Series 32 Free Practice Questions Quiz 26

In disclosing the distribution of profits and taxations, the federal income tax effects of payments for a participant including the federal income tax discussions shall be stated. The document must also disclose the pool’s policies with respect to payment of distributions from profits or capital and the frequency of such payments. The Commodity Pool Operator is required to explain the objectives and the manner in which the related risks will be achieved if the pool is specifically structured to accomplish certain federal income tax objectives. In reporting, the document must state all participants with either monthly or quarterly statements of accounts as well as a certified annual report.

The document must disclose that the arrangement may dispose of them to trade more actively if the Commodity Pool Operator or major Commodity Trading Advisor receives office space or other soft dollar benefits from the Futures Commission Merchant, RFED, or IB. The document must disclose that an incentive has been given to trade the account actively to increase the compensation that the employer will receive if the CPO or major CTA is an Associated Person of the Futures Commission Merchant. In its description, the conflicts whereby a person may directly or indirectly benefit shall be included from the maintenance of the pool’s account.

The following information must be seen in a shared account of all participants. Some information that is included in the employment status of the member if he/she is self-employed or retired, the member’s projected liquid net worth, his or her age, and the investment experience and familiarity of the member. Lastly, the objectives of investment such as income, growth, trading profits, and principal’s safety must be obtained by the member.

In addition, with the information that is needed in the diligence of opening accounts, account records of customers shall include the stated information above. Agreement of discretionary authorization on file, name, affiliation to the customer, and knowledge of person holding trading authority must be included. Additional information also includes the date disclosure document equipped to the customer, name of the principal approving account, dates of approval, and authentication of currency of account information.

Under the Security Futures in Opening of Accounts, specifically in the agreement of accounts, within 15 days after the account of the customer has been approved, the member shall obtain the following from the customer. The written agreement also includes that the customer agrees to be certain by the FINRA rules regarding the security futures trading. The customer shall also specify on the written agreement that the customer agrees not to breach security futures position limits.

The background and financial data of every natural person whose account has been accepted for security futures must receive verification within 15 days after the account of the customer has been approved for trading of security futures. However, it shall not apply if the information and background are included in the account agreement of the customer or if the data of the customer has been confirmed by the member in connection with an options account.

In maintaining the records of security futures, every member shall preserve and have a separate central log, index, and files of complaints that are related to security futures. This central file must be placed at the principal place of business or principal office chosen by the member. Other information that must be included in the central file is the registered representative’s identification that is checking the account and the overall explanation of the matter complained of. Lastly, if any, the record of what action has been taken with respect to the complaint must be included.

Under the maintenance of records for security futures, security futures-related complaints shall mean a written statement of a customer on behalf of a customer-related to security futures. This is acknowledged by a branch office of a member and shall be forwarded to the office. It is also stated that the central file is located not later than 30 days after the receipt by the branch office relates to the subject of the complaint. Lastly, for every security futures-related complaint, a copy must be kept at the branch office.

According to the National Futures Association’s requirement in review and approval of promotional material, the supervisory personnel, instead of the member, must document the review and approval of all promotional material in writing before using it by the users. The supervisory personnel is the officer, general partner, sole proprietor, branch office manager, or other supervisory employees other than the individual who prepared such material. The promotional material shall also be maintained on file for a period of five years from the date of its last use. It shall also have a readily accessible location for the convenience of its users. The members must also provide written supervisory procedures for promotional material used by the associated persons and employees.

Under the use of high pressure stated by the National Futures Association, any member or associated persons shall not use high-pressure sales tactics or make communications that are part of a high-pressure sales approach. This includes rushing a customer through account opening forms and glossing over the risk disclosure in haste to open the account. The use of electronic communications shall also be prohibited if it includes bolded, capitalized, or highlighted text or subject lines in an attempt to convey a false urgency to a customer. A member or associated person shall not threaten or intimidate a customer. One of the primary goals of the association is to protect the interest of a third person, especially the customer.