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Question 1 of 30
1. Question
Which of the following reasons a Member may NOT be allowed to accept orders in commodity futures contracts to cover leverage transactions for any non-Member of NFA or suspended Member?
I. A suspended Member is exempted from the prohibition by the Appeals Committee.
II. A non-Member is a member of another futures association registered under Section 17 of the Act.
III. A non-Member is exempted from the prohibition by Board resolution.
IV. A suspended Member is exempted from the prohibition by Board resolution.Correct
A Member may only be allowed to accept orders in commodity futures contracts to cover leverage transactions for a suspended Member only if they are exempted by the Appeals Committee.
Reference: BYLAW 1101. PROHIBITION.
Incorrect
A Member may only be allowed to accept orders in commodity futures contracts to cover leverage transactions for a suspended Member only if they are exempted by the Appeals Committee.
Reference: BYLAW 1101. PROHIBITION.
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Question 2 of 30
2. Question
Which of the following is a/are minimum requirement/s with regard to obtaining customer information for risk disclosure?
I. Both estimated annual income and net worth for all customers
II. Information required by CFTC Regulation 1.37 (a) which applies to FCM or IB
III. An individual customer’s age or date of birth
IV. Any other information used or considered to be reasonableCorrect
For individual customers, Members must obtain BOTH estimated annual income and net worth. For all other customers, Members must obtain estimated annual income and net worth or net assets.
Reference: 9004 – NFA COMPLIANCE RULE 2-30: CUSTOMER INFORMATION AND RISK DISCLOSURE
Incorrect
For individual customers, Members must obtain BOTH estimated annual income and net worth. For all other customers, Members must obtain estimated annual income and net worth or net assets.
Reference: 9004 – NFA COMPLIANCE RULE 2-30: CUSTOMER INFORMATION AND RISK DISCLOSURE
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Question 3 of 30
3. Question
These are individuals or firms who seek to profit from anticipated increases or decreases in futures prices.
Correct
Speculators are individuals or firms who seek to profit from anticipated increases or decreases in futures prices. If they expect the price of the underlying instrument to increase, they will buy the security futures contract.
Reference: 9050 – NFA COMPLIANCE RULE 2-30(b): RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS
Incorrect
Speculators are individuals or firms who seek to profit from anticipated increases or decreases in futures prices. If they expect the price of the underlying instrument to increase, they will buy the security futures contract.
Reference: 9050 – NFA COMPLIANCE RULE 2-30(b): RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS
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Question 4 of 30
4. Question
Which of the following is the most common trading strategies involving security futures contracts?
Correct
The most common trading strategy involving security futures contracts are:
buying with the hope of profiting from an anticipated price increase, and
selling with the hope of profiting from an anticipated decrease.Reference: 9050 – NFA COMPLIANCE RULE 2-30(b): RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS
Incorrect
The most common trading strategy involving security futures contracts are:
buying with the hope of profiting from an anticipated price increase, and
selling with the hope of profiting from an anticipated decrease.Reference: 9050 – NFA COMPLIANCE RULE 2-30(b): RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS
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Question 5 of 30
5. Question
Which of the following is NOT true about hedging?
Correct
Hedging does NOT eliminate the risk. It may mitigate or reduce the risk.
Reference: 9050 – NFA COMPLIANCE RULE 2-30(b): RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS
Incorrect
Hedging does NOT eliminate the risk. It may mitigate or reduce the risk.
Reference: 9050 – NFA COMPLIANCE RULE 2-30(b): RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS
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Question 6 of 30
6. Question
Which of the following is TRUE in the Pre-Hearing of an Arbitration?
I. The parties shall cooperate in the voluntary exchange of material and relevant documents.
II. Parties shall exchange documents no later than 15 days after the last pleading is due.
III. Respondent shall wait for the issuance of a subpoena as a signal they are needed to provide documents and materials.
IV. Where the aggregate claim amount exceeds $50, 000, the requesting party shall serve its request for documents and written information on the responding party no later than 30 days after the last pleading is due.Correct
Parties should submit the documents and materials voluntarily, thus, without the need for the issuance of subpoenas.
Reference: Section 8: PRE-HEARING
Incorrect
Parties should submit the documents and materials voluntarily, thus, without the need for the issuance of subpoenas.
Reference: Section 8: PRE-HEARING
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Question 7 of 30
7. Question
Which of the following is the best explanation for the security futures risk “Day Trading strategies involve security futures contracts and other products pose special risks”?
Correct
Day trading imposes a number of special risks such as substantial commissions, exposure to leverage, and competition with professional traders. These risks should be totally understood and must have appropriate before engaging in day trading.
Reference: 9050 – NFA COMPLIANCE RULE 2-30(b): RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS
Incorrect
Day trading imposes a number of special risks such as substantial commissions, exposure to leverage, and competition with professional traders. These risks should be totally understood and must have appropriate before engaging in day trading.
Reference: 9050 – NFA COMPLIANCE RULE 2-30(b): RISK DISCLOSURE STATEMENT FOR SECURITY FUTURES CONTRACTS
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Question 8 of 30
8. Question
Which of the following is TRUE with position limits?
I. Position limits permit the accumulation of positions in excess of the limit without prior exemption.
II. Position limits and position accountability limits are most suitable for most retail investors.
III. All security futures contracts trading on regulated exchanges in the US are subject to position limits or position accountability limits.
IV. Position limits restrict the number of security futures contracts that any one person or group of related persons may hold or control in a particular security futures contract.Correct
Position limits and position accountability limits are beyond the threshold of most retail investors.
Reference: (8.2. Position Limits and Large Trader Reporting)
Incorrect
Position limits and position accountability limits are beyond the threshold of most retail investors.
Reference: (8.2. Position Limits and Large Trader Reporting)
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Question 9 of 30
9. Question
Which of the following is TRUE in the settlement of security futures contracts?
I. You are obliged to either make a cash payment or deliver/accept delivery of the underlying securities in exchange for final payment of the final settlement price if you do not liquidate your position prior to the end of trading on the last day before the expiration of the security futures contract.
II. In cash settlements, no actual securities are delivered at the expiration of the security futures contract.
III. Settlement by physical delivery is carried out by clearing brokers or their agents with National Securities Clearing Corporation.
IV. The last trading day of a security futures contract will be the last Friday of the expiring contract month, and the expiration day will be the following Saturday.
III.
IV.Correct
The last trading day of a security futures contract will be the THIRD Friday of the expiring contract month, and the expiration day will be the following Saturday. The third Friday may be the last Friday of the month at times but not necessarily always.
Reference: (Section 5 – Settlement)
Incorrect
The last trading day of a security futures contract will be the THIRD Friday of the expiring contract month, and the expiration day will be the following Saturday. The third Friday may be the last Friday of the month at times but not necessarily always.
Reference: (Section 5 – Settlement)
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Question 10 of 30
10. Question
Which of the following is a reason for the requirement of a margin deposit for each security futures contract?
Correct
A security futures contract has potential for loss as a result of the daily market-to-market process and it has no value as a collateral for loan.
Reference: (Section 4 – Margin and Leverage)
Incorrect
A security futures contract has potential for loss as a result of the daily market-to-market process and it has no value as a collateral for loan.
Reference: (Section 4 – Margin and Leverage)
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Question 11 of 30
11. Question
In the filing of CPO/CTA Quarterly reports, how much is the fee for late filing?
Correct
Each NFA Form PQR or NFA FOrm PR that is filed after it is due shall be accompanied by a fee of $200 for each business day it is late.
Reference: Part 2 – Rules Governing the Business Conduct of Members Registered with the Commission (RULE 2-46. CPO AND CTA QUARTERLY REPORTING REQUIREMENTS)
Incorrect
Each NFA Form PQR or NFA FOrm PR that is filed after it is due shall be accompanied by a fee of $200 for each business day it is late.
Reference: Part 2 – Rules Governing the Business Conduct of Members Registered with the Commission (RULE 2-46. CPO AND CTA QUARTERLY REPORTING REQUIREMENTS)
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Question 12 of 30
12. Question
Which of the following is NOT true with regard to the registration of branch offices?
Correct
An office is already considered a branch office even if there’s only one person at the location.
Reference: 9002 – REGISTRATION REQUIREMENTS; BRANCH OFFICES
Incorrect
An office is already considered a branch office even if there’s only one person at the location.
Reference: 9002 – REGISTRATION REQUIREMENTS; BRANCH OFFICES
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Question 13 of 30
13. Question
What is the best definition of Ex Parte Contacts?
Correct
Ex Parte Contact means no party to the arbitration, or any representative thereof, shall communicate with any Panel member regarding the arbitration, other than the inquiries concerning the status thereof, except at the oral hearing, or in writing on notice to the other parties.
Reference: Member Arbitration Rules (SECTION 3. ARBITRATION PANEL)
Incorrect
Ex Parte Contact means no party to the arbitration, or any representative thereof, shall communicate with any Panel member regarding the arbitration, other than the inquiries concerning the status thereof, except at the oral hearing, or in writing on notice to the other parties.
Reference: Member Arbitration Rules (SECTION 3. ARBITRATION PANEL)
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Question 14 of 30
14. Question
Which of the following locations is NOT an office location requirement for FCM Members and Forex Dealer members?
Correct
Each FCM Member and Forex Dealer Members must maintain an office in the continental United States, Alaska, Hawaii and Puerto Rico.
Reference: RULE 2-10. RECORDKEEPING
Incorrect
Each FCM Member and Forex Dealer Members must maintain an office in the continental United States, Alaska, Hawaii and Puerto Rico.
Reference: RULE 2-10. RECORDKEEPING
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Question 15 of 30
15. Question
In recordkeeping, which of the following is/are required from each CPO/CTA/FCM/FDM/IB/MSP and SD Member?
I. Provide English translation of other foreign-language documents and records and file financial information in U.S. dollars upon NFA’s request
II. File reports, requests for extensions, and other documents required to be filed with the CFTC and/or NFA in English
III. Maintain written procedures required by CFTC or NFA rules in English as well as in any other language if necessary for them to be understood by the Member’s employees and agents
IV. Make available to NFA an individual who is authorized to act on the Member’s behalf who may or may not be necessarily fluent in English but is knowledgeable about the Member’s business and about financial matters.Correct
Everything with regard to recordkeeping must be in English–whether it be reports or individuals especially those who act on a Member’s behalf.
Reference: Rule 2-10. Recordkeeping
Incorrect
Everything with regard to recordkeeping must be in English–whether it be reports or individuals especially those who act on a Member’s behalf.
Reference: Rule 2-10. Recordkeeping
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Question 16 of 30
16. Question
Which of the following reasons is a/are condition/s to which claims are arbitrable between Members?
I. All parties to the dispute are members of a contract market that has jurisdiction over the dispute.
II. At the election of the Member with the claim, the Member respondent is still an NFA Member.
III. The parties, by valid and binding agreement, have committed themselves to the resolution of such dispute in a forum other than NFA.
IV. The parties to such disputes are all required by the rules of another self-regulatory organization to submit the controversy to the settlement procedures of that self-regulatory organization.Correct
A dispute is not arbitrable if the Member respondent is no longer an NFA Member.
Reference: SECTION 2. Member Arbitration Rules (ARBITRABLE DISPUTES)
Incorrect
A dispute is not arbitrable if the Member respondent is no longer an NFA Member.
Reference: SECTION 2. Member Arbitration Rules (ARBITRABLE DISPUTES)
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Question 17 of 30
17. Question
Which of the following can be a reason for the reopening of the record in the claims dispute between Members?
I. The Panel reopens for the failure of one party to comply with the procedures.
II. The Panel reopens it in its own motion.
III. The Panel reopens on the motion of a party for any good cause at any time prior to the Panel rendering its award.
IV. The Panel reopens for any additional purposes required for the investigation after the Panel rendering the award.Correct
The Panel may reopen it in its own motion or on the motion of a party for a good cause at any time prior to the Panel rendering its award.
Reference: Member Arbitration Rules (SECTION 2. ARBITRABLE DISPUTES)
Incorrect
The Panel may reopen it in its own motion or on the motion of a party for a good cause at any time prior to the Panel rendering its award.
Reference: Member Arbitration Rules (SECTION 2. ARBITRABLE DISPUTES)
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Question 18 of 30
18. Question
Which of the following are minimum areas that should be addressed in a Member’s business continuity and discovery plans?
I. Developing a communication plan to contact essential parties such as employees, customers, carrying brokers, vendors, and disaster recovery specialists.
II. Establishing back-up facilities, systems, and personnel that are located in one or more reasonably separate geographic areas from the Member’s primary facilities, systems, and personnel.
III. Having third parties generate their own continuity and recovery plan to minimize the effect on the Member firm.
IV. Backing up/Copying essential documents and data on a periodic basis and storing information off-site in either hard-copy or electronic format.Correct
It is part of a Member’s responsibility to consider the impact of business interruptions encountered by third parties. It is also a Member’s responsibility to identify the ways to minimize the impact of these interruptions caused by third parties.
Reference: 9052 – NFA COMPLIANCE RULE 2-38: BUSINESS CONTINUITY AND DISASTER RECOVERY PLAN
Incorrect
It is part of a Member’s responsibility to consider the impact of business interruptions encountered by third parties. It is also a Member’s responsibility to identify the ways to minimize the impact of these interruptions caused by third parties.
Reference: 9052 – NFA COMPLIANCE RULE 2-38: BUSINESS CONTINUITY AND DISASTER RECOVERY PLAN
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Question 19 of 30
19. Question
Which of the following is NOT true when it comes to IBs filing financial reports?
Correct
IBs operating pursuant to a guarantee agreement who meet the requirements set forth in CFTC Regulation 1.10 are excluded in filing financial reports semi-annually.
Reference: (FINANCIAL REQUIREMENT: SECTION 5. INTRODUCING BROKER FINANCIAL REQUIREMENTS)
Incorrect
IBs operating pursuant to a guarantee agreement who meet the requirements set forth in CFTC Regulation 1.10 are excluded in filing financial reports semi-annually.
Reference: (FINANCIAL REQUIREMENT: SECTION 5. INTRODUCING BROKER FINANCIAL REQUIREMENTS)
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Question 20 of 30
20. Question
Which of the following should a Member IB acquire from NFA in order to access NFA’s electronic financial reports database?
Correct
No Member IB may access NFA’s electronic financial reports database until NFA has assigned it a unique identifying code and password.
Reference: SECTION 5. INTRODUCING BROKER FINANCIAL REQUIREMENTS.
Incorrect
No Member IB may access NFA’s electronic financial reports database until NFA has assigned it a unique identifying code and password.
Reference: SECTION 5. INTRODUCING BROKER FINANCIAL REQUIREMENTS.
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Question 21 of 30
21. Question
How many business days shall a Member notify NFA after the Member knows that another Member or its associated person has been found to have violated any provision of the securities laws?
Correct
A Member shall notify NFA within 10 business days after the Member knows or should know that the Member or its associated person has been found by a self-regulatory organization or professional association to have violated any provision of the securities laws or regulations.
Reference: RULE 2-37. SECURITY FUTURES PRODUCTS
Incorrect
A Member shall notify NFA within 10 business days after the Member knows or should know that the Member or its associated person has been found by a self-regulatory organization or professional association to have violated any provision of the securities laws or regulations.
Reference: RULE 2-37. SECURITY FUTURES PRODUCTS
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Question 22 of 30
22. Question
Which of the following is a /are requirement/s for an Associate to be a branch manager?
I. The Associate is qualified to act as a branch office manager under the rules of the National Association of Securities Dealers.
II. The Associate is sponsored by a registered broker-dealer.
III. The Associate has been registered under the Act for a minimum total of two years.
IV. The Associate has worked in a registered capacity as a branch manager for two years minimum.Correct
The Associate should have been continuously registered under the Act for a minimum of two years.
Reference: Rule 2-7 BRANCH OFFICE MANAGER MINIMUM EXPERIENCE REQUIREMENT
Incorrect
The Associate should have been continuously registered under the Act for a minimum of two years.
Reference: Rule 2-7 BRANCH OFFICE MANAGER MINIMUM EXPERIENCE REQUIREMENT
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Question 23 of 30
23. Question
Which of the following should a Member registered as a broker-dealer consider before using a promotional material referring to security futures products?
I. The promotional material includes the date it was first used.
II. The promotional material provides contact information for obtaining a copy of the disclosure statement for security futures products.
III. The promotional material includes current recommendations regarding security futures products only if the material discloses all material conflicts of interest created by the Member’s or Associate’s activities underlying the security.
IV. The promotional material has been submitted to NFA for review and approval at least 15 business days prior to first use if it reaches a public audience through mass media.Correct
The promotional material submitted to NFA for review and approval should be submitted at least 10 days prior to first use if it reaches or is designed to reach a public audience through mass media.
Reference: RULE 2-29. COMMUNICATIONS WITH THE PUBLIC AND PROMOTIONAL MATERIAL
Incorrect
The promotional material submitted to NFA for review and approval should be submitted at least 10 days prior to first use if it reaches or is designed to reach a public audience through mass media.
Reference: RULE 2-29. COMMUNICATIONS WITH THE PUBLIC AND PROMOTIONAL MATERIAL
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Question 24 of 30
24. Question
In using a third-party administrator, CPOs must perform adequate due diligence related to the use of the administrator. Which of the following should be considered in designing an internal controls system for third-party administrators?
I. The administrator’s costs, reputation, expertise, timeliness of work, and attention to detail.
II. The CPO must obtain evidence of test control and security measures conducted by the administrator.
III. The administrator’s work history with the firm or senior members of the firm, technological tools, income tax expertise, and cybersecurity system.
IV. A CPO’s regular communications with the administrator and other processes and procedures that provide assurance.Correct
Evidence of test control and security measures must be conducted at the administrator by an internal audit department or independent specialist.
Reference: 9074 – NFA COMPLIANCE RULE 2-9: CPO INTERNAL CONTROLS SYSTEM
Incorrect
Evidence of test control and security measures must be conducted at the administrator by an internal audit department or independent specialist.
Reference: 9074 – NFA COMPLIANCE RULE 2-9: CPO INTERNAL CONTROLS SYSTEM
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Question 25 of 30
25. Question
Which of the following should an acceptable ethics training procedure address?
I. Pointing out and making an example of past illegal practices
II. By whom the training will be provided
III. The format of training
IV. How the firm will document that it has followed its written proceduresCorrect
Other things that acceptable procedures must include in the outline of the ethics training program would be:
Topics that will be included in the training program, and
The frequency with which the Member expects its employees to obtain ethics trainingReference: 9051 – NFA COMPLIANCE RULES 2-9 and 2-36: ETHICS TRAINING REQUIREMENTS
Incorrect
Other things that acceptable procedures must include in the outline of the ethics training program would be:
Topics that will be included in the training program, and
The frequency with which the Member expects its employees to obtain ethics trainingReference: 9051 – NFA COMPLIANCE RULES 2-9 and 2-36: ETHICS TRAINING REQUIREMENTS
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Question 26 of 30
26. Question
Which of the following may qualify a respondent to appeal a final action from a suspension from membership or association?
Correct
The Respondent shall have no right to appeal a final action taken under this Rule to the Appeals Committee.
Reference: RULE 3-15. MEMBER OR ASSOCIATE RESPONSIBILITY ACTIONS
Incorrect
The Respondent shall have no right to appeal a final action taken under this Rule to the Appeals Committee.
Reference: RULE 3-15. MEMBER OR ASSOCIATE RESPONSIBILITY ACTIONS
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Question 27 of 30
27. Question
Which of the following is NOT a part of supervisory procedures for branch offices and guaranteed IBs with regard to handling customer funds?
Correct
Supervisory policies and procedures for branch offices and guaranteed IBs should be designed to ensure that all records related to customer funds, including copies of checks, are created, retained, and reviewed for compliance with applicable regulatory requirements, including as applicable to guaranteed IBs CFTC Regulation 1.57(c).
Reference: 9019 – COMPLIANCE RULE 2-9: SUPERVISION OF BRANCH OFFICES AND GUARANTEED IBS
Incorrect
Supervisory policies and procedures for branch offices and guaranteed IBs should be designed to ensure that all records related to customer funds, including copies of checks, are created, retained, and reviewed for compliance with applicable regulatory requirements, including as applicable to guaranteed IBs CFTC Regulation 1.57(c).
Reference: 9019 – COMPLIANCE RULE 2-9: SUPERVISION OF BRANCH OFFICES AND GUARANTEED IBS
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Question 28 of 30
28. Question
Which of the following is the reason that would exempt an individual from the review of discretionary trades and minimum experience requirements?
Correct
The provisions of the review of discretionary trades, minimum experience requirement, and third-party account controllers shall NOT apply when the individual who owns the account and the individual exercising discretion are members of the same family (a spouse, parent, child, grandparent, grandchild, brother, sister, aunt, nephew, niece or in-law).
Reference: RULE 2-8. DISCRETIONARY CUSTOMER ACCOUNTS.
Incorrect
The provisions of the review of discretionary trades, minimum experience requirement, and third-party account controllers shall NOT apply when the individual who owns the account and the individual exercising discretion are members of the same family (a spouse, parent, child, grandparent, grandchild, brother, sister, aunt, nephew, niece or in-law).
Reference: RULE 2-8. DISCRETIONARY CUSTOMER ACCOUNTS.
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Question 29 of 30
29. Question
Which of the following should notify current sponsors of an AP if that AP is applying for registration as an AP with a new sponsor?
Correct
NFA shall notify each of the current sponsors of the AP that the AP is applying to be an AP with a new sponsor.
Reference: RULE 207. MULTIPLE ASSOCIATIONS
Incorrect
NFA shall notify each of the current sponsors of the AP that the AP is applying to be an AP with a new sponsor.
Reference: RULE 207. MULTIPLE ASSOCIATIONS
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Question 30 of 30
30. Question
Which of the following will satisfy the proficiency requirement pursuant to NFA Bylaw 301(b)for any individual applying to become a Member of NFA (as an FCM/RFED/IB/CPO/CTA/LTM)?
I. The applicant is or within the past two years has been registered or licensed within the US jurisdiction.
II.The applicant has satisfied the proficiency requirements in a foreign jurisdiction and the Board of Directors has designated those proficiency requirements.
III. NFA has received satisfactory evidence that the applicant has taken and passed the Limited Futures Examination-Regulation (Series 30).
IV. Since the date the applicant last passed such examination, there has been no period of two consecutive years during which the applicant has not been registered as a FB or AP or FCM/RFED/IB/CTA/CPO or LTM that is a Membe of NFA.Correct
The application is or within the past two years has been registered or licensed in a jurisdiction outside the United States. Also, the applicant should have taken and passed the Limited Futures Examination-Regulation (Series 32).
Reference: RULE 401. QUALIFICATION TESTING REQUIREMENT.
Incorrect
The application is or within the past two years has been registered or licensed in a jurisdiction outside the United States. Also, the applicant should have taken and passed the Limited Futures Examination-Regulation (Series 32).
Reference: RULE 401. QUALIFICATION TESTING REQUIREMENT.