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Question 1 of 30
1. Question
An unregulated person is defined as any person that is not of which of the following?
I. A bank or trust company regulated by a U.S. banking regulator
II. A broker-dealer registered with the SEC and a member of FINRA
III. An FCM registered with the CFTC and a Member of NFA
IV. An RFED registered with the CFTC and a Member of NFACorrect
An unregulated person is defined as any person that is not one of the following:
- A bank or trust company regulated by a U.S. banking regulator;
- A broker-dealer registered with the SEC and a member of FINRA;
- An FCM registered with the CFTC and a Member of NFA;
- An RFED registered with the CFTC and a Member of NFA;
- A bank or trust company regulated in a money center country and which has in excess of $1 billion in regulatory capital.
Incorrect
An unregulated person is defined as any person that is not one of the following:
- A bank or trust company regulated by a U.S. banking regulator;
- A broker-dealer registered with the SEC and a member of FINRA;
- An FCM registered with the CFTC and a Member of NFA;
- An RFED registered with the CFTC and a Member of NFA;
- A bank or trust company regulated in a money center country and which has in excess of $1 billion in regulatory capital.
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Question 2 of 30
2. Question
Unaudited Form 1-FR must contain the following except?
Correct
Unaudited Form 1-FR must contain the following:
Statement of financial condition;
Statement of the computation of minimum capital requirements;
Statement of changes in ownership equity; and
Statement of changes in liabilities subordinated to the claims of general creditors pursuant to a satisfactory subordination agreementIncorrect
Unaudited Form 1-FR must contain the following:
Statement of financial condition;
Statement of the computation of minimum capital requirements;
Statement of changes in ownership equity; and
Statement of changes in liabilities subordinated to the claims of general creditors pursuant to a satisfactory subordination agreement -
Question 3 of 30
3. Question
The certified year-end Form 1-FR must include which of the following?
I. The statement of income
II. The statement of cash flows
III. The statement of contracts
IV. The statement of customer filingCorrect
The certified year-end Form 1-FR must also include:
The statement of income; and
The statement of cash flows.Incorrect
The certified year-end Form 1-FR must also include:
The statement of income; and
The statement of cash flows. -
Question 4 of 30
4. Question
Which of the following statements are true with regards to both the unaudited Form 1-FRs and the audited Form 1-FRs?
I. If the FDM/RFED is registered as an FCM, NFA must receive audited Form 1-FRs within 60 days after the statement date.
II. The instructions for the Form 1-FR does not include where to classify items on the form.
III. NFA must receive unaudited Form 1-FRs within 17 business days after the statement date.
IV. NFA must receive audited Form 1-FRs within 90 days after the statement date.Correct
NFA must receive unaudited Form 1-FRs within 17 business days after the statement date. NFA must receive audited Form 1-FRs within 90 days after the statement date. Please note that if the FDM/RFED is registered as an FCM, NFA must receive audited Form 1-FRs within 60 days after the statement date.
The instructions for the Form 1-FR generally say where to classify items on the form. When the CFTC adopted Form 1-FR, however, registered firms generally did not conduct forex business. As a result, the form does not clearly indicate how to account for some items related to the forex activities of FDMs.
Incorrect
NFA must receive unaudited Form 1-FRs within 17 business days after the statement date. NFA must receive audited Form 1-FRs within 90 days after the statement date. Please note that if the FDM/RFED is registered as an FCM, NFA must receive audited Form 1-FRs within 60 days after the statement date.
The instructions for the Form 1-FR generally say where to classify items on the form. When the CFTC adopted Form 1-FR, however, registered firms generally did not conduct forex business. As a result, the form does not clearly indicate how to account for some items related to the forex activities of FDMs.
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Question 5 of 30
5. Question
Which of the following statement with regards to capital charges for forex positions is false?
Correct
FDMs must take a capital charge on all uncovered proprietary positions, although the firm may net on-exchange and off-exchange positions when determining the firm’s uncovered position. Uncovered off-exchange proprietary positions are subject to a haircut charge that depends on the underlying currency. Net balances in British pounds, Japanese yen, Canadian dollars, Swiss francs and the Euro are subject to a 6% charge. Net balances in all other currencies are subject to a 20% charge.
Incorrect
FDMs must take a capital charge on all uncovered proprietary positions, although the firm may net on-exchange and off-exchange positions when determining the firm’s uncovered position. Uncovered off-exchange proprietary positions are subject to a haircut charge that depends on the underlying currency. Net balances in British pounds, Japanese yen, Canadian dollars, Swiss francs and the Euro are subject to a 6% charge. Net balances in all other currencies are subject to a 20% charge.
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Question 6 of 30
6. Question
A firm may include foreign currency held in which of the following when calculating its net position?
I. Trading accounts via broker-dealers
II. Trading accounts in banks
III. Deposit
IV. InvestmentCorrect
When calculating its net position, your firm may include foreign currency held in deposit, investment, or trading accounts at banks, FCMs, and broker-dealers
Incorrect
When calculating its net position, your firm may include foreign currency held in deposit, investment, or trading accounts at banks, FCMs, and broker-dealers
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Question 7 of 30
7. Question
Which of the following statement with regards to subordinated loan agreements is/are accurate?
I. The firm can include positions at an affiliate or an unregulated person when calculating its net position for purposes of the capital charge.
II. If a lender contributes 10 percent or more of the firm’s capital, then the firm must list the lender as a principal.
III. The firm must submit a signed copy of the agreement to its DSRO at least 10 days prior to the proposed effective date.
IV. A subordination agreement must include the name and address of the lender, state the business relationship of the lender to the firm, and indicate whether the firm carried funds or securities for the lender at or about the time firm files the proposed agreement.Correct
Proceeds from subordinated loan agreements may be included in the firm’s capital if the agreement meets the requirements in CFTC Regulation 1.17(h) and has been filed with and approved by the firm’s DSRO. The firm must submit a signed copy of the agreement to its DSRO at least 10 days prior to the proposed effective date. A subordination agreement must include the name and address of the lender, state the business relationship of the lender to the firm, and indicate whether the firm carried funds or securities for the lender at or about the time firm files the proposed agreement. If a lender contributes 10 percent or more of the firm’s capital, then the firm must list the lender as a principal.
In addition, the Member’s DSRO must approve prepayments or special prepayments, and the Member must give its DSRO notice of accelerated maturity. The Member must also submit amendments to existing subordination agreements to its DSRO for approval. Finally, NFA has developed standardized Cash Subordination Loan Agreements and Secured Demand Notes.
Incorrect
Proceeds from subordinated loan agreements may be included in the firm’s capital if the agreement meets the requirements in CFTC Regulation 1.17(h) and has been filed with and approved by the firm’s DSRO. The firm must submit a signed copy of the agreement to its DSRO at least 10 days prior to the proposed effective date. A subordination agreement must include the name and address of the lender, state the business relationship of the lender to the firm, and indicate whether the firm carried funds or securities for the lender at or about the time firm files the proposed agreement. If a lender contributes 10 percent or more of the firm’s capital, then the firm must list the lender as a principal.
In addition, the Member’s DSRO must approve prepayments or special prepayments, and the Member must give its DSRO notice of accelerated maturity. The Member must also submit amendments to existing subordination agreements to its DSRO for approval. Finally, NFA has developed standardized Cash Subordination Loan Agreements and Secured Demand Notes.
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Question 8 of 30
8. Question
Which of the following is/are qualified institutions for calculating the amount owed to forex customers and hold assets in the UNited States?
I. a bank or trust company regulated by a U.S. banking regulator
II. an FCM registered with the CFTC and a Member of NFA
III. a broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority
IV. An RFED registered with the FDM for trading accountsCorrect
For assets held in the United States, a qualifying institution is:
a bank or trust company regulated by a U.S. banking regulator;
a broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority; or
an FCM registered with the CFTC and a Member of NFA.Incorrect
For assets held in the United States, a qualifying institution is:
a bank or trust company regulated by a U.S. banking regulator;
a broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority; or
an FCM registered with the CFTC and a Member of NFA. -
Question 9 of 30
9. Question
Which of the following statements with regards to Assets Covering Liabilities to Retail Forex Customers is false?
Correct
An FDM must calculate the amount owed to forex customers and hold assets, solely of the type permitted under CFTC Regulation 1.25, equal to or in excess of the amount at certain qualified institutions.
To calculate the amount owed, add up the net liquidating values of each forex account that liquidates to a positive number, using the fair market value for each asset other than open positions and the current market value for open positions.Assets held in a money center country are not eligible to cover the amount owed to customers unless the FDM and the qualifying institution have entered into an agreement, acceptable to NFA, authorizing the institution to provide NFA and the CFTC with information regarding the FDM’s accounts and to provide that information directly to NFA or the CFTC upon their request. This signed agreement must be filed with NFA.
Incorrect
An FDM must calculate the amount owed to forex customers and hold assets, solely of the type permitted under CFTC Regulation 1.25, equal to or in excess of the amount at certain qualified institutions.
To calculate the amount owed, add up the net liquidating values of each forex account that liquidates to a positive number, using the fair market value for each asset other than open positions and the current market value for open positions.Assets held in a money center country are not eligible to cover the amount owed to customers unless the FDM and the qualifying institution have entered into an agreement, acceptable to NFA, authorizing the institution to provide NFA and the CFTC with information regarding the FDM’s accounts and to provide that information directly to NFA or the CFTC upon their request. This signed agreement must be filed with NFA.
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Question 10 of 30
10. Question
FDMs are required to prepare and maintain ledgers or other similar records that summarize each transaction affecting which of the following?
I. Member’s capital accounts
II. Member’s income
III. Member’s liability
IV. Member’s assetsCorrect
FDMs are required to prepare and maintain ledgers or other similar records that summarize each transaction affecting the Member’s assets, liability, income, expense and capital accounts and include appropriate references to supporting documents.
Incorrect
FDMs are required to prepare and maintain ledgers or other similar records that summarize each transaction affecting the Member’s assets, liability, income, expense and capital accounts and include appropriate references to supporting documents.
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Question 11 of 30
11. Question
The record of daily trades should show which of the following?
I. Commissions and fees
II. Currency Pair
III. Size of customer votes
IV. PriceCorrect
In order to demonstrate compliance with the capital requirements, an FDM should make and maintain daily records showing the transactions executed that day and their effect on the firm’s obligations to its customers.
The record of daily trades should show, at a minimum, the date, time, currency pair, price, and size of each transaction; commissions and fees; and the person for whom the transaction was made.
Incorrect
In order to demonstrate compliance with the capital requirements, an FDM should make and maintain daily records showing the transactions executed that day and their effect on the firm’s obligations to its customers.
The record of daily trades should show, at a minimum, the date, time, currency pair, price, and size of each transaction; commissions and fees; and the person for whom the transaction was made.
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Question 12 of 30
12. Question
Which of the following statements in relation to financial books and records is false?
Correct
FDMs are required to prepare and maintain ledgers or other similar records that summarize each transaction affecting the Member’s assets, liability, income, expense and capital accounts and include appropriate references to supporting documents.
In order to demonstrate compliance with the capital requirements, an FDM should make and maintain daily records showing the transactions executed that day and their effect on the firm’s obligations to its customers.
The individuals responsible for preparing an FDM’s books and records must be under the ultimate supervision of a listed principal and registered AP of the Member.
Incorrect
FDMs are required to prepare and maintain ledgers or other similar records that summarize each transaction affecting the Member’s assets, liability, income, expense and capital accounts and include appropriate references to supporting documents.
In order to demonstrate compliance with the capital requirements, an FDM should make and maintain daily records showing the transactions executed that day and their effect on the firm’s obligations to its customers.
The individuals responsible for preparing an FDM’s books and records must be under the ultimate supervision of a listed principal and registered AP of the Member.
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Question 13 of 30
13. Question
The record of obligations to customers should include which of the following?
I. The gross profits and the gross losses to customers
II. The firm’s open currency exposures to customers
III. The sum of the customers’ cash balances
IV. The net liquidating value of all customer accounts combinedCorrect
The record of obligations to customers should include the gross profits and the gross losses to customers, the firm’s open currency exposures to customers, the sum of the customers’ cash balances, and the net liquidating value of all customer accounts combined.
Incorrect
The record of obligations to customers should include the gross profits and the gross losses to customers, the firm’s open currency exposures to customers, the sum of the customers’ cash balances, and the net liquidating value of all customer accounts combined.
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Question 14 of 30
14. Question
Which of the following statements in relation to internal financial controls is/are accurate?
I. The internal controls must be audited by a third party firm who is registered by a certified member of the NFA under Section 108 of the CFTC Form 1-FR
II. The FDM must demonstrate that its system of internal financial controls has no material weaknesses and that it is adequate for establishing and maintaining internal controls over financial reporting by the Member.
III. An FDM may satisfy this obligation by obtaining an internal control report that is prepared and certified by an independent public accountant who is registered under Section 102 of the Sarbanes-Oxley Act (SOX).
IV. The FDM must demonstrate that its system of internal controls provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.Correct
The FDM must demonstrate that its system of internal controls provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
The FDM must demonstrate that its system of internal financial controls has no material weaknesses and that it is adequate for establishing and maintaining internal controls over financial reporting by the Member.
An FDM may satisfy this obligation by obtaining an internal control report that is prepared and certified by an independent public accountant who is registered under Section 102 of the Sarbanes-Oxley Act (SOX).
If NFA believes that a Member’s internal controls are inadequate at any time, NFA’s Compliance department may require it to provide to NFA an internal control report that is prepared and certified by an independent public accountant who is registered under Section 102 of the SOX.
Incorrect
The FDM must demonstrate that its system of internal controls provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
The FDM must demonstrate that its system of internal financial controls has no material weaknesses and that it is adequate for establishing and maintaining internal controls over financial reporting by the Member.
An FDM may satisfy this obligation by obtaining an internal control report that is prepared and certified by an independent public accountant who is registered under Section 102 of the Sarbanes-Oxley Act (SOX).
If NFA believes that a Member’s internal controls are inadequate at any time, NFA’s Compliance department may require it to provide to NFA an internal control report that is prepared and certified by an independent public accountant who is registered under Section 102 of the SOX.
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Question 15 of 30
15. Question
Which of the following information should be included in the internal control report?
I. the net liquidating value of all customer accounts combined
II. a representation by the accountant that it has examined and tested the FDM’s system of internal controls
III. a firm’s open currency control exposures to customers
IV. a detailed explanation of the examination performed by the accountantCorrect
The internal control report shall contain, at a minimum, a detailed explanation of the examination performed by the accountant and a representation by the accountant that it has examined and tested the FDM’s system of internal controls and that the controls comply with the above standards.
Incorrect
The internal control report shall contain, at a minimum, a detailed explanation of the examination performed by the accountant and a representation by the accountant that it has examined and tested the FDM’s system of internal controls and that the controls comply with the above standards.
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Question 16 of 30
16. Question
Which of the following should FDMs prepare for customers with regards to forex reporting?
I. a daily computation showing the total amount of customer funds on deposit
II. a daily computation showing the total amount of customer open positions
III. a daily computation showing the total amount due to customers
IV. a daily computation showing the total amount of customer surcharges and feesCorrect
FDMs should prepare a daily computation showing the total amount of customer funds on deposit, the total amount of customer open positions, and the total amount due to customers.
Incorrect
FDMs should prepare a daily computation showing the total amount of customer funds on deposit, the total amount of customer open positions, and the total amount due to customers.
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Question 17 of 30
17. Question
Which of the following report types is NOT a necessacity for a firm to file with the NFA with regards to forex reporting?
Correct
The firm must file with NFA three report types: daily electronic reports showing liabilities to customers and other financial and operational information; monthly operational and risk management reports; and quarterly reports that contain the most-recent performance disclosures required under CFTC Regulation 5.5(e)(1)(i)(iii).
Incorrect
The firm must file with NFA three report types: daily electronic reports showing liabilities to customers and other financial and operational information; monthly operational and risk management reports; and quarterly reports that contain the most-recent performance disclosures required under CFTC Regulation 5.5(e)(1)(i)(iii).
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Question 18 of 30
18. Question
Which of the following is/are accurate statements with regards to the forex reporting times?
I. The quarterly reports must be filed within 17 business days after the end of each quarter for which the report is prepared.
II. The monthly reports must be filed within 17 business days after the end of each month for which the report is prepared.
III. The daily reports must be prepared each business day, and must be filed by noon on the following business day.
IV. The weekly reports must be prepared before the weekend, and must be filed by noon on the following day.Correct
The daily reports must be prepared each business day, and must be filed by noon on the following business day. The monthly reports must be filed within 17 business days after the end of each month for which the report is prepared. Similarly, the quarterly reports must be filed within 17 business days after the end of each quarter for which the report is prepared.
Incorrect
The daily reports must be prepared each business day, and must be filed by noon on the following business day. The monthly reports must be filed within 17 business days after the end of each month for which the report is prepared. Similarly, the quarterly reports must be filed within 17 business days after the end of each quarter for which the report is prepared.
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Question 19 of 30
19. Question
No Forex Dealer Member or Associate of a Forex Dealer Member engaging in any forex transaction shall do which of the following?
I. Willfully submit materially false or misleading information to NFA or its agents with respect to forex transactions
II. Cheat, defraud or deceive, or attempt to cheat, defraud or deceive any other person
III. Disseminate, or cause to be disseminated, false or misleading information, or a knowingly inaccurate report, that affects or tends to affect the price of any foreign currency
IV. Willfully make or cause to be made a false report, or willfully to enter or cause to be entered a false record in or in connection with any forex transactionCorrect
No Forex Dealer Member or Associate of a Forex Dealer Member engaging in any forex transaction shall:
(1) Cheat, defraud or deceive, or attempt to cheat, defraud or deceive any other person;
(2) Willfully make or cause to be made a false report, or willfully to enter or cause to be entered a false record in or in connection with any forex transaction;
(3) Disseminate, or cause to be disseminated, false or misleading information, or a knowingly inaccurate report, that affects or tends to affect the price of any foreign currency;
(4) Engage in manipulative acts or practices regarding the price of any foreign currency or a forex transaction;
(5) Willfully submit materially false or misleading information to NFA or its agents with respect to forex transactions;
(6) Embezzle, steal or purloin or knowingly convert any money, securities or other property received or accruing to any person in or in connection with a forex transaction.
Incorrect
No Forex Dealer Member or Associate of a Forex Dealer Member engaging in any forex transaction shall:
(1) Cheat, defraud or deceive, or attempt to cheat, defraud or deceive any other person;
(2) Willfully make or cause to be made a false report, or willfully to enter or cause to be entered a false record in or in connection with any forex transaction;
(3) Disseminate, or cause to be disseminated, false or misleading information, or a knowingly inaccurate report, that affects or tends to affect the price of any foreign currency;
(4) Engage in manipulative acts or practices regarding the price of any foreign currency or a forex transaction;
(5) Willfully submit materially false or misleading information to NFA or its agents with respect to forex transactions;
(6) Embezzle, steal or purloin or knowingly convert any money, securities or other property received or accruing to any person in or in connection with a forex transaction.
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Question 20 of 30
20. Question
Which of the following transaction data information should an FDM provide upon the request of his/her customer?
I. Execution price
II. Quantity
III. Execution date and time
IV. Customer sideCorrect
Upon the request of an FDM’s customer with respect to a particular executed forex transaction of that customer, an FDM must provide the customer, within 30 minutes of the customer’s request, with the following transaction data for the 15 forex transactions that occur immediately before and after in the same currency pair of the customer’s transaction:
(i) Execution date and time (to the nearest millisecond in Eastern time);
(ii) Customer side (i.e., buy or sell);
(iii) Quantity;
(iv) Currency pair;
(v) Execution price (including any mark-up);
(vi) Commission and other charges assessed by the FDM (if applicable); and
(vii) Currency denomination of commission or other charges.
Incorrect
Upon the request of an FDM’s customer with respect to a particular executed forex transaction of that customer, an FDM must provide the customer, within 30 minutes of the customer’s request, with the following transaction data for the 15 forex transactions that occur immediately before and after in the same currency pair of the customer’s transaction:
(i) Execution date and time (to the nearest millisecond in Eastern time);
(ii) Customer side (i.e., buy or sell);
(iii) Quantity;
(iv) Currency pair;
(v) Execution price (including any mark-up);
(vi) Commission and other charges assessed by the FDM (if applicable); and
(vii) Currency denomination of commission or other charges.
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Question 21 of 30
21. Question
Each Forex Dealer Member shall disclose which of the following, if applicable, to each customer on a per-trade basis in the same currency as the base currency of the account on the customer transaction confirmation statement?
I. A description of the mid-point spread cost in a NFA form
II. Commission and any other fees
III. For transactions where a Forex Dealer Member is not using straight-through processing, the mid-point spread cost
IV. For transactions where a Forex Dealer Member is using straight-through processing, any mark-up or mark-down the Forex Dealer Member imposes on the price the Forex Dealer Member received for the offsetting position to the customer’s orderCorrect
Each Forex Dealer Member shall disclose the following, if applicable, to each customer on a per-trade basis in the same currency as the base currency of the account on the customer transaction confirmation statement:
(i) Commission and any other fees;
(ii) For transactions where a Forex Dealer Member is using straight-through processing, any mark-up or mark-down the Forex Dealer Member imposes on the price the Forex Dealer Member received for the offsetting position to the customer’s order; and
(iii) For transactions where a Forex Dealer Member is not using straight-through processing, the mid-point spread cost.
Incorrect
Each Forex Dealer Member shall disclose the following, if applicable, to each customer on a per-trade basis in the same currency as the base currency of the account on the customer transaction confirmation statement:
(i) Commission and any other fees;
(ii) For transactions where a Forex Dealer Member is using straight-through processing, any mark-up or mark-down the Forex Dealer Member imposes on the price the Forex Dealer Member received for the offsetting position to the customer’s order; and
(iii) For transactions where a Forex Dealer Member is not using straight-through processing, the mid-point spread cost.
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Question 22 of 30
22. Question
Which of the following provides an accurate description of a straight-through processing?
Correct
“Straight-through processing” means when a Forex Dealer Member automatically executes (without human intervention and without exception) an offsetting position to a customer order with another counterparty prior to providing an execution to the customer order.
Incorrect
“Straight-through processing” means when a Forex Dealer Member automatically executes (without human intervention and without exception) an offsetting position to a customer order with another counterparty prior to providing an execution to the customer order.
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Question 23 of 30
23. Question
Which of the following statements in regards to the written risk management program is/are accurate?
I. Each FDM must adopt written policies and procedures that describe the risk management program and those policies and procedures must be approved in writing by the firm’s governing body.
II. The firm must ensure that any materials changes to the policies and procedures are approved in writing by the firm’s governing body.
III. The Risk Management Program must include procedures for the timely distribution of the written Risk Management Program to relevant supervisory personnel.
IV. The FDM is required to maintain records of the persons whom the Risk Management Program is distributed to along with the date of distribution.Correct
Each FDM must adopt written policies and procedures that describe the risk management program and those policies and procedures must be approved in writing by the firm’s governing body.
The firm must ensure that any materials changes to the policies and procedures are approved in writing by the firm’s governing body.
The Risk Management Program must include procedures for the timely distribution of the written Risk Management Program to relevant supervisory personnel.
The FDM is required to maintain records of the persons whom the Risk Management Program is distributed to along with the date of distribution.
Incorrect
Each FDM must adopt written policies and procedures that describe the risk management program and those policies and procedures must be approved in writing by the firm’s governing body.
The firm must ensure that any materials changes to the policies and procedures are approved in writing by the firm’s governing body.
The Risk Management Program must include procedures for the timely distribution of the written Risk Management Program to relevant supervisory personnel.
The FDM is required to maintain records of the persons whom the Risk Management Program is distributed to along with the date of distribution.
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Question 24 of 30
24. Question
Each FDM must establish and maintain a risk management unit (RMU) that contains which of the following?
I. marketing personnel
II. qualified personnel
III. financial personnel
IV. sufficient authorityCorrect
Each FDM must establish and maintain a risk management unit (RMU). The RMU must have sufficient authority; qualified personnel; and financial, operational and other resources to carry out the firm’s Risk Management Program.
Incorrect
Each FDM must establish and maintain a risk management unit (RMU). The RMU must have sufficient authority; qualified personnel; and financial, operational and other resources to carry out the firm’s Risk Management Program.
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Question 25 of 30
25. Question
The following statements with regards to Risk Management Unit (RMU) are true except?
Correct
Each FDM must establish and maintain a risk management unit (RMU)
The RMU should report directly to the firm’s senior management
The RMU also must provide to FDM senior management and its governing body quarterly written risk exposure reportsIncorrect
Each FDM must establish and maintain a risk management unit (RMU)
The RMU should report directly to the firm’s senior management
The RMU also must provide to FDM senior management and its governing body quarterly written risk exposure reports -
Question 26 of 30
26. Question
The RMU should report directly to the firm’s senior management, and must be independent from those employees involved which of the following?
I. Pricing
II. Trading
III. Sales
IV. AdveertisingCorrect
The RMU should report directly to the firm’s senior management, and must be independent from those employees involved (including in a supervisory capacity) in pricing, trading, sales, marketing, advertising, and solicitation activities of the FDM (collectively business trading unit).
Incorrect
The RMU should report directly to the firm’s senior management, and must be independent from those employees involved (including in a supervisory capacity) in pricing, trading, sales, marketing, advertising, and solicitation activities of the FDM (collectively business trading unit).
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Question 27 of 30
27. Question
The Risk Management Program must include policies and procedures to monitor and manage the following risks except?
Correct
The Risk Management Program must include policies and procedures to monitor and manage the following risks: market risk, credit risk, liquidity risk, foreign currency risk, legal risk, operational risk, counterparty risk, liabilities to retail forex customers risk, technological risk, capital risk, and any other applicable risk.
Incorrect
The Risk Management Program must include policies and procedures to monitor and manage the following risks: market risk, credit risk, liquidity risk, foreign currency risk, legal risk, operational risk, counterparty risk, liabilities to retail forex customers risk, technological risk, capital risk, and any other applicable risk.
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Question 28 of 30
28. Question
Which of the following statements in regards to the review and testing of the Risk Management Program are true?
I. The review must include an analysis of adherence to, and the effectiveness of, the risk management policies and procedures, and any recommendations for modifications to the Risk Management Program.
II. The FDM must ensure that the Risk Management Program is reviewed and tested at least annually or upon any material change in the FDM’s business that is reasonably likely to alter the FDM’s risk profile.
III. The review and testing should be conducted by qualified external audit staff with no affiliation to the firm or the FDM.
IV. The results of the review must be reported to and reviewed by the FDM’s senior management and governing body.Correct
The FDM must ensure that the Risk Management Program is reviewed and tested at least annually or upon any material change in the FDM’s business that is reasonably likely to alter the FDM’s risk profile.
The review and testing should be conducted by qualified internal audit staff that are independent of the business trading unit, or by a qualified third party audit service, which reports to FDM staff that are independent of the business trading unit.
The review must include an analysis of adherence to, and the effectiveness of, the risk management policies and procedures, and any recommendations for modifications to the Risk Management Program.
The results of the review must be reported to and reviewed by the FDM’s senior management and governing body.
Incorrect
The FDM must ensure that the Risk Management Program is reviewed and tested at least annually or upon any material change in the FDM’s business that is reasonably likely to alter the FDM’s risk profile.
The review and testing should be conducted by qualified internal audit staff that are independent of the business trading unit, or by a qualified third party audit service, which reports to FDM staff that are independent of the business trading unit.
The review must include an analysis of adherence to, and the effectiveness of, the risk management policies and procedures, and any recommendations for modifications to the Risk Management Program.
The results of the review must be reported to and reviewed by the FDM’s senior management and governing body.
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Question 29 of 30
29. Question
Each FDM must make which of the following financial information available on its website and must update the information as necessary to keep it accurate?
I. The pending or completed material administrative for customer assurance as required under CFTC Regulation 5.5
II. A summary schedule of the FDM’s adjusted net capital; net capital and excess net capital; all computed in accordance with the CFTC Regulation 5.7 and reflecting balances as of the month-end for the most recent 12 months
III. The total customer liability as reported each day to NFA on the Forex Financial Report for the last 12 months
IV. The Statement of Financial Condition and all related footnotes that are part of the FDM”s most current certified annual reports pursuant to CFTC Regulation 1.16Correct
Each FDM must make the following information available on its website and must update the information as necessary to keep it accurate but at least on an annual basis:
The following financial information:A summary schedule of the FDM’s adjusted net capital; net capital and excess net capital; all computed in accordance with the CFTC Regulation 5.7 and reflecting balances as of the month-end for the most recent 12 months;
The Statement of Financial Condition and all related footnotes that are part of the FDM”s most current certified annual reports pursuant to CFTC Regulation 1.16; and
The total customer liability as reported each day to NFA on the Forex Financial Report for the last 12 months.
Incorrect
Each FDM must make the following information available on its website and must update the information as necessary to keep it accurate but at least on an annual basis:
The following financial information:A summary schedule of the FDM’s adjusted net capital; net capital and excess net capital; all computed in accordance with the CFTC Regulation 5.7 and reflecting balances as of the month-end for the most recent 12 months;
The Statement of Financial Condition and all related footnotes that are part of the FDM”s most current certified annual reports pursuant to CFTC Regulation 1.16; and
The total customer liability as reported each day to NFA on the Forex Financial Report for the last 12 months.
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Question 30 of 30
30. Question
Members must establish and implement policies, procedures, and internal controls reasonably designed to assure compliance with AML provisions of the Bank Secrecy Act (BSA) and related regulations. A firm’s procedures must cover which of the following areas?
I. internal policies, procedures and controls reasonably designed to achieve compliance with the BSA and -implementing regulations
II. an ongoing training program
III. appointment of a designated compliance officer to oversee the program’s day-to-day operations
IV. an independent auditCorrect
Members must establish and implement policies, procedures, and internal controls reasonably designed to assure compliance with AML provisions of the Bank Secrecy Act (BSA) and related regulations. A firm’s procedures must cover these key areas:
-internal policies, procedures and controls reasonably designed to achieve compliance with the BSA and -implementing regulations;
-appointment of a designated compliance officer to oversee the program’s day-to-day operations;
-an ongoing training program;
-an independent audit;Incorrect
Members must establish and implement policies, procedures, and internal controls reasonably designed to assure compliance with AML provisions of the Bank Secrecy Act (BSA) and related regulations. A firm’s procedures must cover these key areas:
-internal policies, procedures and controls reasonably designed to achieve compliance with the BSA and -implementing regulations;
-appointment of a designated compliance officer to oversee the program’s day-to-day operations;
-an ongoing training program;
-an independent audit;