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Question 1 of 10
1. Question
Which of the following statements is true regarding the customer information provided by NFA member who is not a FINRA member?
Correct
Customer information provided by NFA member who is not a FINRA member
Information about the customer provided by a National Futures Association (NFA) member who is not also registered as a member of the Financial Industry Regulatory Authority (FINRA) and intends to trade security-based futures on behalf of a customer include the following details:
• The intent of the customer to engage in either hedging or speculation
• The employment status of the customer (name of employer, self-employed, retired, etc.)
• The estimated net worth of the customer (cash, securities, properties, other)
• The marital status of the customer and the number of dependents
• Other information that the member or associate considers reasonable and relevant, and will allow the member or associate to provide appropriate recommendations to the customerIncorrect
Customer information provided by NFA member who is not a FINRA member
Information about the customer provided by a National Futures Association (NFA) member who is not also registered as a member of the Financial Industry Regulatory Authority (FINRA) and intends to trade security-based futures on behalf of a customer include the following details:
• The intent of the customer to engage in either hedging or speculation
• The employment status of the customer (name of employer, self-employed, retired, etc.)
• The estimated net worth of the customer (cash, securities, properties, other)
• The marital status of the customer and the number of dependents
• Other information that the member or associate considers reasonable and relevant, and will allow the member or associate to provide appropriate recommendations to the customer -
Question 2 of 10
2. Question
Regarding Compliance Rule 2-8, which of the following statements is false?
Correct
Compliance Rule 2-8
Once a trade has been executed in a discretionary account, additional steps are required to ensure proper compliance with Compliance Rule 2-8 of the National Futures Association (NFA). NFA Rule 2-8 requires that all trading in discretionary accounts be reviewed by a principal of the member in order to ensure the following:
• A partner, officer, director, branch office manager, or supervisory employee of the member regularly reviews discretionary trading activity, and a designated security futures principal regularly reviews discretionary security futures trading.
• A written record that such review procedures were performed by a partner, officer, director, branch office manager, supervisory employee, or designated security futures principal is created.Incorrect
Compliance Rule 2-8
Once a trade has been executed in a discretionary account, additional steps are required to ensure proper compliance with Compliance Rule 2-8 of the National Futures Association (NFA). NFA Rule 2-8 requires that all trading in discretionary accounts be reviewed by a principal of the member in order to ensure the following:
• A partner, officer, director, branch office manager, or supervisory employee of the member regularly reviews discretionary trading activity, and a designated security futures principal regularly reviews discretionary security futures trading.
• A written record that such review procedures were performed by a partner, officer, director, branch office manager, supervisory employee, or designated security futures principal is created. -
Question 3 of 10
3. Question
From the statements below regarding foreign futures/options, which one seems to be the most appropriate to you?
Correct
Foreign futures/options
Compliance Rule 2-8 states, in part, that an NFA member or associate cannot exercise discretion with regard to foreign futures or foreign options transactions on behalf of a customer unless the customer or account controller has specifically given written authorization for the member or associate to exercise such discretion. As with all transactions, written authorization should be provided in the form of a power of attorney or other such instrument.Incorrect
Foreign futures/options
Compliance Rule 2-8 states, in part, that an NFA member or associate cannot exercise discretion with regard to foreign futures or foreign options transactions on behalf of a customer unless the customer or account controller has specifically given written authorization for the member or associate to exercise such discretion. As with all transactions, written authorization should be provided in the form of a power of attorney or other such instrument. -
Question 4 of 10
4. Question
Which of the following statements is false regarding compliance with CFTC and Bank Secrecy Act and the Department of the Treasury?
Correct
Compliance with CFTC and Bank Secrecy Act and the Department of the Treasury
The minimum program requirements intended to ensure member compliance with Commodity Futures Trading Commission (CFTC) regulations and the anti-money laundering regulations of the Bank Secrecy Act and the Department of the Treasury include the following:
• the establishment and implementation of reasonably designed policies, procedures, and internal controls that are sufficient to ensure compliance with the applicable provisions of the Bank Secrecy Act and implementing regulations
• the establishment of an independent testing compliance program administered by a member or a similarly qualified outside party
• the designation and assignment of an individual or individuals who will assume responsibility for the implementation and monitoring of daily operations and internal program controls
• the establishment of a continuous training program for appropriate personnelIncorrect
Compliance with CFTC and Bank Secrecy Act and the Department of the Treasury
The minimum program requirements intended to ensure member compliance with Commodity Futures Trading Commission (CFTC) regulations and the anti-money laundering regulations of the Bank Secrecy Act and the Department of the Treasury include the following:
• the establishment and implementation of reasonably designed policies, procedures, and internal controls that are sufficient to ensure compliance with the applicable provisions of the Bank Secrecy Act and implementing regulations
• the establishment of an independent testing compliance program administered by a member or a similarly qualified outside party
• the designation and assignment of an individual or individuals who will assume responsibility for the implementation and monitoring of daily operations and internal program controls
• the establishment of a continuous training program for appropriate personnel -
Question 5 of 10
5. Question
Regarding daily reporting requirements, which of the following statements is true?
Correct
Daily reporting requirements
The CFTC and the exchanges require daily reporting from futures commission merchants (FCM) and clearing members in all so-called reportable positions. Any single trader that exceeds certain thresholds set by either the CFTC or the exchange regarding the net long or short position in a single futures or option (or all futures or options for a single commodity) is deemed to be in a reportable position. The purpose of the disclosure is to identify and thus preclude any attempts by a trader to accumulate a position sufficiently large to enable market control and price manipulation of a commodity futures or option.Incorrect
Daily reporting requirements
The CFTC and the exchanges require daily reporting from futures commission merchants (FCM) and clearing members in all so-called reportable positions. Any single trader that exceeds certain thresholds set by either the CFTC or the exchange regarding the net long or short position in a single futures or option (or all futures or options for a single commodity) is deemed to be in a reportable position. The purpose of the disclosure is to identify and thus preclude any attempts by a trader to accumulate a position sufficiently large to enable market control and price manipulation of a commodity futures or option. -
Question 6 of 10
6. Question
Which of the following statements is true regarding large trader reporting requirements of the CFTC?
Correct
Large trader reporting requirements of the CFTC
The term large trader signifies that the limit on positions has been reached, which triggers a reportable event. A futures commission merchant (FCM), clearing member, or foreign broker must include a special account identification report containing background information for each large trader in his or her daily report. In addition, each large trader may be asked to provide additional information to the CFTC upon request.Incorrect
Large trader reporting requirements of the CFTC
The term large trader signifies that the limit on positions has been reached, which triggers a reportable event. A futures commission merchant (FCM), clearing member, or foreign broker must include a special account identification report containing background information for each large trader in his or her daily report. In addition, each large trader may be asked to provide additional information to the CFTC upon request. -
Question 7 of 10
7. Question
Regarding daily reporting requirements, which of the following statements is true?
Correct
Daily reporting requirements
The CFTC and the exchanges require daily reporting from futures commission merchants (FCM) and clearing members in all so-called reportable positions. Any single trader that exceeds certain thresholds set by either the CFTC or the exchange regarding the net long or short position in a single futures or option (or all futures or options for a single commodity) is deemed to be in a reportable position. The purpose of the disclosure is to identify and thus preclude any attempts by a trader to accumulate a position sufficiently large to enable market control and price manipulation of a commodity futures or option.Incorrect
Daily reporting requirements
The CFTC and the exchanges require daily reporting from futures commission merchants (FCM) and clearing members in all so-called reportable positions. Any single trader that exceeds certain thresholds set by either the CFTC or the exchange regarding the net long or short position in a single futures or option (or all futures or options for a single commodity) is deemed to be in a reportable position. The purpose of the disclosure is to identify and thus preclude any attempts by a trader to accumulate a position sufficiently large to enable market control and price manipulation of a commodity futures or option. -
Question 8 of 10
8. Question
From the statements below regarding special call provision, which one seems to be inappropriate to you?
Correct
Special call provision
A special call is used by the CFTC to obtain information from registered individuals or entities for specific purposes. Examples of such special call information include the following:
• information regarding persons who exercise control over the trading in a customer account
• information regarding open contracts containing specific futures or options positions owned or controlled by traders
• information on selected special open contracts of various traders or clearing members identified by the CFTCIncorrect
Special call provision
A special call is used by the CFTC to obtain information from registered individuals or entities for specific purposes. Examples of such special call information include the following:
• information regarding persons who exercise control over the trading in a customer account
• information regarding open contracts containing specific futures or options positions owned or controlled by traders
• information on selected special open contracts of various traders or clearing members identified by the CFTC -
Question 9 of 10
9. Question
Which of the following statements is true regarding exemption from position reporting limits?
Correct
Exemption from position reporting limits
A speculative position limit sets the maximum value a single trader can hold in a single futures or option contract, regardless of whether the position is net short or net long. Hedge positions which conform to the structure defined by the Commodity Futures Trading Commission (CFTC) are generally exempt from position reporting limits. While the defined structure can be quite specific, the general requirements for a qualifying hedge are that the hedge:
• represents a substitute for transactions made or to be made, or for positions taken or to be taken at a later time in a physical marketing channel
• is economically appropriate for the purpose of reducing risk related to the conduct and management of a commercial enterprise
• arises from the potential change of one or several underlying assetsIncorrect
Exemption from position reporting limits
A speculative position limit sets the maximum value a single trader can hold in a single futures or option contract, regardless of whether the position is net short or net long. Hedge positions which conform to the structure defined by the Commodity Futures Trading Commission (CFTC) are generally exempt from position reporting limits. While the defined structure can be quite specific, the general requirements for a qualifying hedge are that the hedge:
• represents a substitute for transactions made or to be made, or for positions taken or to be taken at a later time in a physical marketing channel
• is economically appropriate for the purpose of reducing risk related to the conduct and management of a commercial enterprise
• arises from the potential change of one or several underlying assets -
Question 10 of 10
10. Question
Regarding speculative position limits and position accountability limits, which of the following statements is true?
Correct
Speculative position limits and position accountability limits
Speculative position limits represent the maximum position of combined futures and options (either net long or net short) that may be held by any single trader or group of traders acting in concert. CFTC regulations currently apply such limits to grains, the soybean complex, and cotton. Exchanges may extend the limits to other commodities. Position accountability limits permit traders to accumulate positions that exceed the limitation amounts in exchange for on-demand reporting of such positions as requested by the CFTC and/or the exchange.Incorrect
Speculative position limits and position accountability limits
Speculative position limits represent the maximum position of combined futures and options (either net long or net short) that may be held by any single trader or group of traders acting in concert. CFTC regulations currently apply such limits to grains, the soybean complex, and cotton. Exchanges may extend the limits to other commodities. Position accountability limits permit traders to accumulate positions that exceed the limitation amounts in exchange for on-demand reporting of such positions as requested by the CFTC and/or the exchange.