Wylie, a registered representative, recently opened an investment account for a client who is listed on the Specially Designated Nationals list. What crime has been committed?

• A. Tax fraud
• B. Insider trading
• C. Money laundering
• D. Securities fraud

Answer: (D)

The main idea being tested is compliance with sanctions and securities laws when dealing with clients who are on the Specially Designated Nationals list. When a registered representative opens an investment account for someone listed on that sanctions list, they are facilitating securities activity for a prohibited person. That interaction falls under securities fraud because it involves providing investment services in a way that violates regulatory restrictions and sanctions rules. The broker has a duty to screen clients against the SDN list and to refuse or block services to designated individuals; circumventing that duty by opening the account and enabling trades constitutes a fraudulent act in the securities markets.

Tax fraud would involve evading taxes, which isn’t the issue here. Insider trading centers on using material nonpublic information to trade, which isn’t specified in this scenario. Money laundering involves concealing the origins of illicit funds, which could be related in broader sanctions contexts, but the specific act described—opening an account for a sanctioned individual to engage in securities activities—fits securities fraud best in the options given.