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Question 1 of 30
1. Question
A firm may not act as a counterparty, or offer to act as a counterparty, to any forex transaction unless the firm is one of the regulated entities listed in the CEA. These entities (authorized counterparties) include the following except?
Correct
A firm may not act as a counterparty, or offer to act as a counterparty, to any forex transaction unless the firm is one of the regulated entities listed in the CEA. These entities (authorized counterparties) are:
-U.S.-based financial institutions (e.g., banks and savings associations);
-financial holding companies;
-registered FCMs that are primarily or substantially engaged in on-exchange futures activities; and
-RFEDs.Incorrect
A firm may not act as a counterparty, or offer to act as a counterparty, to any forex transaction unless the firm is one of the regulated entities listed in the CEA. These entities (authorized counterparties) are:
-U.S.-based financial institutions (e.g., banks and savings associations);
-financial holding companies;
-registered FCMs that are primarily or substantially engaged in on-exchange futures activities; and
-RFEDs. -
Question 2 of 30
2. Question
Individuals employed by which of the following must register as associated persons (AP) and be approved as forex APs by NFA?
I. an FCM
II. RFED
III. Introducing broker (IB)
IV. Commodity Pool Operator (CPO)Correct
Individuals employed by an FCM, RFED, introducing broker (IB), commodity pool operator (CPO) or commodity trading advisor (CTA) who solicit or accept retail forex customer orders or supervise any person who solicits or accepts retail forex customer orders must register as associated persons (AP) and be approved as forex APs by NFA. No Member may be approved as a forex firm unless at least one of its principals is registered as an AP and approved as a forex AP.
Incorrect
Individuals employed by an FCM, RFED, introducing broker (IB), commodity pool operator (CPO) or commodity trading advisor (CTA) who solicit or accept retail forex customer orders or supervise any person who solicits or accepts retail forex customer orders must register as associated persons (AP) and be approved as forex APs by NFA. No Member may be approved as a forex firm unless at least one of its principals is registered as an AP and approved as a forex AP.
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Question 3 of 30
3. Question
Except for otherwise regulated U.S.-based financial institutions, registered broker-dealers and certain affiliates and financial holding companies, entities or individuals that introduce forex customers to registered FCMs or RFEDs must do which which of the following?
I. be registered as IBs
II. be members of NFA
III. be registered as Future Commission Merchant
IV. be members of Clearing House Interbank Payment AssociationCorrect
Except for otherwise regulated U.S.-based financial institutions, registered broker-dealers and certain affiliates and financial holding companies, entities or individuals that introduce forex customers to registered FCMs or RFEDs must register as IBs and be NFA Members.
Incorrect
Except for otherwise regulated U.S.-based financial institutions, registered broker-dealers and certain affiliates and financial holding companies, entities or individuals that introduce forex customers to registered FCMs or RFEDs must register as IBs and be NFA Members.
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Question 4 of 30
4. Question
A person or entity exercising trading authority over a customer’s forex account must register as a CTA except for which of the following?
I. certified financial dealers
II. financial holding companies
III. registered broker-dealers and certain affiliates
IV. regulated U.S.-based financial institutionsCorrect
Except for otherwise regulated U.S.-based financial institutions, registered broker-dealers and certain affiliates, and financial holding companies, a person or entity exercising trading authority over a customer’s forex account must register as a CTA. A person exercising trading authority over a customer’s account may not receive or hold the customer’s funds. Those funds must be held by the FCM or RFED counterparty.
Incorrect
Except for otherwise regulated U.S.-based financial institutions, registered broker-dealers and certain affiliates, and financial holding companies, a person or entity exercising trading authority over a customer’s forex account must register as a CTA. A person exercising trading authority over a customer’s account may not receive or hold the customer’s funds. Those funds must be held by the FCM or RFED counterparty.
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Question 5 of 30
5. Question
Bylaw 1507(b) excludes the following from the forex definition if the transaction is not a futures or options contract except?
Correct
Bylaw 1507(b) also excludes the following from the forex definition if the transaction is not a futures or options contract:
securities (other than security futures products);
any contract of sale that results in actual delivery within two days; and
any contract of sale that creates an enforceable obligation to deliver between a seller and buyer that have the ability to deliver and accept delivery, respectively, in connection with their line of business.Incorrect
Bylaw 1507(b) also excludes the following from the forex definition if the transaction is not a futures or options contract:
securities (other than security futures products);
any contract of sale that results in actual delivery within two days; and
any contract of sale that creates an enforceable obligation to deliver between a seller and buyer that have the ability to deliver and accept delivery, respectively, in connection with their line of business. -
Question 6 of 30
6. Question
In developing its forex requirements, NFA’s primary concern is to do which of the following?
Correct
In developing its forex requirements, NFA’s primary concern was to ensure that they provide adequate protection for retail customers without imposing undue burdens on NFA Members.
Incorrect
In developing its forex requirements, NFA’s primary concern was to ensure that they provide adequate protection for retail customers without imposing undue burdens on NFA Members.
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Question 7 of 30
7. Question
In developing its forex requirements, NFA believes that its requirements should include the following except?
Correct
In developing its forex requirements, NFA’s primary concern was to ensure that they provide adequate protection for retail customers without imposing undue burdens on NFA Members. NFA also believes that its requirements should, where consistent with customer protection, promote innovation and competition.
Incorrect
In developing its forex requirements, NFA’s primary concern was to ensure that they provide adequate protection for retail customers without imposing undue burdens on NFA Members. NFA also believes that its requirements should, where consistent with customer protection, promote innovation and competition.
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Question 8 of 30
8. Question
NFA Compliance Rule 2-36 subsection (d) sets out which of the following?
Correct
NFA Compliance Rule 2-36 sets out the general standards that apply to Forex Dealer Members and their Associates in connection with forex transactions.
subsection (d) prohibits Members from accepting forex orders or accounts from, handling a forex transaction for or on behalf of, receiving compensation for forex transactions from, or paying compensation for forex transactions to any non-Member of NFA that is required to be registered with the Commission as a FCM, RFED, IB, CPO, or CTA in connection with its forex activitiesIncorrect
NFA Compliance Rule 2-36 sets out the general standards that apply to Forex Dealer Members and their Associates in connection with forex transactions.
subsection (d) prohibits Members from accepting forex orders or accounts from, handling a forex transaction for or on behalf of, receiving compensation for forex transactions from, or paying compensation for forex transactions to any non-Member of NFA that is required to be registered with the Commission as a FCM, RFED, IB, CPO, or CTA in connection with its forex activities -
Question 9 of 30
9. Question
NFA Compliance Rule 2-36 Subsection (b) states which of the following?
Correct
NFA Compliance Rule 2-36 Subsection (b) prohibits Forex Dealer Members and their Associates from engaging in fraudulent activities
Incorrect
NFA Compliance Rule 2-36 Subsection (b) prohibits Forex Dealer Members and their Associates from engaging in fraudulent activities
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Question 10 of 30
10. Question
The Interpretive Notice has the following sections except?
Correct
The Interpretive Notice has three sections. The first section explains who qualifies as a Forex Dealer Member under NFA Bylaw 306, the second section provides additional guidance about the requirements in Compliance Rule 2-36, and the third section covers other miscellaneous requirements.
Incorrect
The Interpretive Notice has three sections. The first section explains who qualifies as a Forex Dealer Member under NFA Bylaw 306, the second section provides additional guidance about the requirements in Compliance Rule 2-36, and the third section covers other miscellaneous requirements.
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Question 11 of 30
11. Question
Which of the following statements in regards to the Forex Dealer Members is/are accurate?
I. Members can act as counterparties ehrn they introduce or manage forex accounts
II. Forex Dealer Members are NFA Members who act as counterparties to forex transactions
III. Any NFA Member who qualifies is automatically a Forex Dealer Member
IV. Members who do not act as counterparties are not Forex Dealer Members, even if they introduce or manage forex accountsCorrect
Forex Dealer Members are NFA Members who act as counterparties to forex transactions. This is a self-executing requirement, which means that any Member who qualifies is automatically a Forex Dealer Member. There is no application form and no approval requirement.
Members who do not act as counterparties are not Forex Dealer Members, even if they introduce or manage forex accounts.
Incorrect
Forex Dealer Members are NFA Members who act as counterparties to forex transactions. This is a self-executing requirement, which means that any Member who qualifies is automatically a Forex Dealer Member. There is no application form and no approval requirement.
Members who do not act as counterparties are not Forex Dealer Members, even if they introduce or manage forex accounts.
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Question 12 of 30
12. Question
Which of the following statement is/are accurate in regards to Disclosure un the Compliance Rule 2 – 36?
I. Members and Associates introducing or managing accounts should know what information has been provided and should supplement it when necessary.
II. Members should update any material information that has changed prior to entering into new transactions with current customers if failing to update the information would make it misleading.
III. At or before the time a customer first engages in a forex transaction, a Member and its Associates should also disclose how the Member will be compensated for the services it will provide to the customer.
IV. At or before the time a customer first engages in a forex transaction, a Forex Dealer Member and its Associates should provide the customer sufficient information concerning the characteristics and particular risks of entering into forex transactions.Correct
At or before the time a customer first engages in a forex transaction, a Forex Dealer Member and its Associates should provide the customer sufficient information concerning the characteristics and particular risks of entering into forex transactions. Members and Associates introducing or managing accounts should know what information has been provided and should supplement it when necessary. At or before the time a customer first engages in a forex transaction, a Member and its Associates should also disclose how the Member will be compensated for the services it will provide to the customer. Forex Dealer Members should provide both the bid and the offer when the customer enters an order. Members should update any material information that has changed prior to entering into new transactions with current customers if failing to update the information would make it misleading.
Incorrect
At or before the time a customer first engages in a forex transaction, a Forex Dealer Member and its Associates should provide the customer sufficient information concerning the characteristics and particular risks of entering into forex transactions. Members and Associates introducing or managing accounts should know what information has been provided and should supplement it when necessary. At or before the time a customer first engages in a forex transaction, a Member and its Associates should also disclose how the Member will be compensated for the services it will provide to the customer. Forex Dealer Members should provide both the bid and the offer when the customer enters an order. Members should update any material information that has changed prior to entering into new transactions with current customers if failing to update the information would make it misleading.
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Question 13 of 30
13. Question
Although Members have the flexibility to design procedures that are tailored to their own situation, an adequate program for supervision would include procedures for performing day-to-day monitoring. These procedures would include the following except?
Correct
Although Members have the flexibility to design procedures that are tailored to their own situation, an adequate program for supervision would include procedures for performing day-to-day monitoring. These procedures would include:
screening prospective Associates to ensure that they are qualified and to determine the extent of 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 that they are Members of NFA;
monitoring communications with the public, including sales solicitations and web sites, and approving promotional material;
reviewing the information obtained from and the information provided to customers solicited by the firm and its employees to ensure that the necessary account information has been obtained and the appropriate information provided; and
handling and resolving customer complaints;
reviewing disclosures given to customers to ensure they are understandable, timely, and provide sufficient information;
reviewing and analyzing the forex activity in customer accounts, including discretionary customer accounts; and
handling customer funds, including accepting security deposits, if applicable.Incorrect
Although Members have the flexibility to design procedures that are tailored to their own situation, an adequate program for supervision would include procedures for performing day-to-day monitoring. These procedures would include:
screening prospective Associates to ensure that they are qualified and to determine the extent of 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 that they are Members of NFA;
monitoring communications with the public, including sales solicitations and web sites, and approving promotional material;
reviewing the information obtained from and the information provided to customers solicited by the firm and its employees to ensure that the necessary account information has been obtained and the appropriate information provided; and
handling and resolving customer complaints;
reviewing disclosures given to customers to ensure they are understandable, timely, and provide sufficient information;
reviewing and analyzing the forex activity in customer accounts, including discretionary customer accounts; and
handling customer funds, including accepting security deposits, if applicable. -
Question 14 of 30
14. Question
In determining whether an individual responsible for preparing the Member’s financial books and records is qualified, the firm and its financial principal should consider which of the following?
I. Has the individual ever been sanctioned or refused membership by the American Institute of Certified Public Accountants or any other accounting organization?
II. Does the individual exercise independent judgment?
III. Are there any pending actions against the individual or a firm for which the individual performed auditing, accounting, or bookkeeping?
IV. Is the individual qualified for the position by experience or training?Correct
In determining whether an individual responsible for preparing the Member’s financial books and records is qualified, the firm and its financial principal should consider the following:
Is the individual qualified for the position by experience or training?
Does the individual exercise independent judgment?
Has the individual ever been sanctioned or refused membership or licensing by NFA, the CFTC, the SEC, NASD or FINRA, the Public Company Accounting Oversight Board, or any other financial regulator?
Has the individual ever been sanctioned or refused membership by the American Institute of Certified Public Accountants or any other accounting organization?
Has any firm for which the individual performed auditing, accounting, or bookkeeping been subject to an emergency action or sanctioned by NFA, the CFTC, the SEC, NASD or FINRA, the Public Company Accounting Oversight Board, or any other financial regulator for failure to comply with financial requirements or for having inadequate books and records while the individual was engaged in those activities?
Are there any pending actions against the individual or a firm for which the individual performed auditing, accounting, or bookkeeping?Incorrect
In determining whether an individual responsible for preparing the Member’s financial books and records is qualified, the firm and its financial principal should consider the following:
Is the individual qualified for the position by experience or training?
Does the individual exercise independent judgment?
Has the individual ever been sanctioned or refused membership or licensing by NFA, the CFTC, the SEC, NASD or FINRA, the Public Company Accounting Oversight Board, or any other financial regulator?
Has the individual ever been sanctioned or refused membership by the American Institute of Certified Public Accountants or any other accounting organization?
Has any firm for which the individual performed auditing, accounting, or bookkeeping been subject to an emergency action or sanctioned by NFA, the CFTC, the SEC, NASD or FINRA, the Public Company Accounting Oversight Board, or any other financial regulator for failure to comply with financial requirements or for having inadequate books and records while the individual was engaged in those activities?
Are there any pending actions against the individual or a firm for which the individual performed auditing, accounting, or bookkeeping? -
Question 15 of 30
15. Question
An adequate supervisory program should also include annual on-site visits to branch offices and guaranteed introducing brokers that conduct forex business on behalf of the Member. The number of visits should depend on which of the following?
I. the amount of employees hired
II. the number of customer complaints received
III. the amount of business generated
IV. the frequency and nature of problems that arise from the officeCorrect
The Member needs to determine the frequency and nature of these visits. The number of visits will depend on the amount of business generated, the number of customer complaints received, the training and experience of the office personnel, and the frequency and nature of problems that arise from the office.
Incorrect
The Member needs to determine the frequency and nature of these visits. The number of visits will depend on the amount of business generated, the number of customer complaints received, the training and experience of the office personnel, and the frequency and nature of problems that arise from the office.
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Question 16 of 30
16. Question
A Member’s supervisory responsibilities include the obligation to ensure that its employees are properly trained to perform their duties. The formality of a training program will depend on which of the following?
I. the purpose of the company
II. the number of assets gained
III. the nature of its business
IV. the size of the firmCorrect
A Member’s supervisory responsibilities include the obligation to ensure that its employees are properly trained to perform their duties. The formality of a training program will depend on the size of the firm and the nature of its business.
Incorrect
A Member’s supervisory responsibilities include the obligation to ensure that its employees are properly trained to perform their duties. The formality of a training program will depend on the size of the firm and the nature of its business.
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Question 17 of 30
17. Question
Which of the following statements in regards to communications under Compliance Rule 2 – 36 is inaccurate?
Correct
No Member or Associate may represent that forex funds deposited with a Forex Dealer Member are given special protection under the bankruptcy laws.
No Member or Associate may represent or imply that any assets necessary to satisfy its obligations to customers are more secure because the Member keeps some or all of those assets at a regulated entity in the United States or a money center country.
No Member or Associate may represent that its services are commission free without prominently disclosing how it is compensated in near proximity to that representation.
No Member or Associate may represent that a customer will have direct access to the interbank-market because the Member is actually the counterparty to every customers’ forex transactions.Incorrect
No Member or Associate may represent that forex funds deposited with a Forex Dealer Member are given special protection under the bankruptcy laws.
No Member or Associate may represent or imply that any assets necessary to satisfy its obligations to customers are more secure because the Member keeps some or all of those assets at a regulated entity in the United States or a money center country.
No Member or Associate may represent that its services are commission free without prominently disclosing how it is compensated in near proximity to that representation.
No Member or Associate may represent that a customer will have direct access to the interbank-market because the Member is actually the counterparty to every customers’ forex transactions. -
Question 18 of 30
18. Question
No Member or Associate may represent that it offers trading with “no-slippage” or that it guarantees the price at which a transaction will be executed or filled, unless which of the following occurs?
I. It can demonstrate that all orders for all customers have been executed and fulfilled at the price initially quoted on the trading platform when the order was placed
II. No authority exists, pursuant to a contract, agreement, or otherwise, to adjust customer accounts in a manner that would have the direct or indirect effect of changing the price at which an order was executed
III. It can balance any discussion regarding the advantages of leverage with an equally prominent contemporaneous disclosure that increasing leverage increases risk.
IV. They subject to discipline for promotional material promoting forex trading systems developed by third parties.Correct
No Member or Associate may represent that it offers trading with “no-slippage” or that it guarantees the price at which a transaction will be executed or filled, unless:
It can demonstrate that all orders for all customers have been executed and fulfilled at the price initially quoted on the trading platform when the order was placed
No authority exists, pursuant to a contract, agreement, or otherwise, to adjust customer accounts in a manner that would have the direct or indirect effect of changing the price at which an order was executedIncorrect
No Member or Associate may represent that it offers trading with “no-slippage” or that it guarantees the price at which a transaction will be executed or filled, unless:
It can demonstrate that all orders for all customers have been executed and fulfilled at the price initially quoted on the trading platform when the order was placed
No authority exists, pursuant to a contract, agreement, or otherwise, to adjust customer accounts in a manner that would have the direct or indirect effect of changing the price at which an order was executed -
Question 19 of 30
19. Question
Which of the following statements in regards to Customer Information and Risk Disclosure is/are true?
I. the Member soliciting the customer to engage in forex transactions must obtain the information and provide the disclosures required by Compliance Rule 2-36(l).
II. Members and their Associates need to ensure that each customer they solicit has received adequate information concerning the risks of forex transactions so that the customer can make an informed decision as to whether forex transactions are appropriate for the customer.
III. Every Member should determine what information it will obtain from a prospective forex customer.
IV. The essential feature of the Rule is the link between “knowing the customer” and providing risk disclosure.Correct
Every Member should determine what information it will obtain from a prospective forex customer. At a minimum, the Member soliciting the customer to engage in forex transactions must obtain the information and provide the disclosures required by Compliance Rule 2-36(l).
Members and their Associates need to ensure that each customer they solicit has received adequate information concerning the risks of forex transactions so that the customer can make an informed decision as to whether forex transactions are appropriate for the customer.
NFA believes that a determination of who those customers are cannot be made except on a case-by-case basis, because no objective criteria can be established that will apply to all customers. The essential feature of the Rule is the link between “knowing the customer” and providing risk disclosure.
Members and Associates are prohibited from making individualized recommendations to any customer for which the Member or Associate has or should have advised that forex trading is too risky for that customer.
Finally, although it is the responsibility of the Member soliciting the account to comply with these requirements, Members may agree in writing that the Member acting as the counterparty to the transaction will be responsible for fulfilling the requirements of Compliance Rule 2-36(l).
Incorrect
Every Member should determine what information it will obtain from a prospective forex customer. At a minimum, the Member soliciting the customer to engage in forex transactions must obtain the information and provide the disclosures required by Compliance Rule 2-36(l).
Members and their Associates need to ensure that each customer they solicit has received adequate information concerning the risks of forex transactions so that the customer can make an informed decision as to whether forex transactions are appropriate for the customer.
NFA believes that a determination of who those customers are cannot be made except on a case-by-case basis, because no objective criteria can be established that will apply to all customers. The essential feature of the Rule is the link between “knowing the customer” and providing risk disclosure.
Members and Associates are prohibited from making individualized recommendations to any customer for which the Member or Associate has or should have advised that forex trading is too risky for that customer.
Finally, although it is the responsibility of the Member soliciting the account to comply with these requirements, Members may agree in writing that the Member acting as the counterparty to the transaction will be responsible for fulfilling the requirements of Compliance Rule 2-36(l).
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Question 20 of 30
20. Question
NFA Bylaw 1301(e) requires Forex Dealer Members to do wich of the following?
Correct
NFA Bylaw 1301(e) requires Forex Dealer Members to pay annual dues that are graduated according to the firm’s gross annual revenue from customers for its forex activities
Incorrect
NFA Bylaw 1301(e) requires Forex Dealer Members to pay annual dues that are graduated according to the firm’s gross annual revenue from customers for its forex activities
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Question 21 of 30
21. Question
Financial Requirements Section 11(b) states which of the following?
Correct
Financial Requirements Section 11(b)
Section 11(b) prohibits a Forex Dealer Member from including assets held by an affiliate or an unregulated person in the firm’s current assets for purposes of determining its adjusted net capital under CFTC Regulation 5.7(b)(2)(v)(A).Incorrect
Financial Requirements Section 11(b)
Section 11(b) prohibits a Forex Dealer Member from including assets held by an affiliate or an unregulated person in the firm’s current assets for purposes of determining its adjusted net capital under CFTC Regulation 5.7(b)(2)(v)(A). -
Question 22 of 30
22. Question
Financial Requirements Section 13 states the following except?
Correct
Financial Requirements Section 13
Section 13 obligates FDMs to file daily reports regarding an FDM’s capital position and its ability to meet its obligation to retail Forex customers. Among other daily reporting obligations, FDMs must indicate the net aggregate notional value for all open futures and options Forex positions.
In addition, NFA requires FDMs to provide operational information on a monthly basis. These monthly reports must specify the number of retail and ECP Forex customers as well as how many customers are active, US domiciled or foreign domiciled. Also, FDMs must file monthly reports with respect to the FDM’s risk management of its market exposure.
FDMs must also file quarterly reports containing the most updated performance disclosures required by CFTC Regulation 5.5(e)(1)(i) – (iii).
Incorrect
Financial Requirements Section 13
Section 13 obligates FDMs to file daily reports regarding an FDM’s capital position and its ability to meet its obligation to retail Forex customers. Among other daily reporting obligations, FDMs must indicate the net aggregate notional value for all open futures and options Forex positions.
In addition, NFA requires FDMs to provide operational information on a monthly basis. These monthly reports must specify the number of retail and ECP Forex customers as well as how many customers are active, US domiciled or foreign domiciled. Also, FDMs must file monthly reports with respect to the FDM’s risk management of its market exposure.
FDMs must also file quarterly reports containing the most updated performance disclosures required by CFTC Regulation 5.5(e)(1)(i) – (iii).
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Question 23 of 30
23. Question
FDMs must also file quarterly reports containing the most updated performance disclosures required by CFTC Regulation 5.5(e)(1)(i) – (iii). This report must include which of the following?
I. the FDM’s capital position, its operations or any other information which NFA deems relevant
II. the percentage of non-discretionary retail forex customer accounts that were profitable during the quarter
III. the percentage of accounts that were not profitable during the quarter
IV. the total number of non-discretionary retail forex customer accounts maintained by the FDM for the prior quarterCorrect
FDMs must also file quarterly reports containing the most updated performance disclosures required by CFTC Regulation 5.5(e)(1)(i) – (iii). This report must include the total number of non-discretionary retail forex customer accounts maintained by the FDM for the prior quarter, the percentage of such accounts that were profitable during the quarter and the percentage of accounts that were not profitable during the quarter.
Incorrect
FDMs must also file quarterly reports containing the most updated performance disclosures required by CFTC Regulation 5.5(e)(1)(i) – (iii). This report must include the total number of non-discretionary retail forex customer accounts maintained by the FDM for the prior quarter, the percentage of such accounts that were profitable during the quarter and the percentage of accounts that were not profitable during the quarter.
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Question 24 of 30
24. Question
Members or their Associates are required to obtain certain personal and financial information from a customer. These include which of the following?
I. Customer’s address
II. Name
III. Previous investments
IV. Personal lifestyleCorrect
At a minimum, Members or their Associates must obtain the customer’s true name, address, principal occupation or business, and previous investment, futures trading and forex trading experience
Incorrect
At a minimum, Members or their Associates must obtain the customer’s true name, address, principal occupation or business, and previous investment, futures trading and forex trading experience
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Question 25 of 30
25. Question
With regards to individual customer information, the Member or Associate must obtain which of the following information?
I. customer’s net worth
II. customer’s current estimated annual income
III. customer’s net assets
IV. customer’s previous year’s annual incomeCorrect
For customers who are individuals, the Member or Associate must obtain the customer’s net worth or net assets and current estimated annual income or the previous year’s annual income.
Incorrect
For customers who are individuals, the Member or Associate must obtain the customer’s net worth or net assets and current estimated annual income or the previous year’s annual income.
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Question 26 of 30
26. Question
Which of the following information with regards to risk disclosure is accurate?
I. Members or their Associates must determine the appropriate risk disclosure to provide the customer.
II. The written risk disclosure must include the disclosure language prescribed in CFTC Regulation 5.5(b).
III. The risk disclosure statement must be provided on a weekly basis with every transaction.
IV. FDMs and IBs must provide retail customers with understandable and timely written risk disclosure on essential features and risks of forex trading prior to opening the account.Correct
Members or their Associates must determine the appropriate risk disclosure to provide the customer.
FDMs and IBs must provide retail customers with understandable and timely written risk disclosure on essential features and risks of forex trading prior to opening the account.
The written risk disclosure must include the disclosure language prescribed in CFTC Regulation 5.5(b).
Incorrect
Members or their Associates must determine the appropriate risk disclosure to provide the customer.
FDMs and IBs must provide retail customers with understandable and timely written risk disclosure on essential features and risks of forex trading prior to opening the account.
The written risk disclosure must include the disclosure language prescribed in CFTC Regulation 5.5(b).
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Question 27 of 30
27. Question
Immediately following the prescribed disclosure in CFTC Regulation 5.5(b), the risk disclosure statement must also include which the following except?
Correct
In addition, immediately following the prescribed disclosure, the risk disclosure statement must also include: (1) the total number of non-discretionary retail forex customer accounts maintained by the FDM, (2) the percentage of such accounts that were profitable in the quarter and (3) the percentage of such accounts that were not profitable during the quarter.
Incorrect
In addition, immediately following the prescribed disclosure, the risk disclosure statement must also include: (1) the total number of non-discretionary retail forex customer accounts maintained by the FDM, (2) the percentage of such accounts that were profitable in the quarter and (3) the percentage of such accounts that were not profitable during the quarter.
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Question 28 of 30
28. Question
CFTC Regulation 5.10 states Each retail foreign exchange dealer registered with the Commission pursuant to section 2(c)(2)(B)(i)(II)(ff) of the Act shall prepare, maintain and preserve which of the following information?
I. An organizational chart which includes the retail foreign exchange dealer and each of its affiliated persons.
II. Written policies, procedures, or systems concerning the retail foreign exchange dealer’s
III. Fiscal year-end consolidated and consolidating balance sheets for the highest level Material Affiliated Person within the retail foreign exchange dealer’s organizational structure
IV. Fiscal year-end consolidated and consolidating income statements and consolidated cash flow statements for the highest level Material Affiliated Person within the retail foreign exchange dealer’s organizational structureCorrect
CFTC Regulation 5.10 – Risk assessment recordkeeping requirements for retail foreign exchange dealers.
Requirement to maintain and preserve information. (1) Each retail foreign exchange dealer registered with the Commission pursuant to section 2(c)(2)(B)(i)(II)(ff) of the Act shall prepare, maintain and preserve the following information:(i) An organizational chart which includes the retail foreign exchange dealer and each of its affiliated persons.
(ii) Written policies, procedures, or systems concerning the retail foreign exchange dealer’s
(iii) Fiscal year-end consolidated and consolidating balance sheets for the highest level Material Affiliated Person within the retail foreign exchange dealer’s organizational structure
(iv) Fiscal year-end consolidated and consolidating income statements and consolidated cash flow statements for the highest level Material Affiliated Person within the retail foreign exchange dealer’s organizational structureIncorrect
CFTC Regulation 5.10 – Risk assessment recordkeeping requirements for retail foreign exchange dealers.
Requirement to maintain and preserve information. (1) Each retail foreign exchange dealer registered with the Commission pursuant to section 2(c)(2)(B)(i)(II)(ff) of the Act shall prepare, maintain and preserve the following information:(i) An organizational chart which includes the retail foreign exchange dealer and each of its affiliated persons.
(ii) Written policies, procedures, or systems concerning the retail foreign exchange dealer’s
(iii) Fiscal year-end consolidated and consolidating balance sheets for the highest level Material Affiliated Person within the retail foreign exchange dealer’s organizational structure
(iv) Fiscal year-end consolidated and consolidating income statements and consolidated cash flow statements for the highest level Material Affiliated Person within the retail foreign exchange dealer’s organizational structure -
Question 29 of 30
29. Question
CTFC regulation 5.10 states Each retail foreign exchange dealer registered with the Commission pursuant to section 2(c)(2)(B)(i)(II)(ff) of the Act shall prepare, maintain and preserve Written policies, procedures, or systems concerning the retail foreign exchange dealer’s such as the following except?
Correct
CTFC regulation 5.10 states Each retail foreign exchange dealer registered with the Commission pursuant to section 2(c)(2)(B)(i)(II)(ff) of the Act shall prepare, maintain and preserve Written policies, procedures, or systems concerning the retail foreign exchange dealer’s such as:
(A) Method(s) for monitoring and controlling financial and operational risks to it resulting from the activities of any of its affiliated persons;(B) Financing and capital adequacy, including information regarding sources of funding, together with a narrative discussion by management of the liquidity of the material assets of the retail foreign exchange dealer, the structure of debt capital, and sources of alternative funding;
(C) Establishing and maintaining internal controls with respect to market risk, credit risk, and other risks created by the retail foreign exchange dealer’s trading activities
Incorrect
CTFC regulation 5.10 states Each retail foreign exchange dealer registered with the Commission pursuant to section 2(c)(2)(B)(i)(II)(ff) of the Act shall prepare, maintain and preserve Written policies, procedures, or systems concerning the retail foreign exchange dealer’s such as:
(A) Method(s) for monitoring and controlling financial and operational risks to it resulting from the activities of any of its affiliated persons;(B) Financing and capital adequacy, including information regarding sources of funding, together with a narrative discussion by management of the liquidity of the material assets of the retail foreign exchange dealer, the structure of debt capital, and sources of alternative funding;
(C) Establishing and maintaining internal controls with respect to market risk, credit risk, and other risks created by the retail foreign exchange dealer’s trading activities
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Question 30 of 30
30. Question
CTFC Regulation 5.10 (ii.c) states that FDMs must establish and maintain internal controls with respect to market risk, credit risk, and other risks created by the retail foreign exchange dealer’s trading activities including systems and policies for supervising, monitoring, reporting and reviewing trading activities in which of the following?
I. securities
II. forex transactions
III. futures contracts
IV. commodity optionsCorrect
CTFC Regulation 5.10 (ii.c) – establishing and maintaining internal controls with respect to market risk, credit risk, and other risks created by the retail foreign exchange dealer’s trading activities, including systems and policies for supervising, monitoring, reporting and reviewing trading activities in forex transactions, securities, futures contracts, commodity options, forward contracts and financial instruments; policies for hedging or managing risks created by trading activities or supervising accounts carried for affiliates, including a description of the types of reviews conducted to monitor positions; and policies relating to restrictions or limitations on trading activities
Incorrect
CTFC Regulation 5.10 (ii.c) – establishing and maintaining internal controls with respect to market risk, credit risk, and other risks created by the retail foreign exchange dealer’s trading activities, including systems and policies for supervising, monitoring, reporting and reviewing trading activities in forex transactions, securities, futures contracts, commodity options, forward contracts and financial instruments; policies for hedging or managing risks created by trading activities or supervising accounts carried for affiliates, including a description of the types of reviews conducted to monitor positions; and policies relating to restrictions or limitations on trading activities