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Question 1 of 30
1. Question
Members should adopt and enforce written procedures regarding communications with the public. such as which of the following?
I. address oral sales solicitations
II. prevent your firm and its Associates from making any communication with potential or current customers that operates as a fraud or deceit
III. address promotional material
IV. implying that forex transactions are appropriate for all customersCorrect
Members should adopt and enforce written procedures regarding communications with the public. These procedures should address oral sales solicitations as well as promotional material, and they should be reasonably designed to prevent your firm and its Associates from making any communication with potential or current customers that operates as a fraud or deceit, uses a high‑pressure approach, implies that forex transactions are appropriate for all customers, or is not in accordance with the requirements set forth under NFA Compliance Rule 2-29 and the Interpretive Notices related to this rule.
Incorrect
Members should adopt and enforce written procedures regarding communications with the public. These procedures should address oral sales solicitations as well as promotional material, and they should be reasonably designed to prevent your firm and its Associates from making any communication with potential or current customers that operates as a fraud or deceit, uses a high‑pressure approach, implies that forex transactions are appropriate for all customers, or is not in accordance with the requirements set forth under NFA Compliance Rule 2-29 and the Interpretive Notices related to this rule.
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Question 2 of 30
2. Question
Which of the following statements in regards to FDM communications with the public and promotional materials is inaccurate?
Correct
no FDM that utilizes straight-through processing can suggest that they are not the counterparty to a customer’s trade.
an FDM or an IB may not represent that it offers “no-slippage” or can guarantee fills unless it can demonstrate that all orders on its platform have been executed at the price initially quoted when the order was placed on the platform and it does not have the authority to adjust customer accounts so as to have the effect of changing the price at which the order was executed.
if an FDM “re-quotes” prices or has the contractual right to make adjustments that directly or indirectly change the price of an order after it is executed, it cannot claim to have no slippage.
an FDM may not represent that a customer will have direct access to the interbank market since the FDM is actually the counterparty to every customer’s forex transition.
Incorrect
no FDM that utilizes straight-through processing can suggest that they are not the counterparty to a customer’s trade.
an FDM or an IB may not represent that it offers “no-slippage” or can guarantee fills unless it can demonstrate that all orders on its platform have been executed at the price initially quoted when the order was placed on the platform and it does not have the authority to adjust customer accounts so as to have the effect of changing the price at which the order was executed.
if an FDM “re-quotes” prices or has the contractual right to make adjustments that directly or indirectly change the price of an order after it is executed, it cannot claim to have no slippage.
an FDM may not represent that a customer will have direct access to the interbank market since the FDM is actually the counterparty to every customer’s forex transition.
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Question 3 of 30
3. Question
No FCM, IB, CPO or CTA Member or Associate shall make any communication related to its commodity interest business that does which of the following?
I. makes any statement that commodity interest trading is appropriate for all persons
II. employs or is part of a high-pressure approach
III. providing information that poses as an investment risk for the customer
IV. operates as a fraud or deceitCorrect
No FCM, IB, CPO or CTA Member or Associate shall make any communication related to its commodity interest business that:
(1) operates as a fraud or deceit;
(2) employs or is part of a high-pressure approach; or
(3) makes any statement that commodity interest trading is appropriate for all persons.Incorrect
No FCM, IB, CPO or CTA Member or Associate shall make any communication related to its commodity interest business that:
(1) operates as a fraud or deceit;
(2) employs or is part of a high-pressure approach; or
(3) makes any statement that commodity interest trading is appropriate for all persons. -
Question 4 of 30
4. Question
No FCM, IB, CPO or CTA Member or Associate shall use any promotional material that has which of the following?
I. is likely to deceive the public
II. mentions the possibility of profit unless accompanied by an equally prominent discussion of the risk of loss
III. contains any material misstatement of fact or which the Member or Associate knows omits a fact if the omission makes the promotional material misleading
IV. includes any reference to actual past trading profits without mentioning that past results are not necessarily indicative of future resultsCorrect
No FCM, IB, CPO or CTA Member or Associate shall use any promotional material that:
(1) is likely to deceive the public;
(2) contains any material misstatement of fact or which the Member or Associate knows omits a fact if the omission makes the promotional material misleading;
(3) mentions the possibility of profit unless accompanied by an equally prominent discussion of the risk of loss;
(4) includes any reference to actual past trading profits without mentioning that past results are not necessarily indicative of future results;
Incorrect
No FCM, IB, CPO or CTA Member or Associate shall use any promotional material that:
(1) is likely to deceive the public;
(2) contains any material misstatement of fact or which the Member or Associate knows omits a fact if the omission makes the promotional material misleading;
(3) mentions the possibility of profit unless accompanied by an equally prominent discussion of the risk of loss;
(4) includes any reference to actual past trading profits without mentioning that past results are not necessarily indicative of future results;
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Question 5 of 30
5. Question
No FCM, IB, CPO or CTA Member or Associate shall use any promotional material that includes any specific numerical or statistical information about the past performance of any actual accounts (including rate of return) unless which of the following occurs?
I. such information is and can be demonstrated to NFA to be representative of the actual performance for the same time period of all reasonably comparable accounts;
II. the performance is presented net of all commissions, fees and expenses (see Interpretive Notice 9003 for a limited exception)
III. in the case of rate of return figures, such figures are calculated in a manner consistent with CFTC Regulation 4.25 for commodity pools and with CFTC Regulation 4.35, as modified by NFA Compliance Rule 2-34(a), for figures based on separate accounts
IV. such information utilizes or promotes forex trading systems developed by third partiesCorrect
No FCM, IB, CPO or CTA Member or Associate shall use any promotional material that includes any specific numerical or statistical information about the past performance of any actual accounts (including rate of return) unless:
(i) such information is and can be demonstrated to NFA to be representative of the actual performance for the same time period of all reasonably comparable accounts;
(ii) the performance is presented net of all commissions, fees and expenses (see Interpretive Notice 9003 for a limited exception); and
(iii) in the case of rate of return figures, such figures are calculated in a manner consistent with CFTC Regulation 4.25 for commodity pools and with CFTC Regulation 4.35, as modified by NFA Compliance Rule 2-34(a), for figures based on separate accounts
Incorrect
No FCM, IB, CPO or CTA Member or Associate shall use any promotional material that includes any specific numerical or statistical information about the past performance of any actual accounts (including rate of return) unless:
(i) such information is and can be demonstrated to NFA to be representative of the actual performance for the same time period of all reasonably comparable accounts;
(ii) the performance is presented net of all commissions, fees and expenses (see Interpretive Notice 9003 for a limited exception); and
(iii) in the case of rate of return figures, such figures are calculated in a manner consistent with CFTC Regulation 4.25 for commodity pools and with CFTC Regulation 4.35, as modified by NFA Compliance Rule 2-34(a), for figures based on separate accounts
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Question 6 of 30
6. Question
Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act and their Associates shall not use any promotional material that specifically refers to security futures products unless the promotional material has which of the following?
I. prominently identifies the Member
II. includes the date that the material was first used
III. states that security futures products are not suitable for all customers
IV. provides contact information for obtaining a copy of the disclosure statement for security futures productsCorrect
Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act and their Associates shall not use any promotional material that specifically refers to security futures products unless the promotional material:
(1) prominently identifies the Member;
(2) includes the date that the material was first used;
(3) provides contact information for obtaining a copy of the disclosure statement for security futures products;
(4) states that security futures products are not suitable for all customers;
(5) does not include any statement suggesting that security futures positions can be liquidated at any time;
(6) does not include any cautionary statement, caveat, or disclaimer that is not legible, that attempts to disclaim responsibility for the content of the promotional material or the opinions expressed in the material, that is misleading, or that is otherwise inconsistent with the content of the material;
(7) discloses the source of any statistical tables, charts, graphs, or other illustrations from a source other than the Member, unless the source of the information is otherwise obvious;
(8) states that supporting documentation will be furnished upon request if it includes any claims, comparisons, recommendations, statistics or other technical data;
Incorrect
Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act and their Associates shall not use any promotional material that specifically refers to security futures products unless the promotional material:
(1) prominently identifies the Member;
(2) includes the date that the material was first used;
(3) provides contact information for obtaining a copy of the disclosure statement for security futures products;
(4) states that security futures products are not suitable for all customers;
(5) does not include any statement suggesting that security futures positions can be liquidated at any time;
(6) does not include any cautionary statement, caveat, or disclaimer that is not legible, that attempts to disclaim responsibility for the content of the promotional material or the opinions expressed in the material, that is misleading, or that is otherwise inconsistent with the content of the material;
(7) discloses the source of any statistical tables, charts, graphs, or other illustrations from a source other than the Member, unless the source of the information is otherwise obvious;
(8) states that supporting documentation will be furnished upon request if it includes any claims, comparisons, recommendations, statistics or other technical data;
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Question 7 of 30
7. Question
Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act and their Associates shall not use any promotional material that specifically refers to security futures products unless the promotional material includes current recommendations regarding security futures products only if which of the following occurs?
I. the Member has a reasonable basis for the recommendation
II. materials that disclose the source of any statistical tables, charts, graphs, or other illustrations from a source other than the Member
III. the material contains contact information for obtaining the list of prior recommendations regarding security futures products, the underlying securities, or a derivative thereof only if it sets forth all recommendations as to the same type, kind, grade, or classification of securities made by the Member or Associate within the last year
IV. the material discloses all material conflicts of interest created by the Member’s or Associate’s activities in the underlying securityCorrect
Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act and their Associates shall not use any promotional material that specifically refers to security futures products unless the promotional material:
includes current recommendations regarding security futures products only if: (i) the Member has a reasonable basis for the recommendation; (ii) the material discloses all material conflicts of interest created by the Member’s or Associate’s activities in the underlying security; and (iii) the material contains contact information for obtaining the list of prior recommendations regarding security futures products, the underlying securities, or a derivative thereof only if it sets forth all recommendations as to the same type, kind, grade, or classification of securities made by the Member or Associate within the last year
Incorrect
Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act and their Associates shall not use any promotional material that specifically refers to security futures products unless the promotional material:
includes current recommendations regarding security futures products only if: (i) the Member has a reasonable basis for the recommendation; (ii) the material discloses all material conflicts of interest created by the Member’s or Associate’s activities in the underlying security; and (iii) the material contains contact information for obtaining the list of prior recommendations regarding security futures products, the underlying securities, or a derivative thereof only if it sets forth all recommendations as to the same type, kind, grade, or classification of securities made by the Member or Associate within the last year
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Question 8 of 30
8. Question
Which of the following statements with regards to hypothetical results is false?
Correct
If an FCM, IB, CPO or CTA Member or Associate has either less than one year of experience in directing customer accounts or trading proprietary accounts, then the disclaimer must also contain the following statement:
(THE MEMBER) HAS HAD LITTLE OR NO EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CUSTOMERS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE HYPOTHETICAL PERFORMANCE RESULTS, CUSTOMERS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THESE HYPOTHETICAL PERFORMANCE RESULTS.
Any FCM, IB, CPO or CTA Member or Associate who uses promotional material which includes a measurement or description of or makes any reference to a hypothetical composite performance record showing what a multi-advisor account portfolio or pool could have achieved in the past if assets had been allocated among particular trading advisors must include in the promotional material the following disclaimer prescribed by NFA’s Board of Directors
Any FCM, IB, CPO or CTA Member or Associate utilizing promotional material containing hypothetical performance results must adhere to all the requirements contained in the Board’s Interpretive Notice 9025 entitled Compliance Rule 2-29: Use of Promotional Material Containing Hypothetical Performance Results.
Incorrect
If an FCM, IB, CPO or CTA Member or Associate has either less than one year of experience in directing customer accounts or trading proprietary accounts, then the disclaimer must also contain the following statement:
(THE MEMBER) HAS HAD LITTLE OR NO EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CUSTOMERS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE HYPOTHETICAL PERFORMANCE RESULTS, CUSTOMERS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THESE HYPOTHETICAL PERFORMANCE RESULTS.
Any FCM, IB, CPO or CTA Member or Associate who uses promotional material which includes a measurement or description of or makes any reference to a hypothetical composite performance record showing what a multi-advisor account portfolio or pool could have achieved in the past if assets had been allocated among particular trading advisors must include in the promotional material the following disclaimer prescribed by NFA’s Board of Directors
Any FCM, IB, CPO or CTA Member or Associate utilizing promotional material containing hypothetical performance results must adhere to all the requirements contained in the Board’s Interpretive Notice 9025 entitled Compliance Rule 2-29: Use of Promotional Material Containing Hypothetical Performance Results.
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Question 9 of 30
9. Question
An FDM has responsibility for the following with regards to communications with the Public and Promotional Materials except?
Correct
an FDM has direct responsibility for misleading promotional material if the FDM prepares or distributes it; has agency responsibility if the trading system developer is an agent of the FDM under established principles of agency law; and has supervisory responsibility if the Member fails to supervise its own employees in its activities with a third-party system developer.
Incorrect
an FDM has direct responsibility for misleading promotional material if the FDM prepares or distributes it; has agency responsibility if the trading system developer is an agent of the FDM under established principles of agency law; and has supervisory responsibility if the Member fails to supervise its own employees in its activities with a third-party system developer.
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Question 10 of 30
10. Question
Members must maintain the following with regards to Communications with the Public and Promotional Materials except?
Correct
Members must maintain all promotional material for five years from the date of last use and must keep it readily accessible for the first two years. Furthermore, Members must maintain supporting documentation for all statements, claims and performance results included in promotional materials.
Incorrect
Members must maintain all promotional material for five years from the date of last use and must keep it readily accessible for the first two years. Furthermore, Members must maintain supporting documentation for all statements, claims and performance results included in promotional materials.
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Question 11 of 30
11. Question
Which of the following statements in regards to customer orders is inaccurate?
Correct
FDMs, and their Associates, may not exercise trading authority over a customer account for which the FDM is, or is offering to be the counterparty.
An FDM may not carry offsetting positions in a customer account and must offset the positions on a first-in, first-out basis.
An FDM is prohibited from directly or indirectly canceling or adjusting the price of executed customer orders
A customer may direct the FDM to offset same-size transactions even if there are older transactions of a different size, but the transaction must be offset against the oldest transaction of that size.
Incorrect
FDMs, and their Associates, may not exercise trading authority over a customer account for which the FDM is, or is offering to be the counterparty.
An FDM may not carry offsetting positions in a customer account and must offset the positions on a first-in, first-out basis.
An FDM is prohibited from directly or indirectly canceling or adjusting the price of executed customer orders
A customer may direct the FDM to offset same-size transactions even if there are older transactions of a different size, but the transaction must be offset against the oldest transaction of that size.
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Question 12 of 30
12. Question
An FDM is prohibited from directly or indirectly canceling or adjusting the price of executed customer orders, with which of the following exceptions?
I. Exception where additional information is offered the customer’s needs to make an informed decision on whether to enter into forex transactions.
II. Exception where the adjustment is done to settle a customer complaint in the favor of the customer.
III. Exception where a customer account offsets the positions on a first-in, first-out basis.
IV. Exception where the FDM uses exclusively “straight-through processing” such that it 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.Correct
An FDM is prohibited from directly or indirectly canceling or adjusting the price of executed customer orders, with two exceptions.
The first exception is where the adjustment is done to settle a customer complaint in the favor of the customer. An FDM may also adjust orders even in the absence of individual customer complaints if the customer were adversely affected by a technical problem with the Member’s trading platform. However, an FDM may not adjust prices on customer orders that benefitted from the error and may not cherry-pick which account to adjust.
The second exception is where the FDM uses exclusively “straight-through processing” such that it 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
An FDM is prohibited from directly or indirectly canceling or adjusting the price of executed customer orders, with two exceptions.
The first exception is where the adjustment is done to settle a customer complaint in the favor of the customer. An FDM may also adjust orders even in the absence of individual customer complaints if the customer were adversely affected by a technical problem with the Member’s trading platform. However, an FDM may not adjust prices on customer orders that benefitted from the error and may not cherry-pick which account to adjust.
The second exception is where the FDM uses exclusively “straight-through processing” such that it 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 13 of 30
13. Question
The following statements with regards to price slippage are accurate except?
Correct
In the context of FDM trading systems, price slippage sometimes occurs between the time a customer first submits an order and the time the order reaches the FDM’s system.
Other FDMs have built in slippage parameters that permit execution of the order if the slippage is within the established parameters.
FDMs that use slippage parameters must apply the slippage settings uniformly regardless of the direction the market has moved.
If the FDM requotes prices when the market moves against it, it must requote prices when the market moves in its favor.
Incorrect
In the context of FDM trading systems, price slippage sometimes occurs between the time a customer first submits an order and the time the order reaches the FDM’s system.
Other FDMs have built in slippage parameters that permit execution of the order if the slippage is within the established parameters.
FDMs that use slippage parameters must apply the slippage settings uniformly regardless of the direction the market has moved.
If the FDM requotes prices when the market moves against it, it must requote prices when the market moves in its favor.
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Question 14 of 30
14. Question
Which of the following statements in regards to electronic funding of customer accounts is/are true?
I. FDMs are prohibited from permitting customers to fund their commodity interest accounts with a credit card or other electronic funding mechanisms that draw funds from a credit card.
II. FDMs may accept customer deposits from electronic payment mechanisms that draw funds directly from a customer’s account at a financial institution.
III. FDMs, and their Associates, may not exercise trading authority over a customer account for which the FDM is, or is offering to be the counterparty.
IV. An FDM may not carry offsetting positions in a customer account and must offset the positions on a first-in, first-out basis.Correct
FDMs are prohibited from permitting customers to fund their commodity interest accounts with a credit card or other electronic funding mechanisms that draw funds from a credit card.
FDMs may accept customer deposits from electronic payment mechanisms that draw funds directly from a customer’s account at a financial institution provided that the FDM is able to distinguish, prior to accepting funds, between an electronic funding method that draws funds from a customer’s account at a financial institution and a traditional credit card, and be able to reject the credit card before accepting customer funds.
Incorrect
FDMs are prohibited from permitting customers to fund their commodity interest accounts with a credit card or other electronic funding mechanisms that draw funds from a credit card.
FDMs may accept customer deposits from electronic payment mechanisms that draw funds directly from a customer’s account at a financial institution provided that the FDM is able to distinguish, prior to accepting funds, between an electronic funding method that draws funds from a customer’s account at a financial institution and a traditional credit card, and be able to reject the credit card before accepting customer funds.
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Question 15 of 30
15. Question
NFA Compliance Rule 2-36(k) requires Members and Associates to provide daily and monthly written confirmations of all account activity to customers that comply with CFTC Regulation 5.13.
The monthly confirmation must clearly show which of the following:
I. The open retail forex transactions with prices at which they were acquired
II. The net unrealized profits or losses in all open retail forex transactions marked to the market
III. Any money, securities or other property carried with the FDM
IV. A detailed accounting of all financial charges and credits to such retail forex accounts during the monthly reporting period, including money, securities or property received from or disbursed to such customer and realized profits and lossesCorrect
NFA Compliance Rule 2-36(k) requires Members and Associates to provide daily and monthly written confirmations of all account activity to customers that comply with CFTC Regulation 5.13.
The monthly confirmation must clearly show the following:
-The open retail forex transactions with prices at which they were acquired;
-The net unrealized profits or losses in all open retail forex transactions marked to the market;
-Any money, securities or other property carried with the FDM; and
-A detailed accounting of all financial charges and credits to such retail forex accounts during the monthly reporting period, including money, securities or property received from or disbursed to such customer and realized profits and losses.Incorrect
NFA Compliance Rule 2-36(k) requires Members and Associates to provide daily and monthly written confirmations of all account activity to customers that comply with CFTC Regulation 5.13.
The monthly confirmation must clearly show the following:
-The open retail forex transactions with prices at which they were acquired;
-The net unrealized profits or losses in all open retail forex transactions marked to the market;
-Any money, securities or other property carried with the FDM; and
-A detailed accounting of all financial charges and credits to such retail forex accounts during the monthly reporting period, including money, securities or property received from or disbursed to such customer and realized profits and losses. -
Question 16 of 30
16. Question
No Forex Dealer Member or Associate of a Forex Dealer Member engaging in any forex transaction shall do which of the following?
I. Cheat, defraud or deceive, or attempt to cheat, defraud or deceive any other person
II. 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
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. Engage in manipulative acts or practices regarding the price of any foreign currency or a 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 17 of 30
17. Question
NFA Compliance Rule 2-36(k) requires Members and Associates to provide daily and monthly written confirmations of all account activity to customers that comply with CFTC Regulation 5.13.
The monthly confirmation must clearly show the following with the exception of?Correct
NFA Compliance Rule 2-36(k) requires Members and Associates to provide daily and monthly written confirmations of all account activity to customers that comply with CFTC Regulation 5.13.
The monthly confirmation must clearly show the following:-The open retail forex transactions with prices at which they were acquired;
-The net unrealized profits or losses in all open retail forex transactions marked to the market;
-Any money, securities or other property carried with the FDM; and
-A detailed accounting of all financial charges and credits to such retail forex accounts during the monthly reporting period, including money, securities or property received from or disbursed to such customer and realized profits and losses.Incorrect
NFA Compliance Rule 2-36(k) requires Members and Associates to provide daily and monthly written confirmations of all account activity to customers that comply with CFTC Regulation 5.13.
The monthly confirmation must clearly show the following:-The open retail forex transactions with prices at which they were acquired;
-The net unrealized profits or losses in all open retail forex transactions marked to the market;
-Any money, securities or other property carried with the FDM; and
-A detailed accounting of all financial charges and credits to such retail forex accounts during the monthly reporting period, including money, securities or property received from or disbursed to such customer and realized profits and losses. -
Question 18 of 30
18. Question
With regards to transaction disclosures, each FDM shall do 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. Commission and any other fees
II. For transactions where an FDM is not using straight-through processing, the mid-point spread cost
III. For transactions where an FDM is using straight-through processing, any mark-up or mark-down the FDM imposes on the price the FDM received for the offsetting position to the customer’s order
IV. For a description of the mid-point spread cost in a form and manner required by NFACorrect
Each FDM 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:
Commission and any other fees;
For transactions where an FDM is using straight-through processing, any mark-up or mark-down the FDM imposes on the price the FDM received for the offsetting position to the customer’s order; and
For transactions where an FDM is not using straight-through processing, the mid-point spread cost.Incorrect
Each FDM 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:
Commission and any other fees;
For transactions where an FDM is using straight-through processing, any mark-up or mark-down the FDM imposes on the price the FDM received for the offsetting position to the customer’s order; and
For transactions where an FDM is not using straight-through processing, the mid-point spread cost. -
Question 19 of 30
19. Question
Which of the following statements in regards to FDM Chief Compliance Officer Requirement is inaccurate?
Correct
Each FDM must designate one person who must be a principal to serve as Chief Compliance Officer (CCO).
Each FDM must provide the annual report to the FDM’s Board of Directors or Senior Officer and must submit the annual report to NFA within 90 days after the FDM’s fiscal year end.
The annual report must include a certification by the FDM’s CCO or chief executive officer that to the best of his or her knowledge and reasonable belief, and under penalty of law, the information contained in the annual report is accurate and complete.
Members must establish, maintain, and enforce written supervisory procedures reasonably designed to detect and prevent violations of NFA rules.
Incorrect
Each FDM must designate one person who must be a principal to serve as Chief Compliance Officer (CCO).
Each FDM must provide the annual report to the FDM’s Board of Directors or Senior Officer and must submit the annual report to NFA within 90 days after the FDM’s fiscal year end.
The annual report must include a certification by the FDM’s CCO or chief executive officer that to the best of his or her knowledge and reasonable belief, and under penalty of law, the information contained in the annual report is accurate and complete.
Members must establish, maintain, and enforce written supervisory procedures reasonably designed to detect and prevent violations of NFA rules.
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Question 20 of 30
20. Question
All Members subject to NFA’s forex requirements should have procedures to address which of the following?
I. Screening prospective Associates to ensure that they are qualified and to determine the extent of the supervision the person would require if hired
II. Reviewing disclosures provided to customers to ensure that they are understandable, timely, and provide sufficient information
III. Monitoring communications with the public, including sales solicitations and web sites, and approving promotional material
IV. Handling and resolving customer complaintsCorrect
All Members subject to NFA’s forex requirements should have procedures to address the following:
-Screening prospective Associates to ensure that they are qualified and to determine the extent of the supervision the person would require if hired;
-Screening persons with whom the Member intends to do forex business to determine if they are required to be registered with the Commission and, if so, to ensure they are Members of NFA;
-Monitoring communications with the public, including sales solicitations and web sites, and approving promotional material;
-Reviewing disclosures provided to customers to ensure that they are understandable, timely, and provide sufficient information;
-Reviewing the information obtained from and provided to customers solicited by the firm and its employees to ensure that the appropriate information has been obtained and provided;
-Handling and resolving customer complaints;
-Reviewing and analyzing the forex activity in customer accounts, including discretionary customer accounts; and
-Handling customer funds, including accepting security deposits.Incorrect
All Members subject to NFA’s forex requirements should have procedures to address the following:
-Screening prospective Associates to ensure that they are qualified and to determine the extent of the supervision the person would require if hired;
-Screening persons with whom the Member intends to do forex business to determine if they are required to be registered with the Commission and, if so, to ensure they are Members of NFA;
-Monitoring communications with the public, including sales solicitations and web sites, and approving promotional material;
-Reviewing disclosures provided to customers to ensure that they are understandable, timely, and provide sufficient information;
-Reviewing the information obtained from and provided to customers solicited by the firm and its employees to ensure that the appropriate information has been obtained and provided;
-Handling and resolving customer complaints;
-Reviewing and analyzing the forex activity in customer accounts, including discretionary customer accounts; and
-Handling customer funds, including accepting security deposits. -
Question 21 of 30
21. Question
NFA Member FCMs, FDMs, IBs, CPOs and CTAs must also ensure that their employees are properly trained to do which of the following?
I. To perform their duties
II. To abide by CFTC and NFA requirements
III. To handle customer accounts
IV. To resolve forex activity in customer accountsCorrect
NFA Member FCMs, FDMs, IBs, CPOs and CTAs must also ensure that their employees are properly trained to perform their duties, to abide by CFTC and NFA requirements, and to handle customer accounts.
Incorrect
NFA Member FCMs, FDMs, IBs, CPOs and CTAs must also ensure that their employees are properly trained to perform their duties, to abide by CFTC and NFA requirements, and to handle customer accounts.
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Question 22 of 30
22. Question
The electronic system must record and maintain information regarding the following except?
Correct
The electronic system must record and maintain information regarding:
-Transaction records for orders (which must include the types of information contained on orders for exchange-traded commodities, such as the date and time an order was received) and rollovers
-Account records showing the financial status of each account
-Time and price records similar to those maintained by the futures exchangesIncorrect
The electronic system must record and maintain information regarding:
-Transaction records for orders (which must include the types of information contained on orders for exchange-traded commodities, such as the date and time an order was received) and rollovers
-Account records showing the financial status of each account
-Time and price records similar to those maintained by the futures exchanges -
Question 23 of 30
23. Question
Members must have in place procedures reasonably designed to ensure the integrity of trades placed on their trading platforms. Three areas of particular concern include the following except?
Correct
Members must have in place procedures reasonably designed to ensure the integrity of trades placed on their trading platforms. Three areas of particular concern include the following:
Pricing
Slippage
RolloversIncorrect
Members must have in place procedures reasonably designed to ensure the integrity of trades placed on their trading platforms. Three areas of particular concern include the following:
Pricing
Slippage
Rollovers -
Question 24 of 30
24. Question
With regards to trading standards, FDMs must have in place and enforce procedures to ensure the following except?
Correct
FDMs must have in place and enforce procedures to ensure that:
Executable customer orders are executed before proprietary orders of the FDM or related persons (See CFTC Regulation 5.18(a)(2).);
The Member does not disclose that it is holding the order of another person, unless necessary to execute the order;
The Member does not carry a forex account for persons related to another FDM, nor do persons related to the Member have forex accounts with other FDMs, unless the related persons have written authorization from their firm and their firm receives certain records regarding their trading.Incorrect
FDMs must have in place and enforce procedures to ensure that:
Executable customer orders are executed before proprietary orders of the FDM or related persons (See CFTC Regulation 5.18(a)(2).);
The Member does not disclose that it is holding the order of another person, unless necessary to execute the order;
The Member does not carry a forex account for persons related to another FDM, nor do persons related to the Member have forex accounts with other FDMs, unless the related persons have written authorization from their firm and their firm receives certain records regarding their trading. -
Question 25 of 30
25. Question
Which of the following statements about slippage is accurate with regards to trade integrity?
I. Electronic trading platforms should be designed to ensure that any slippage is based on real market conditions.
II. FDMs that utilize slippage parameters to execute orders must ensure that the slippage settings are applied uniformly regardless of the way the market has moved.
III. Customer market or limit orders must be executed at or near the price at which orders of other customers during the same time period have been executed.
IV. the FDM must have written procedures that outline the manner it applies any slippage parameters and requoting practices.Correct
Slippage. Electronic trading platforms should be designed to ensure that any slippage is based on real market conditions. FDMs that utilize slippage parameters to execute orders must ensure that the slippage settings are applied uniformly regardless of the way the market has moved. In addition, the FDM must have written procedures that outline the manner it applies any slippage parameters and requoting practices. Furthermore, if an FDM advertises “no slippage,” the platform should be designed to execute a market order at the price displayed when the order is entered and to execute a stop order at the stop price.
Incorrect
Slippage. Electronic trading platforms should be designed to ensure that any slippage is based on real market conditions. FDMs that utilize slippage parameters to execute orders must ensure that the slippage settings are applied uniformly regardless of the way the market has moved. In addition, the FDM must have written procedures that outline the manner it applies any slippage parameters and requoting practices. Furthermore, if an FDM advertises “no slippage,” the platform should be designed to execute a market order at the price displayed when the order is entered and to execute a stop order at the stop price.
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Question 26 of 30
26. Question
For FDMs, which of the following imposes a surcharge that is graduated according to the firm’s gross annual revenue?
Correct
For FDMs, NFA Bylaw 1301(e) imposes a surcharge that is graduated according to the firm’s gross annual revenue.
Incorrect
For FDMs, NFA Bylaw 1301(e) imposes a surcharge that is graduated according to the firm’s gross annual revenue.
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Question 27 of 30
27. Question
Which of the following statements in regards to Swap Dealer and Major Swap Participant Members is/are accurate?
I. Each Swap Dealer Member that meets the definition of a Large Financial Institution pursuant to Article XVIII of the Articles shall pay to NFA annual dues in the amount of $1,000,000;
II. Each Swap Dealer Member that does not meet the definition of a Large Financial Institution pursuant to Article XVIII of the Articles shall pay to NFA annual dues in the amount of $250,000;
III. Each Major Swap Participant Member shall pay to NFA annual dues in the amount of $150,000; and
IV. Any Swap Dealer Member or Major Swap Participant Member that is an affiliate as defined in Article XVIII of the Articles of a Swap Dealer Member that pays annual dues in the amount described in subsections (i) or (ii) above or a Major Swap Participant Member that pays annual dues in the amount described in subsection (iii) above shall pay annual dues in the amount of $150,000.Correct
Swap Dealer and Major Swap Participant Members
(i) Each Swap Dealer Member that meets the definition of a Large Financial Institution pursuant to Article XVIII of the Articles shall pay to NFA annual dues in the amount of $1,000,000;
(ii) Each Swap Dealer Member that does not meet the definition of a Large Financial Institution pursuant to Article XVIII of the Articles shall pay to NFA annual dues in the amount of $250,000;
(iii) Each Major Swap Participant Member shall pay to NFA annual dues in the amount of $150,000; and
(iv) Any Swap Dealer Member or Major Swap Participant Member that is an affiliate as defined in Article XVIII of the Articles of a Swap Dealer Member that pays annual dues in the amount described in subsections (i) or (ii) above or a Major Swap Participant Member that pays annual dues in the amount described in subsection (iii) above shall pay annual dues in the amount of $150,000.
Incorrect
Swap Dealer and Major Swap Participant Members
(i) Each Swap Dealer Member that meets the definition of a Large Financial Institution pursuant to Article XVIII of the Articles shall pay to NFA annual dues in the amount of $1,000,000;
(ii) Each Swap Dealer Member that does not meet the definition of a Large Financial Institution pursuant to Article XVIII of the Articles shall pay to NFA annual dues in the amount of $250,000;
(iii) Each Major Swap Participant Member shall pay to NFA annual dues in the amount of $150,000; and
(iv) Any Swap Dealer Member or Major Swap Participant Member that is an affiliate as defined in Article XVIII of the Articles of a Swap Dealer Member that pays annual dues in the amount described in subsections (i) or (ii) above or a Major Swap Participant Member that pays annual dues in the amount described in subsection (iii) above shall pay annual dues in the amount of $150,000.
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Question 28 of 30
28. Question
Under BYLAW 1301(d), Annual dues for the other membership categories shall be which of the following?
I. Commodity Investment Broker-$750
II. Commodity Trading Advisor-$750
III. Commodity Pool Operator-$750
IV. Introducing Broker-$750Correct
BYLAW 1301(d) Other Members.
Annual dues for the other membership categories shall be as follows:
(i) Commodity Trading Advisor-$750
(ii) Commodity Pool Operator-$750
(iii) Introducing Broker-$750Incorrect
BYLAW 1301(d) Other Members.
Annual dues for the other membership categories shall be as follows:
(i) Commodity Trading Advisor-$750
(ii) Commodity Pool Operator-$750
(iii) Introducing Broker-$750 -
Question 29 of 30
29. Question
Which of the following statements is/are true in relation to security deposit?
I. An FDM may decrease the required security deposit amount below the highest minimum security deposit amount as applicable to a particular currency under NFA Financial Requirements Section 12.
II. Security deposits help protect FDMs against losses from defaulting customers and ECP counterparties
III. An FDM is required to notify NFA’s Compliance department immediately if the FDM changes the security deposit amount it requires customers or ECP counterparties to deposit.
IV. FDMs must collect security deposits from customers. FDMs also must collect deposits from their ECP counterparties.Correct
FDMs must collect security deposits from customers. FDMs also must collect deposits from their ECP counterparties. These security deposits help protect FDMs against losses from defaulting customers and ECP counterparties, which, if significant enough, could cause an FDM to become insolvent and put the funds of its other, non-defaulting customers and ECP counterparties at risk.
An FDM is required to notify NFA’s Compliance department immediately if the FDM changes the security deposit amount it requires customers or ECP counterparties to deposit.
An FDM may not, however, decrease the required security deposit amount below the highest minimum security deposit amount as applicable to a particular currency under NFA Financial Requirements Section 12.
Incorrect
FDMs must collect security deposits from customers. FDMs also must collect deposits from their ECP counterparties. These security deposits help protect FDMs against losses from defaulting customers and ECP counterparties, which, if significant enough, could cause an FDM to become insolvent and put the funds of its other, non-defaulting customers and ECP counterparties at risk.
An FDM is required to notify NFA’s Compliance department immediately if the FDM changes the security deposit amount it requires customers or ECP counterparties to deposit.
An FDM may not, however, decrease the required security deposit amount below the highest minimum security deposit amount as applicable to a particular currency under NFA Financial Requirements Section 12.
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Question 30 of 30
30. Question
An unregulated person is defined as any person that is not one of which of the following?
I. An RFED registered with the CFTC and a Member of NFA
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. A bank or trust company regulated by a U.S. banking regulatorCorrect
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.