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Question 1 of 10
1. Question
Regarding IB and FCM, which of the following statements is true?
Correct
IB and FCM
An IB cannot accept customer funds, and therefore requires the services of an FCM. The FCM may act either in a service provider capacity, where the IB remains independent, or in a guarantor capacity. An IB acting under a guaranty agreement with an FCM is required to process all customer activity through the guarantor FCM. An independent IB is not restricted to using a specific FCM to process customer account activity. Regulations prevent an IB from accepting customer funds with the exception of checks made payable to a futures commission merchant (FCM). Therefore, an IB must register as an FCM in order to accept customer payments. An IB that registers as an FCM is subject to a higher threshold with respect to minimum capital and reporting requirements.Incorrect
IB and FCM
An IB cannot accept customer funds, and therefore requires the services of an FCM. The FCM may act either in a service provider capacity, where the IB remains independent, or in a guarantor capacity. An IB acting under a guaranty agreement with an FCM is required to process all customer activity through the guarantor FCM. An independent IB is not restricted to using a specific FCM to process customer account activity. Regulations prevent an IB from accepting customer funds with the exception of checks made payable to a futures commission merchant (FCM). Therefore, an IB must register as an FCM in order to accept customer payments. An IB that registers as an FCM is subject to a higher threshold with respect to minimum capital and reporting requirements. -
Question 2 of 10
2. Question
Which of the following statements is true regarding IB and FCM?
Correct
IB and FCM
An IB cannot accept customer funds, and therefore requires the services of an FCM. The FCM may act either in a service provider capacity, where the IB remains independent, or in a guarantor capacity. An IB acting under a guaranty agreement with an FCM is required to process all customer activity through the guarantor FCM. An independent IB is not restricted to using a specific FCM to process customer account activity. Regulations prevent an IB from accepting customer funds with the exception of checks made payable to a futures commission merchant (FCM). Therefore, an IB must register as an FCM in order to accept customer payments. An IB that registers as an FCM is subject to a higher threshold with respect to minimum capital and reporting requirements.Incorrect
IB and FCM
An IB cannot accept customer funds, and therefore requires the services of an FCM. The FCM may act either in a service provider capacity, where the IB remains independent, or in a guarantor capacity. An IB acting under a guaranty agreement with an FCM is required to process all customer activity through the guarantor FCM. An independent IB is not restricted to using a specific FCM to process customer account activity. Regulations prevent an IB from accepting customer funds with the exception of checks made payable to a futures commission merchant (FCM). Therefore, an IB must register as an FCM in order to accept customer payments. An IB that registers as an FCM is subject to a higher threshold with respect to minimum capital and reporting requirements. -
Question 3 of 10
3. Question
From the statements below regarding IB and FCM, which one seems to be the most appropriate to you?
Correct
IB and FCM
An IB cannot accept customer funds, and therefore requires the services of an FCM. The FCM may act either in a service provider capacity, where the IB remains independent, or in a guarantor capacity. An IB acting under a guaranty agreement with an FCM is required to process all customer activity through the guarantor FCM. An independent IB is not restricted to using a specific FCM to process customer account activity. Regulations prevent an IB from accepting customer funds with the exception of checks made payable to a futures commission merchant (FCM). Therefore, an IB must register as an FCM in order to accept customer payments. An IB that registers as an FCM is subject to a higher threshold with respect to minimum capital and reporting requirements.Incorrect
IB and FCM
An IB cannot accept customer funds, and therefore requires the services of an FCM. The FCM may act either in a service provider capacity, where the IB remains independent, or in a guarantor capacity. An IB acting under a guaranty agreement with an FCM is required to process all customer activity through the guarantor FCM. An independent IB is not restricted to using a specific FCM to process customer account activity. Regulations prevent an IB from accepting customer funds with the exception of checks made payable to a futures commission merchant (FCM). Therefore, an IB must register as an FCM in order to accept customer payments. An IB that registers as an FCM is subject to a higher threshold with respect to minimum capital and reporting requirements. -
Question 4 of 10
4. Question
Which of the following statements is false regarding Commodity Exchange Act (CEA)?
Correct
CEA
Generally, any individual or firm that wants to trade futures must register with the National Futures Association (NFA), unless certain exemptions apply. The governing statute to which NFA rules must conform is the Commodity Exchange Act (CEA). These rules must also comply with the regulations of the Commodity Futures Trading Commission (CFTC).Incorrect
CEA
Generally, any individual or firm that wants to trade futures must register with the National Futures Association (NFA), unless certain exemptions apply. The governing statute to which NFA rules must conform is the Commodity Exchange Act (CEA). These rules must also comply with the regulations of the Commodity Futures Trading Commission (CFTC). -
Question 5 of 10
5. Question
Which of the following statements is true regarding NFA membership requirements?
Correct
NFA membership requirements
In 1978, legislation that amended the Commodity Exchange Act (CEA) was passed. It provided for mandatory membership in at least one futures association that would act in a regulatory capacity on behalf of the Commodity Futures Trading Commission (CFTC). Since the National Futures Association (NFA) is the only such registered futures association, the legislation effectively made NFA membership mandatory.Incorrect
NFA membership requirements
In 1978, legislation that amended the Commodity Exchange Act (CEA) was passed. It provided for mandatory membership in at least one futures association that would act in a regulatory capacity on behalf of the Commodity Futures Trading Commission (CFTC). Since the National Futures Association (NFA) is the only such registered futures association, the legislation effectively made NFA membership mandatory. -
Question 6 of 10
6. Question
From the statements below regarding NFA membership requirements, which one seems to be inappropriate to you?
Correct
NFA membership requirements
In 1978, legislation that amended the Commodity Exchange Act (CEA) was passed. It provided for mandatory membership in at least one futures association that would act in a regulatory capacity on behalf of the Commodity Futures Trading Commission (CFTC). Since the National Futures Association (NFA) is the only such registered futures association, the legislation effectively made NFA membership mandatory.Incorrect
NFA membership requirements
In 1978, legislation that amended the Commodity Exchange Act (CEA) was passed. It provided for mandatory membership in at least one futures association that would act in a regulatory capacity on behalf of the Commodity Futures Trading Commission (CFTC). Since the National Futures Association (NFA) is the only such registered futures association, the legislation effectively made NFA membership mandatory. -
Question 7 of 10
7. Question
Which of the following statements is false regarding NFA member and NFA registrant?
Correct
NFA member and NFA registrant
Any person registered with the Commodity Futures Trading Commission (CFTC) to conduct futures trading is eligible for membership in the NFA. In addition, any contract market (such as the CBOT, the CME, etc.) and any individual specifically qualified by a CFTC rule is eligible for membership.Incorrect
NFA member and NFA registrant
Any person registered with the Commodity Futures Trading Commission (CFTC) to conduct futures trading is eligible for membership in the NFA. In addition, any contract market (such as the CBOT, the CME, etc.) and any individual specifically qualified by a CFTC rule is eligible for membership. -
Question 8 of 10
8. Question
Regarding Requirements for AP trading in discretionary account of customer, which of the following statements is true?
Correct
Requirements for AP trading in discretionary account of customer
An AP is required to have been continuously registered with the NFA for a minimum of two years while concurrently operating in the capacity of an AP in order to trade in the discretionary account of a customer. The exception is if the AP is already registered as a CTA. The NFA has the discretion to waive the experience requirement based upon evidence of equivalent experience.Incorrect
Requirements for AP trading in discretionary account of customer
An AP is required to have been continuously registered with the NFA for a minimum of two years while concurrently operating in the capacity of an AP in order to trade in the discretionary account of a customer. The exception is if the AP is already registered as a CTA. The NFA has the discretion to waive the experience requirement based upon evidence of equivalent experience. -
Question 9 of 10
9. Question
Which of the following statements is not included in Customer information required to establish trading account?
Correct
Customer information required to establish trading account
National Futures Association (NFA) Compliance Rule 2-30 (the know your customer rule) requires that the risks of futures trading be disclosed to customers before a trading account is opened. The minimum information that must be provided by customers in order to establish a trading account is as follows:
• the name, address, and principal occupation or business of the customer
• the current estimated annual income and net worth of the customer (if the customer is an individual)
• the customer’s net worth or net assets and current estimated annual income; or, if current income is not available, the customer’s annual income for the previous year (if the customer is not an individual)
• the approximate age and/or date of birth of the customer (if the customer is an individual)
• an indication of the previous investment and futures trading experience of the customer
• other information considered to be reasonable and appropriate by the member or associate in order to appropriately disclose the risks of futures trading to the customerIncorrect
Customer information required to establish trading account
National Futures Association (NFA) Compliance Rule 2-30 (the know your customer rule) requires that the risks of futures trading be disclosed to customers before a trading account is opened. The minimum information that must be provided by customers in order to establish a trading account is as follows:
• the name, address, and principal occupation or business of the customer
• the current estimated annual income and net worth of the customer (if the customer is an individual)
• the customer’s net worth or net assets and current estimated annual income; or, if current income is not available, the customer’s annual income for the previous year (if the customer is not an individual)
• the approximate age and/or date of birth of the customer (if the customer is an individual)
• an indication of the previous investment and futures trading experience of the customer
• other information considered to be reasonable and appropriate by the member or associate in order to appropriately disclose the risks of futures trading to the customer -
Question 10 of 10
10. Question
Which of the following statements is true customer information required to establish trading account?
Correct
Customer information required to establish trading account
The futures commission merchant (FCM) member who is responsible for an individual customer’s account is required to contact the customer at least annually to verify that the information previously obtained from the customer is still accurate. The FCM member must also give the customer an opportunity to correct or add any necessary account information. The responsible FCM member must determine whether an additional risk disclosure must be provided to the customer whenever he or she is notified of material changes to customer information.Incorrect
Customer information required to establish trading account
The futures commission merchant (FCM) member who is responsible for an individual customer’s account is required to contact the customer at least annually to verify that the information previously obtained from the customer is still accurate. The FCM member must also give the customer an opportunity to correct or add any necessary account information. The responsible FCM member must determine whether an additional risk disclosure must be provided to the customer whenever he or she is notified of material changes to customer information.