verbiage says the government implementing new laws.

Regulatory risk

  • Potential or current government regulation negatively affects an investment

Legislative risk

  • New domestic law or regulation negatively affects a security

Kaplan definition: The potential for an investment to be adversely affected by changes in investment or tax laws.

So what I am understanding is that it is a law SPECIFIC to the securities industry or to tax laws. Not just ANY laws.

The question states, “new laws”. Not new regulations.

The answer Regulatory is correct - the chapters explanation is not clear

2

Hi @SoniaDanielle, in most situations, laws and regulations can be used interchangeably!

If this question had both regulatory risk and legislative risk as options, it would be much more challenging.

It feels like you understand the concepts so my advice is to continue with other topics, but here are two examples that might help clarify:

  • Regulatory risk: The US government is discussing passing a law that requires Apple to allow the US government access to encrypted messages between users.
  • Legislative risk: The US government is discussing passing a law that requires Apple to pay an additional 25% tax on purchases on semiconductors and materials manufactured overseas.

Many concepts can often apply in these situations, and it’s important to pick the best choice of the given options, without worrying about technicalities!

1 Like