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Question 1 of 30
1. Question
Which of the following conditions may grant an application for a temporary license to an Associated Person?
I. The applicant has been hired or otherwise employed by the sponsor
II. The applicant’s registration is not revoked or suspended
III. The new sponsor has received a copy of the notice of the institution of NFA
IV. The applicant’s registration with a previous sponsor as an AP has terminated no more than 45 days prior to the date the sponsor files the Form 8-RCorrect
The applicant’s registration with a previous sponsor as an AP has terminated no more than 60 days per to the date the sponsor files the Form 8-R.
Reference: Registration Rules Part 300. Temporary Licenses
Incorrect
The applicant’s registration with a previous sponsor as an AP has terminated no more than 60 days per to the date the sponsor files the Form 8-R.
Reference: Registration Rules Part 300. Temporary Licenses
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Question 2 of 30
2. Question
Which of the following risks is NOT TRUE when it comes to security futures contracts?
Correct
As with any financial transaction, you may experience losses if your orders for security futures contracts cannot be executed normally due to systems failures on a regulated exchange or at the brokerage firm carrying your position. Your losses may be greater if the brokerage firm carrying your position does not have adequate back-up systems or procedures.
Reference: 9050 – NFA COMPLIANCE RULE 2-30(b): RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS
Incorrect
As with any financial transaction, you may experience losses if your orders for security futures contracts cannot be executed normally due to systems failures on a regulated exchange or at the brokerage firm carrying your position. Your losses may be greater if the brokerage firm carrying your position does not have adequate back-up systems or procedures.
Reference: 9050 – NFA COMPLIANCE RULE 2-30(b): RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS
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Question 3 of 30
3. Question
Which of the following is NOT a special risk for Day Traders?
Correct
Before engaging in a day trading strategy, you must understand that it is highly risky for someone who has no or little experience with day trading and that you will compete with professional traders who are knowledgeable ad sophisticated in these markets.
Reference: 9050 – NFA COMPLIANCE RULE 2-30(b): RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS
(Section 7 – Special Risks for Day Traders)Incorrect
Before engaging in a day trading strategy, you must understand that it is highly risky for someone who has no or little experience with day trading and that you will compete with professional traders who are knowledgeable ad sophisticated in these markets.
Reference: 9050 – NFA COMPLIANCE RULE 2-30(b): RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS
(Section 7 – Special Risks for Day Traders) -
Question 4 of 30
4. Question
Within how many days of the scheduled hearing during the course of an arbitration proceeding shall the Panel consider granting postponement if a Member/Associate party withdraws its membership from NFA?
Correct
If a Member/Associate arty withdraws from NFA membership during the course of an arbitration proceeding within 60 days of the scheduled hearing, then the Panel shall grant a postponement of the hearing.
Reference: Member Arbitration Rules (SECTION 2. ARBITRABLE DISPUTES)
Incorrect
If a Member/Associate arty withdraws from NFA membership during the course of an arbitration proceeding within 60 days of the scheduled hearing, then the Panel shall grant a postponement of the hearing.
Reference: Member Arbitration Rules (SECTION 2. ARBITRABLE DISPUTES)
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Question 5 of 30
5. Question
Which of the following is NOT TRUE when it comes to accessing NFA’s electronic financial reports database?
Correct
Each Member shall make available any person it has authorized to make or actually performing duties related to electronic filings, for testimony in court or before the Commission, NFA, or any contract market regarding the authentication, integrity o accuracy of any electronic filing.
Reference: SECTION 5. INTRODUCING BROKER FINANCIAL REQUIREMENTS.
Incorrect
Each Member shall make available any person it has authorized to make or actually performing duties related to electronic filings, for testimony in court or before the Commission, NFA, or any contract market regarding the authentication, integrity o accuracy of any electronic filing.
Reference: SECTION 5. INTRODUCING BROKER FINANCIAL REQUIREMENTS.
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Question 6 of 30
6. Question
Which of the following advisories should an FCM or IB Member provide customers engaging in virtual currencies derivative transactions?
I. Futures on Virtual Currencies Including Bitcoin
II. C.F.T.C Commitment of Traders report
III. Dow Jones Futures contract
IV. Understand the Risk of Virtual Currency TradingCorrect
FCM or IB Members must provide:
1. the NFA Investor Advisory – Futures on Virtual Currencies Including Bitcoin, and
2. the CFTC Customer Advisory: Understand the Risk of Virtual Currency Trading
to any customer that engages in a virtual currency derivative transaction with or through the FCM or IB Member.Reference: 9073 – DISCLOSURE REQUIREMENTS FOR NFA MEMBERS ENGAGING IN VIRTUAL CURRENCY ACTIVITIES
Incorrect
FCM or IB Members must provide:
1. the NFA Investor Advisory – Futures on Virtual Currencies Including Bitcoin, and
2. the CFTC Customer Advisory: Understand the Risk of Virtual Currency Trading
to any customer that engages in a virtual currency derivative transaction with or through the FCM or IB Member.Reference: 9073 – DISCLOSURE REQUIREMENTS FOR NFA MEMBERS ENGAGING IN VIRTUAL CURRENCY ACTIVITIES
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Question 7 of 30
7. Question
Which of the following are possible reasons why an applicant would give notice to their sponsor for the termination of the applicant’s temporary license?
I. The applicant should not disclose disciplinary information.
II. The applicant should pay the full amount of a reparations order within the time permitted under section 14 of the Act.
III. The applicant should not pay a civil monetary penalty, restitution, or disgorgement if they have already paid the full amount of reparations.
IV. The applicant must comply with an award in an arbitration proceeding conducted within the time permitted for such compliance of NFA’s Code of Arbitration.Correct
The applicant should disclose disciplinary information in response to disciplinary information questions on Form 8-R. The applicant should also comply with an order to pay a civil monetary penalty, restitution, or disgorgement within the time permitted under Sections 6(e), 6b, 6c(d) of the Act.
Reference: RULE 301. TEMPORARY LICENSING OF ASSOCIATED PERSONS
Incorrect
The applicant should disclose disciplinary information in response to disciplinary information questions on Form 8-R. The applicant should also comply with an order to pay a civil monetary penalty, restitution, or disgorgement within the time permitted under Sections 6(e), 6b, 6c(d) of the Act.
Reference: RULE 301. TEMPORARY LICENSING OF ASSOCIATED PERSONS
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Question 8 of 30
8. Question
Which of the following conducts would NOT violate Compliance Rule 2-4 in relation to trade secrets and proprietary information?
I. Disclosing customer orders prior to execution.
II. Obtaining information about a CTA’s historical trading positions without the CTA’s permission.
III. Using personal information such as a social security number without permission from the customer.
IV. Obtaining information from a customer for disclosure documents purposes.Correct
Reference: 9061 – NFA COMPLIANCE RULE 2-4: MISUSE OF TRADE SECRETS AND PROPRIETARY INFORMATION
Incorrect
Reference: 9061 – NFA COMPLIANCE RULE 2-4: MISUSE OF TRADE SECRETS AND PROPRIETARY INFORMATION
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Question 9 of 30
9. Question
Which of the following should a customer present if asked?
I. Monthly activity statements
II. All powers-of-attorney giving someone the right to trade the account other than the customer
III. A copy of the firm’s electronic Trading System Procedures within the duration the customer’s account was open.
IV. Research and marketing materials concerning any trading recommendations made to the customerCorrect
The copy of the firm’s electronic Trading System Procedures is a requirement for the Member and not the customer. The copy is required by NFA Compliance Rule 2-36(e): Supervision of the Use of Electronic Trading Systems for the period the customer’s account was open.
Reference: 9031 – STANDARD LIST OF DOCUMENTS TO BE EXCHANGED UNDER SECTION 8 OF NFA’S CODE OF ARBITRATION
Incorrect
The copy of the firm’s electronic Trading System Procedures is a requirement for the Member and not the customer. The copy is required by NFA Compliance Rule 2-36(e): Supervision of the Use of Electronic Trading Systems for the period the customer’s account was open.
Reference: 9031 – STANDARD LIST OF DOCUMENTS TO BE EXCHANGED UNDER SECTION 8 OF NFA’S CODE OF ARBITRATION
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Question 10 of 30
10. Question
Which of the following statements regarding discretionary customer accounts is NOT true?
Correct
An Associate/A Member does NOT need to have written authorization to exercise discretion with regard to time and price ONLY.
Reference: RULE 2-8. DISCRETIONARY CUSTOMER ACCOUNTS
Incorrect
An Associate/A Member does NOT need to have written authorization to exercise discretion with regard to time and price ONLY.
Reference: RULE 2-8. DISCRETIONARY CUSTOMER ACCOUNTS
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Question 11 of 30
11. Question
Which of the following is an example/are examples of safeguarding a Member’s ISSP?
I. Using network segmentation and network access controls
II. May or may not use complex passwords but should be changed periodically
III. Prevent the use of unauthorized software updating functionality
IV. Manually monitoring the availability of available software updates and installing updatesCorrect
Members should use complex passwords and change them periodically. Also, they could use automatic software updating functionality. What should be prevented is the use of unauthorized software through the use of application whitelists.
Reference: 9070 – NFA COMPLIANCE RULES 2-9, 2-36 AND 2-49: INFORMATION SYSTEMS SECURITY PROGRAMS
Incorrect
Members should use complex passwords and change them periodically. Also, they could use automatic software updating functionality. What should be prevented is the use of unauthorized software through the use of application whitelists.
Reference: 9070 – NFA COMPLIANCE RULES 2-9, 2-36 AND 2-49: INFORMATION SYSTEMS SECURITY PROGRAMS
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Question 12 of 30
12. Question
Which of the following deceptive practices would a Member be doing if he tells a customer that a promotional material may be traded at a high price during a certain time?
Correct
Claims regarding seasonal trades and historical price moves is a practice wherein a Member suggests, for example, a promotional material traded at a high price at a certain time and that the same record setting move may occur once again.
References: 9033 – NFA COMPLIANCE RULE 2-29: DECEPTIVE ADVERTISING
Incorrect
Claims regarding seasonal trades and historical price moves is a practice wherein a Member suggests, for example, a promotional material traded at a high price at a certain time and that the same record setting move may occur once again.
References: 9033 – NFA COMPLIANCE RULE 2-29: DECEPTIVE ADVERTISING
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Question 13 of 30
13. Question
Which of the following characteristics should a policy against money laundering act have?
I. It should adopt a policy statement that outlines the firm’s policy against money laundering and its commitment to follow all applicable law and regulation.
II. It should discuss the consequences of not following the procedures.
III.It should make clear that all employees of the firm have the responsibility to follow the firm’s written anti-money laundering procedures and controls.
IV. It should reveal the true identity of each customer.Correct
The policy may not directly reveal the true identity of a customer but it should direct the firm’s procedures and controls to enable appropriate personnel to form a reasonable belief that they know the true identity of the customers and recognize suspicious customers and transactions.
Reference: 9045 – NFA COMPLIANCE RULE 2-9: FCM AND IB ANTI-MONEY LAUNDERING PROGRAM
Incorrect
The policy may not directly reveal the true identity of a customer but it should direct the firm’s procedures and controls to enable appropriate personnel to form a reasonable belief that they know the true identity of the customers and recognize suspicious customers and transactions.
Reference: 9045 – NFA COMPLIANCE RULE 2-9: FCM AND IB ANTI-MONEY LAUNDERING PROGRAM
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Question 14 of 30
14. Question
What is the condition that should be met for someone who is a member of the public would be granted access to CFTC records or portions?
Correct
The information/record may be released if it is “public” or “publicly available” under the CFTC regulations.
Reference: RULE 4-1. DISCLOSURE OF INFORMATION FROM CFTC RECORDS, OTHER THAN REGISTRATION RECORDS, MAINTAINED BY NFA.
Incorrect
The information/record may be released if it is “public” or “publicly available” under the CFTC regulations.
Reference: RULE 4-1. DISCLOSURE OF INFORMATION FROM CFTC RECORDS, OTHER THAN REGISTRATION RECORDS, MAINTAINED BY NFA.
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Question 15 of 30
15. Question
Which of the following should be held in a customer segregated fund?
I. Funds that are required to be held for the benefit of customers to margin futures.
II. Funds that customer deposit with an FCM.
III. Options on a futures contract traded on futures markets located in the United States.
IV. Funds that are deposited by the FCM.Correct
Pursuant to CFTC Regulation 1.20, funds that customers deposit with an FCM, or required to be held for the benefit of the customers, to margin futures and options on futures contract traded on futures markets located in the United States must be held in a customer segregated funds. Funds that customer deposit with an FCM wherein the funds exceed the 25% of the FCM’s residual interest.
Reference: NFA Financial Requirements Section 16: FCM Financial Practices and Excess Segregated Funds/Secured Amount Disbursements
Incorrect
Pursuant to CFTC Regulation 1.20, funds that customers deposit with an FCM, or required to be held for the benefit of the customers, to margin futures and options on futures contract traded on futures markets located in the United States must be held in a customer segregated funds. Funds that customer deposit with an FCM wherein the funds exceed the 25% of the FCM’s residual interest.
Reference: NFA Financial Requirements Section 16: FCM Financial Practices and Excess Segregated Funds/Secured Amount Disbursements
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Question 16 of 30
16. Question
Which of the following includes commodity interest accounts, agreements or transactions?
I. Commodity pool participants
II. Agreement to direct trading in commodity interest accounts
III. Agreements involving the sale of non-personalized trading advice concerning commodity interest
IV. Oral presentation concerning commodity interest accountsCorrect
An oral presentation concerning commodity interest accounts is promotional material.
Reference: RULE 2-29. COMMUNICATIONS WITH THE PUBLIC AND PROMOTIONAL MATERIAL.
Incorrect
An oral presentation concerning commodity interest accounts is promotional material.
Reference: RULE 2-29. COMMUNICATIONS WITH THE PUBLIC AND PROMOTIONAL MATERIAL.
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Question 17 of 30
17. Question
Which of the following is a/are limitation/s of a hypothetical composite performance?
I. An FCM, IB, CPO/CTA Member or Associate has less than one year of experience in directing customer accounts.
II. Decisions relating to the selection of trading advisors were made with the benefit of hindsight based upon historical rates of return.
III. Allocation of assets changes from time to time.
IV. Performance records were not based on actual market conditions.Correct
An FCM, IB, CPO/CTA Member or Associate having little or no experience is not a limitation of a hypothetical composite performance, however, it may also under the hypothetical performance in general if they do not contain a disclaimer.
Allocation of assets from time to time is a reason (not a limitation) why a decision based on a composite performance record is considered hypothetical.Reference: RULE 2-29. COMMUNICATIONS WITH THE PUBLIC AND PROMOTIONAL MATERIAL.
Incorrect
An FCM, IB, CPO/CTA Member or Associate having little or no experience is not a limitation of a hypothetical composite performance, however, it may also under the hypothetical performance in general if they do not contain a disclaimer.
Allocation of assets from time to time is a reason (not a limitation) why a decision based on a composite performance record is considered hypothetical.Reference: RULE 2-29. COMMUNICATIONS WITH THE PUBLIC AND PROMOTIONAL MATERIAL.
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Question 18 of 30
18. Question
Which of the following should be reported and be kept in records concerning forex transactions?
I. Option Exercise
II. Rollovers
III. Offsetting transactions
IV. Monetary adjustmentsCorrect
Part of a Member’s responsibility and obligation is to maintain books and records necessary to conduct business. These would include offsetting transactions, rollovers, option exercises, deliveries, option expirations, trades that have been reversed or adjusted, and monetary adjustments.
Reference: Forex Transactions: Regulatory Guide
Incorrect
Part of a Member’s responsibility and obligation is to maintain books and records necessary to conduct business. These would include offsetting transactions, rollovers, option exercises, deliveries, option expirations, trades that have been reversed or adjusted, and monetary adjustments.
Reference: Forex Transactions: Regulatory Guide
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Question 19 of 30
19. Question
Which of the following forms can you discuss a profit?
I. Graphs depicting growth of an account
II. Use of electronic communications with capitalized text.
III. Discussion of opportunity
IV. Past performance resultCorrect
The use of electronic communications with capitalized/bolded/highlighted text or subject lines may convey a sense of false urgency to the customer and thus, it is regarded as a high-pressure sale approach that is not allowed.
Reference: NFA’s Promotional Material Guide: Balance Profit Potential with Risk of Loss
Incorrect
The use of electronic communications with capitalized/bolded/highlighted text or subject lines may convey a sense of false urgency to the customer and thus, it is regarded as a high-pressure sale approach that is not allowed.
Reference: NFA’s Promotional Material Guide: Balance Profit Potential with Risk of Loss
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Question 20 of 30
20. Question
Which of the following must a Member/AP who participate in trading championships may promote as part of their performance result?
I. Markets traded
II. Margin rates
III. Experience in trading
IV. Commission and FeesCorrect
Aside from the three mentioned, a Member/AP may include “Leverage used” in promoting their performance results, and as long as full disclosure is made of all material differences between the program and the contest.
Reference: NFA’s Promotional Material Guide
Incorrect
Aside from the three mentioned, a Member/AP may include “Leverage used” in promoting their performance results, and as long as full disclosure is made of all material differences between the program and the contest.
Reference: NFA’s Promotional Material Guide
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Question 21 of 30
21. Question
Which of the following is a/are requirement/s for the pre-approval of a live advertisement of a promotional material?
I. A recording of the preview must be submitted to NFA before broadcasting.
II. A script or detailed outline must be submitted to NFA at least ten days prior to the broadcast.
III. A recording of the actual advertisement must be submitted to NFA immediately after broadcasting.
IV. A script or detailed outline must be submitted to NFA at least 7 days prior to the broadcast.Correct
A script or detailed outline must be submitted to NFA 10 days prior and the recording should be submitted immediately after for review.
Reference: NFA’s Promotional Material Guide
Incorrect
A script or detailed outline must be submitted to NFA 10 days prior and the recording should be submitted immediately after for review.
Reference: NFA’s Promotional Material Guide
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Question 22 of 30
22. Question
Which of the following promotional material characteristics for options may be generally misleading in using cash or forex data?
I. Use price data that includes commissions and fees comparable to those charged by the Member.
II. Imply that options prices move in tandem with cash, futures, or forex prices.
III. Use price data for at-the-money options to sell out-of-the-money options.
IV. Include futures or forex price chartsCorrect
Including futures or forex price charts is misleading unless it is accompanied by option price charts. Also, including a futures or forex price is also misleading unless it presents different time periods.
Reference: NFA’s Promotional Material Guide
Incorrect
Including futures or forex price charts is misleading unless it is accompanied by option price charts. Also, including a futures or forex price is also misleading unless it presents different time periods.
Reference: NFA’s Promotional Material Guide
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Question 23 of 30
23. Question
Which of the following forms must an IB file with the NFA for a temporary license?
Correct
Form 8-R is for individual principals. Form 1-FR Part B is a guarantee form that must be filed by an IB if an FCM will be the guarantor.
Reference: RULE 302. TEMPORARY LICENSING FOR GUARANTEED INTRODUCING BROKERS.
Incorrect
Form 8-R is for individual principals. Form 1-FR Part B is a guarantee form that must be filed by an IB if an FCM will be the guarantor.
Reference: RULE 302. TEMPORARY LICENSING FOR GUARANTEED INTRODUCING BROKERS.
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Question 24 of 30
24. Question
Which of the following must a guarantor FCM check with due diligence before entering into a guarantee agreement?
Correct
A guarantor FCM must do a due diligence inquiry before entering into a guarantee agreement with an IB. He must check all relevant information (including any derogatory information on the IB, its principals, and its employees) and determine how much supervision an IB will require.
Reference:9042 – COMPLIANCE RULE 2-9: SPECIAL SUPERVISORY REQUIREMENTS FOR MEMBERS REGISTERED AS BROKER-DEALERS UNDER SECTION 15(b)(11) OF THE SECURITIES EXCHANGE ACT OF 1934
Incorrect
A guarantor FCM must do a due diligence inquiry before entering into a guarantee agreement with an IB. He must check all relevant information (including any derogatory information on the IB, its principals, and its employees) and determine how much supervision an IB will require.
Reference:9042 – COMPLIANCE RULE 2-9: SPECIAL SUPERVISORY REQUIREMENTS FOR MEMBERS REGISTERED AS BROKER-DEALERS UNDER SECTION 15(b)(11) OF THE SECURITIES EXCHANGE ACT OF 1934
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Question 25 of 30
25. Question
Which of the following is a/are characteristics of a disciplined firm?
I. The firm has a history of sales practices involving security futures products.
II. The firm has been formally charged with deceptive sales practices by the CFTC.
III. The firm has been permanently barred from the industry at any time as a result of the charges.
IV. The firm has been formally charged but has been resolved.Correct
A disciplined firm are those that have been formally charged by either CFTC or NFA with deceptive sales or promotional material whether the charges have been resolved, the firm has been permanently barred from the industry or they were sanctioned in any way preceding five years as a result of those charges.
Reference: 9021 – NFA COMPLIANCE RULES 2-9 and 2-36: ENHANCED SUPERVISORY REQUIREMENTS FOR FCMs, IBs, FDMs, CPOs AND CTAs
Incorrect
A disciplined firm are those that have been formally charged by either CFTC or NFA with deceptive sales or promotional material whether the charges have been resolved, the firm has been permanently barred from the industry or they were sanctioned in any way preceding five years as a result of those charges.
Reference: 9021 – NFA COMPLIANCE RULES 2-9 and 2-36: ENHANCED SUPERVISORY REQUIREMENTS FOR FCMs, IBs, FDMs, CPOs AND CTAs
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Question 26 of 30
26. Question
Which of the following is an/are exemption/s from being counted as an AP who worked at a disciplined firm?
The AP has never been personally subjected to disciplinary action.
The AP has been previously employed by Disciplined Firms for a cumulative total of less than 60 days.
The AP worked for only one Disciplined Firm more than 10 years preceding the determination of whether a Member firm is required to employ enhanced supervisory requirements.
The AP has been employed by a Member Firm subject to any deceptive sales practice.Correct
If an AP has been subject to any sales practice and is employed by the disciplined firm preceding the disciplinary action, it may not be regarded as an exemption from the disciplinary action.
Reference: 9021 – NFA COMPLIANCE RULES 2-9 and 2-36: ENHANCED SUPERVISORY REQUIREMENTS FOR FCMs, IBs, FDMs, CPOs AND CTAs
Incorrect
If an AP has been subject to any sales practice and is employed by the disciplined firm preceding the disciplinary action, it may not be regarded as an exemption from the disciplinary action.
Reference: 9021 – NFA COMPLIANCE RULES 2-9 and 2-36: ENHANCED SUPERVISORY REQUIREMENTS FOR FCMs, IBs, FDMs, CPOs AND CTAs
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Question 27 of 30
27. Question
Which of the following criteria will be required to FCMs, IBs, CPOs and CTA Members and FDMs to adopt as part of enhanced supervisory procedure?
I. Firms with less than 5 APs, 40% or more have been employed by one or more current disciplined firms.
II. Firms with 10 APs, 40% or more have been employed by one or more current disciplined firms.
III. For firms with at least 10 but less than 20 APs, 40% or more of its current APs have been employed by one or more disciplined firms.
IV. Firms with 20 APs, 20% or more of its APs have been employed by one or more current Disciplined Firms.Correct
Firms with at least 10 but less than 20 APs, if there are 4 or more (not 40% or more) of its current APs have been employed by one or more disciplined firms.
Reference: 9021 – NFA COMPLIANCE RULES 2-9 and 2-36: ENHANCED SUPERVISORY REQUIREMENTS FOR FCMs, IBs, FDMs, CPOs AND CTAs
Incorrect
Firms with at least 10 but less than 20 APs, if there are 4 or more (not 40% or more) of its current APs have been employed by one or more disciplined firms.
Reference: 9021 – NFA COMPLIANCE RULES 2-9 and 2-36: ENHANCED SUPERVISORY REQUIREMENTS FOR FCMs, IBs, FDMs, CPOs AND CTAs
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Question 28 of 30
28. Question
When and how often should a Forex dealer Member provide a customer written information regarding NFA’s BASIC (including website address)?
Correct
A ForEx dealer Member must provide a customer written information regarding NFA’s BASIC when the customer first opens an account and at least once a year thereafter.
Reference: RULE 2-36. REQUIREMENTS FOR FOREX TRANSACTIONS
Incorrect
A ForEx dealer Member must provide a customer written information regarding NFA’s BASIC when the customer first opens an account and at least once a year thereafter.
Reference: RULE 2-36. REQUIREMENTS FOR FOREX TRANSACTIONS
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Question 29 of 30
29. Question
Which of the following should a break-even analysis include?
Correct
A break-even analysis must include the applicable fees and expenses required to be described in the CPO’s disclosure document. It must be based on the minimum initial investment for a participant and minimum total subscription for a pool.
Reference: 9023 – COMPLIANCE RULE 2-13: BREAK-EVEN ANALYSIS
Incorrect
A break-even analysis must include the applicable fees and expenses required to be described in the CPO’s disclosure document. It must be based on the minimum initial investment for a participant and minimum total subscription for a pool.
Reference: 9023 – COMPLIANCE RULE 2-13: BREAK-EVEN ANALYSIS
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Question 30 of 30
30. Question
Which of the following a CPO may be allowed to offset for the purposes of break-even analysis?
I. Fund Operating Expenses
II. Treasury Bills
III. Funds on Deposit with brokerage firms
IV. Interest in a money market mutual fundCorrect
For purposes of the break-even analysis, CPOs may only offset expenses with interest income generated through the pool’s investment in high credit quality short-duration instruments or deposits associated with the pool’s buy-and-hold cash management strategies. Examples of such instruments or investments include, but are not limited to, Treasury Bills, cash on deposit at a bank or in a money market account, funds on deposit with brokerage firms, and interest in a money market mutual fund.
Reference: 9023 – COMPLIANCE RULE 2-13: BREAK-EVEN ANALYSIS
Incorrect
For purposes of the break-even analysis, CPOs may only offset expenses with interest income generated through the pool’s investment in high credit quality short-duration instruments or deposits associated with the pool’s buy-and-hold cash management strategies. Examples of such instruments or investments include, but are not limited to, Treasury Bills, cash on deposit at a bank or in a money market account, funds on deposit with brokerage firms, and interest in a money market mutual fund.
Reference: 9023 – COMPLIANCE RULE 2-13: BREAK-EVEN ANALYSIS