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Question 1 of 10
1. Question
Under the guide to communications with the public by the National Futures Association, which of the following is correct regarding the proprietary accounts?
I. Proprietary performance data shall never be combined with client performance data unless the material discloses what performance is proprietary.
II. Proprietary assets should be included when reporting client assets under management.
III. Proprietary results must clearly be labeled as hypothetical.
IV. Proprietary results should be pro-forma adjusted and reflect the commissions and fees that clients will incr.Correct
For proprietary accounts, members and associated persons who disclose the past performance of their personal trading accounts should comply with certain requirements by the National Futures Association. Proprietary performance data are not combined with client performance data provided that the material clearly discloses the performance’s classification whether it is proprietary or not. It shall also not include proprietary assets in reporting client assets under management. It shall be clearly labeled as proprietary for the proper classification of accounts. Any differences between proprietary trading and client trading must be explained fully.
Incorrect
For proprietary accounts, members and associated persons who disclose the past performance of their personal trading accounts should comply with certain requirements by the National Futures Association. Proprietary performance data are not combined with client performance data provided that the material clearly discloses the performance’s classification whether it is proprietary or not. It shall also not include proprietary assets in reporting client assets under management. It shall be clearly labeled as proprietary for the proper classification of accounts. Any differences between proprietary trading and client trading must be explained fully.
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Question 2 of 10
2. Question
What are the mandatory requirements for all promotional material for security futures products under the National Futures Association?
I. All promotional material for security futures products must be reviewed by a designated security futures principal.
II. All promotional material for security futures products must state that security futures products are suitable for all customers.
III. All promotional material for security futures products must include the date the material was first used.
IV. All promotional material for security futures products must prominently identify the member.Correct
Promotional materials for security futures products must adhere to certain requirements provided by the National Futures Association. The member must prominently be identified in the promotional material. The date of the material when it was first used shall also be indicated. The contact information for obtaining a copy of the Risk Disclosure Statement for Security Futures Products shall be provided. It must also state that the security futures products are not suitable for all customers. It must also be reviewed and approved by a designated security futures principal in writing. The purpose of the promotional material is to reach a public audience through ma media, therefore, it is subject to approval after complying with the mandatory requirements.
Incorrect
Promotional materials for security futures products must adhere to certain requirements provided by the National Futures Association. The member must prominently be identified in the promotional material. The date of the material when it was first used shall also be indicated. The contact information for obtaining a copy of the Risk Disclosure Statement for Security Futures Products shall be provided. It must also state that the security futures products are not suitable for all customers. It must also be reviewed and approved by a designated security futures principal in writing. The purpose of the promotional material is to reach a public audience through ma media, therefore, it is subject to approval after complying with the mandatory requirements.
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Question 3 of 10
3. Question
Which of the following must be disclosed in promotional material to solicit for trading programs that include security futures products?
I. The promotional material must state that the trading program is unproven if the member does not have any customers in the trading program.
II. The cumulative past performance data must be calculated consistently under the Commodity Futures Trading Commission.
III. The performance data must be determined if accurate and represents all reasonable comparable account by a designated futures principal.
IV. The promotional material must state that the trading program is unproven if the member has any customers in the trading program.Correct
The promotional material to solicit for trading programs is used by the Futures Commission Merchant and their associated persons. To comply with the requirements of the National Futures Association, certain disclosures must be applied. The cumulative past performance of all customers involved in the trading program must be disclosed. The calculation of the performance must comply with the Commodity Futures Trading Commission. It shall always show the record on how to maintain the performance through its calculation. Also, a designated security futures principal must determine that the performance data is accurate.
Incorrect
The promotional material to solicit for trading programs is used by the Futures Commission Merchant and their associated persons. To comply with the requirements of the National Futures Association, certain disclosures must be applied. The cumulative past performance of all customers involved in the trading program must be disclosed. The calculation of the performance must comply with the Commodity Futures Trading Commission. It shall always show the record on how to maintain the performance through its calculation. Also, a designated security futures principal must determine that the performance data is accurate.
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Question 4 of 10
4. Question
Which of the following is not included in the charts and statistics regarding security futures products for promotional materials?
Correct
There are certain disclosures required for the promotional material that incorporates charts and statistics regarding security futures products. It shall disclose the source of any statistical data or illustrations except if it was obvious. It must also state that supporting documentation will be furnished upon the following: (1) request for all claims, (2) comparisons, (3) recommendations, (4) statistics, and (5) other technical data.
Incorrect
There are certain disclosures required for the promotional material that incorporates charts and statistics regarding security futures products. It shall disclose the source of any statistical data or illustrations except if it was obvious. It must also state that supporting documentation will be furnished upon the following: (1) request for all claims, (2) comparisons, (3) recommendations, (4) statistics, and (5) other technical data.
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Question 5 of 10
5. Question
Which of the following is not required to be disclosed under the past trade recommendations of security futures products, the underlying securities, or derivatives?
Correct
For the past trade recommendations in security futures products, the underlying securities, or derivatives, there is certain information that must be disclosed unless the promotional material describes all other recommendations made for similar products. The name of the security recommended, together with the date and price of recommendation shall be disclosed. The price or price range is to be disclosed if a certain price is silent. The general market conditions during the period covered and the specific nature of each recommendation is also to be disclosed, or when liquidation was suggested. The example of the specific nature of each recommendation is the buy or sell, the limit order, or the GTC.
Incorrect
For the past trade recommendations in security futures products, the underlying securities, or derivatives, there is certain information that must be disclosed unless the promotional material describes all other recommendations made for similar products. The name of the security recommended, together with the date and price of recommendation shall be disclosed. The price or price range is to be disclosed if a certain price is silent. The general market conditions during the period covered and the specific nature of each recommendation is also to be disclosed, or when liquidation was suggested. The example of the specific nature of each recommendation is the buy or sell, the limit order, or the GTC.
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Question 6 of 10
6. Question
What must be stated if the member does not have any customers who have traded the program under the participation in a trading program of the National Futures Association?
Correct
There are certain disclosures in participating in a trading program by the associated persons of the Futures Commission Merchant. It is stated that if the member does not have any customers who have traded the program, the fact that the trading program is unproven shall be included in the promotional program. All other information must also be indicated as required by Section C of Compliance Rule 2-29 and National Futures Association Interpretive Notice 9025.
Incorrect
There are certain disclosures in participating in a trading program by the associated persons of the Futures Commission Merchant. It is stated that if the member does not have any customers who have traded the program, the fact that the trading program is unproven shall be included in the promotional program. All other information must also be indicated as required by Section C of Compliance Rule 2-29 and National Futures Association Interpretive Notice 9025.
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Question 7 of 10
7. Question
Which of the following are guidelines for promotional materials in including specific trade recommendations for security futures products?
I. A contact information for obtaining the list of prior recommendations must be included in the promotional material.
II. A reasonable basis for the recommendation must be provided by the member.
III. All material conflicts of interest created by the member’s activities in underlying securities must be disclosed in the promotional material.
IV. The general market conditions during the trade recommendations must be disclosed.Correct
For the promotional materials involving current trade recommendations, there are certain guidelines that must be adhered to. The member must indicate a reasonable basis for the recommendation. It must also contain contact information for obtaining the list of prior recommendations described under the Past Trade Recommendations. It must also indicate the material conflicts arose from the underlying assets created by the member’s activities. It must also be disclosed if the member was a manager or co-manager of a public offering of any securities of the issuer within the last three years.
Incorrect
For the promotional materials involving current trade recommendations, there are certain guidelines that must be adhered to. The member must indicate a reasonable basis for the recommendation. It must also contain contact information for obtaining the list of prior recommendations described under the Past Trade Recommendations. It must also indicate the material conflicts arose from the underlying assets created by the member’s activities. It must also be disclosed if the member was a manager or co-manager of a public offering of any securities of the issuer within the last three years.
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Question 8 of 10
8. Question
Which of the following are required to be disclosed for the additional website disclosure obligations for FDMs?
I. A demonstration that all orders for all customers have been executed and fulfilled at the quoted price.
II. A summary schedule of the FDM’s adjusted net capital, and the net capital and excess net capital.
III. A discussion of any pending or completed material administrative, civil, enforcement, or criminal complaints.
IV. A discussion of the material risks associated with the FDM acting as a counterparty to eligible contract participants.Correct
There are certain disclosures for the additional website obligations for FDMs. Each financial information must be readily available for its users no less frequently than on an annual basis. The examples of the disclosures needed for the website are the following: (1) a summary schedule for the adjusted net capital and its excess, (2) any pending or completed material discussion for administrative, civil, or criminal complaints, (3) a discussion on of the material risks acting as a counterparty to eligible contract participants, (4) a discussion of the business of the FDM on behalf of its customers. This includes the customer type, market, currencies traded, and the FDM’s policies and procedures. The significant types of business on behalf of its customers shall also be disclosed.
Incorrect
There are certain disclosures for the additional website obligations for FDMs. Each financial information must be readily available for its users no less frequently than on an annual basis. The examples of the disclosures needed for the website are the following: (1) a summary schedule for the adjusted net capital and its excess, (2) any pending or completed material discussion for administrative, civil, or criminal complaints, (3) a discussion on of the material risks acting as a counterparty to eligible contract participants, (4) a discussion of the business of the FDM on behalf of its customers. This includes the customer type, market, currencies traded, and the FDM’s policies and procedures. The significant types of business on behalf of its customers shall also be disclosed.
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Question 9 of 10
9. Question
Which of the following are included in addressing the number of unique features of virtual currency derivatives?
I. The rules of certain designated contract markets impose trading halts restriction
II. The advisories and disclosures to ensure a customer is aware of the information for virtual currencies
III. The restrictions on customer trading activity in virtual currency derivatives, such as additional margin, position limits, and give-in transactions
IV. The significance of price volatility and the initial margin for virtual currency derivativesCorrect
In a virtual currency derivative, disclosure documents and promotional materials must address the number of virtual currency derivatives. This includes the significant price volatility and the initial margin for virtual currency which would be experienced by the virtual currency derivatives. The rules of certain designated contract markets may restrict the ability of a market participant in exiting into a position during a period of high volatility. There are also some FCMs who restrict customer trading activities in virtual currency derivatives wherein they would prohibit naked shorting, give-in transactions, together with the imposition of position limits.
Incorrect
In a virtual currency derivative, disclosure documents and promotional materials must address the number of virtual currency derivatives. This includes the significant price volatility and the initial margin for virtual currency which would be experienced by the virtual currency derivatives. The rules of certain designated contract markets may restrict the ability of a market participant in exiting into a position during a period of high volatility. There are also some FCMs who restrict customer trading activities in virtual currency derivatives wherein they would prohibit naked shorting, give-in transactions, together with the imposition of position limits.
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Question 10 of 10
10. Question
What should carefully be considered by the Commodity Pool Operators and the Commodity Trading Advisors regarding their obligations in their activities?
Correct
The Commodity Pool Operator and the Commodity Trading Advisor have certain obligations regarding the disclosures in a document. They must carefully assess the risks arising from their own activities, in relation to their function, in virtual currency derivatives and virtual currencies, and customize their disclosure documents, offering documents, and promotional material to address the unique risks related to their specific activities. However, the National Futures Association does not prescribe standardized disclosure language in virtual currency derivatives transactions.
Incorrect
The Commodity Pool Operator and the Commodity Trading Advisor have certain obligations regarding the disclosures in a document. They must carefully assess the risks arising from their own activities, in relation to their function, in virtual currency derivatives and virtual currencies, and customize their disclosure documents, offering documents, and promotional material to address the unique risks related to their specific activities. However, the National Futures Association does not prescribe standardized disclosure language in virtual currency derivatives transactions.