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Question 1 of 10
1. Question
Which of the following are requirements in addressing a firm’s supervisory procedures?
I. It shall address the time and location of the review for electronic communication and allow the public to assess it.
II. It shall address whether employees and agents can use electronic communication systems other than the system of the firm.
III. It shall address how frequently incoming and outgoing electronic communications will be reviewed.
IV. It shall address how members will educate and train employees on the firm’s policies and procedures.Correct
At a minimum, certain information shall be addressed to a firm’s supervisory procedures. These include whether employees and agents can use electronic communication other than using the system provided by the firm itself. It shall also indicate how members will educate and train employees on the firm’s policies and procedures. It shall address whether certain types of electronic communications will require a pre-review or post-review for its accuracy. A member shall also address how frequent incoming and outgoing electronic communications will be reviewed. Firms who employ associated persons with prior disciplinary history should scrutinize those associated person’s electronic communications.
Incorrect
At a minimum, certain information shall be addressed to a firm’s supervisory procedures. These include whether employees and agents can use electronic communication other than using the system provided by the firm itself. It shall also indicate how members will educate and train employees on the firm’s policies and procedures. It shall address whether certain types of electronic communications will require a pre-review or post-review for its accuracy. A member shall also address how frequent incoming and outgoing electronic communications will be reviewed. Firms who employ associated persons with prior disciplinary history should scrutinize those associated person’s electronic communications.
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Question 2 of 10
2. Question
Which of the following are the requirements in implementing written supervisory procedures governing the use of websites, social media, and other internet-based forums?
I. It shall ensure that new versions of the material are reviewed and approved prior to its first use.
II. It shall prohibit or describe how the member will supervise any features that are not available for advanced review.
III. It shall ensure that the review will be pre-documented and post-documented in electronic communications.
IV. It should take into consideration the fact that content that does not limit access to a target audience particularly through a login mechanism is available to the public.Correct
Supervisory procedures for websites, social media, and other internet-based forums have certain requirements in its implementation. This must require prior review and documented approval by an appropriate supervisor before going “live”. It must also ensure that the new versions of the material or its substantive changes are reviewed and approved prior to its first use. It should also prohibit or describe how the member will handle documents that cannot be reviewed in advance such as streaming script containing real-time market news. Members shall also remember to take into consideration the fact that content does not limit access to any particular audience that is available to the public.
Incorrect
Supervisory procedures for websites, social media, and other internet-based forums have certain requirements in its implementation. This must require prior review and documented approval by an appropriate supervisor before going “live”. It must also ensure that the new versions of the material or its substantive changes are reviewed and approved prior to its first use. It should also prohibit or describe how the member will handle documents that cannot be reviewed in advance such as streaming script containing real-time market news. Members shall also remember to take into consideration the fact that content does not limit access to any particular audience that is available to the public.
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Question 3 of 10
3. Question
What are the issues to be considered when developing supervisory procedures for websites, social media, and other internet-based forums?
I. Specifying the process in reviewing the hyperlinks and the date of when it should be reviewed.
II. Explaining the process in the posting of participants that are not affiliated with the member will be monitored.
III. Enabling the review for profiles on employees and personal websites of the agents as those are used in constituting a promotional material.
IV. The use of futures, options, and foreign exchange charts with different time periods.Correct
Periodically, a member must evaluate and modify their review procedures for websites, social media, and other internet-based forums. Its purpose is to ensure that they would remain effective and must retain all required records together with records of prior versions. The issues to be considered are the following: (1) Providing a means for identifying the time frame in which a particular version of such form was in use, (2) enabling the review of the personal website of an agent and their social media profiles, (3) specifying the date such websites will be reviewed and how it will be reviewed, and (4) explaining the process of how posting was made by participants that are not affiliated with the member.
Incorrect
Periodically, a member must evaluate and modify their review procedures for websites, social media, and other internet-based forums. Its purpose is to ensure that they would remain effective and must retain all required records together with records of prior versions. The issues to be considered are the following: (1) Providing a means for identifying the time frame in which a particular version of such form was in use, (2) enabling the review of the personal website of an agent and their social media profiles, (3) specifying the date such websites will be reviewed and how it will be reviewed, and (4) explaining the process of how posting was made by participants that are not affiliated with the member.
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Question 4 of 10
4. Question
Which of the following shall not be done in promotional material for options using cash, futures market, or forex data to sell options?
I. It shall include futures or forex price charts unless it is accompanied by option price charts.
II. It shall not imply that options prices move in tandem with cash, futures, or forex prices.
III. It shall use price data that does not include commissions and fees comparable to those charged by the member.
IV. It shall not use price data for at-the-money options to sell out-of-money options in a promotionalCorrect
Generally, using cash, futures market, or forex data to sell options is misleading. Including futures or forex price charts shall not be done provided that it is accompanied by option price charts. Using futures, options, and forex charts with different time periods shall also not be allowed. In promotional material for options, it should not imply that options prices move in tandem with cash, futures, or forex prices. It is not a requirement for a promotional material to use price data that does not include commissions and fees comparable to those charged by the member.
Incorrect
Generally, using cash, futures market, or forex data to sell options is misleading. Including futures or forex price charts shall not be done provided that it is accompanied by option price charts. Using futures, options, and forex charts with different time periods shall also not be allowed. In promotional material for options, it should not imply that options prices move in tandem with cash, futures, or forex prices. It is not a requirement for a promotional material to use price data that does not include commissions and fees comparable to those charged by the member.
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Question 5 of 10
5. Question
Which of the following duties of a member is basically the same as its duty to supervise other forms of correspondence?
Correct
The duty to supervise other forms of correspondence is basically the same as a member’s duty to supervise the use of commodity interest-related electronic communications, including electronic mails, instant messages, text messages, and messages sent through social media provided by their employees. A promotional material’s example is when an electronic mail sent to targeted individuals or groups has the purpose of soliciting funds or orders.
Incorrect
The duty to supervise other forms of correspondence is basically the same as a member’s duty to supervise the use of commodity interest-related electronic communications, including electronic mails, instant messages, text messages, and messages sent through social media provided by their employees. A promotional material’s example is when an electronic mail sent to targeted individuals or groups has the purpose of soliciting funds or orders.
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Question 6 of 10
6. Question
Which of the following communications involve limited risk or margin calls under the long options?
Correct
The limited risk or no margin calls are contained in communications that indicate option trading. This communication will be considered misleading provided that it adequately discloses that such characteristics apply to long options only. The communication shall disclose the risk of loss limited to the premium paid on the option adding up the commissions and fees. Limited risk is used to imply that the likelihood of loss is limited and is highly misleading. The term for limited risk must clearly be discussed as it refers to the amount of loss but not the likelihood of loss.
Incorrect
The limited risk or no margin calls are contained in communications that indicate option trading. This communication will be considered misleading provided that it adequately discloses that such characteristics apply to long options only. The communication shall disclose the risk of loss limited to the premium paid on the option adding up the commissions and fees. Limited risk is used to imply that the likelihood of loss is limited and is highly misleading. The term for limited risk must clearly be discussed as it refers to the amount of loss but not the likelihood of loss.
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Question 7 of 10
7. Question
What shall the audio or video content of the promotional material be pre-approved by the members?
Correct
An audio or video content must be pre-approved if the promotional material acquires the following requirements: (1) It provides the implication of opportunity through the use of adjectives such as hot or explosive, (2) if it represents that there is an existence of potential opportunity regardless of whether the discussion is purely subjective or based upon factual data, (3) if it provides an opinion regarding the anticipation of the direction of a particular market or markets, (4) it highlights particular markets more than others. The characteristics which would not require an advertisement are the factual market data which do not have the potential opportunity and a general discussion of the services the firm provides.
Incorrect
An audio or video content must be pre-approved if the promotional material acquires the following requirements: (1) It provides the implication of opportunity through the use of adjectives such as hot or explosive, (2) if it represents that there is an existence of potential opportunity regardless of whether the discussion is purely subjective or based upon factual data, (3) if it provides an opinion regarding the anticipation of the direction of a particular market or markets, (4) it highlights particular markets more than others. The characteristics which would not require an advertisement are the factual market data which do not have the potential opportunity and a general discussion of the services the firm provides.
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Question 8 of 10
8. Question
Which of the following are examples of differences between the program followed in the contest and the program being used to trade customer accounts?
Correct
A member and associated person who participate in trading championships may only promote their performance results once the disclosure is full and made of all material differences between the program after the contest and the program being used to trade customer accounts. These material differences are the markets traded, leverage used, margin rates, and commission and fees.
Incorrect
A member and associated person who participate in trading championships may only promote their performance results once the disclosure is full and made of all material differences between the program after the contest and the program being used to trade customer accounts. These material differences are the markets traded, leverage used, margin rates, and commission and fees.
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Question 9 of 10
9. Question
Which of the following is correct regarding the cherry-picking practice of trading an account?
Correct
In a cherry-picking, the performance of isolated accounts or isolated trades within an account is being highlighted as its process. This cherry-picking practice can highly be misleading. The performance of one particular account, such as the model account, may not be presented provided that performance is representative of all reasonably comparable accounts. The performance of specific trades within an account may also not be presented provided those returns are representative of the overall performance of the account.
Incorrect
In a cherry-picking, the performance of isolated accounts or isolated trades within an account is being highlighted as its process. This cherry-picking practice can highly be misleading. The performance of one particular account, such as the model account, may not be presented provided that performance is representative of all reasonably comparable accounts. The performance of specific trades within an account may also not be presented provided those returns are representative of the overall performance of the account.
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Question 10 of 10
10. Question
Which of the following are a misleading act and a violation of the rules of the National Futures Commission?
Correct
The performance of a third-party index as a way to promote the benefits of the managed futures are used by the members and its associated persons even though it is not representative of the member’s or associated person’s trading program or performance results. It can be misleading when the third-party index performance is used in lieu of or more prominently than the member’s own trading performance.
Incorrect
The performance of a third-party index as a way to promote the benefits of the managed futures are used by the members and its associated persons even though it is not representative of the member’s or associated person’s trading program or performance results. It can be misleading when the third-party index performance is used in lieu of or more prominently than the member’s own trading performance.