Series 30 Part 3
An IB does not maintain the signed and dated acknowledgment from the customer that he has reviewed the Risk Disclosure Document. It is given to the FCM.
True
False
The NFA's compliance direct needs court approval to subpoena documents from an NFA member.
True
False
An IB may accept funds in the name of the FCM if authorized by the FCM.
True
False
A CPO operator must disclose the potential size of a commodity pool to a prospective participant.
True
False
For a discretionary account, the National Futures Association requires that the AP handling the account have been continuously registered for a minimum of two years and have worked in such registered capacity for that period.
True
False
A settlement between a respondent and the NFA may be settled in a manner that neither admits nor denies the allegations contained in the complaint.
True
False
A commodity options confirmation statement must include the customer's account identification number, a separate listing of the amount of the premium and all the other commissions, the option series, and the expiration date.
True
False
A commodity pool operator does not need to provide Risk Disclosure Documents to participants of the pool if the pool has not started trading.
True
False
All of the following statements are true regarding original margin EXCEPT:
It is the amount of funds required by the broker when the futures contract is initiated
It is established by the commodity exchange on which the commodity exchange on which the commodity is traded
It is required to insure performance under the terms of a futures contract
It is established by the federal government
When a CTA is registered with the CFTC, the CTA may state that its qualification have been approved by the CFTC
True
False
Variation margin is the amount of funds deposited by a customer in addition to the original margin when:
The market price moves against her position
The future position is closed out
The customer holding the opposite side of the futures contract makes a demand for the deposit of the additional funds
The market price declines by 50% or more when the customer is long, or advances by 50% or more when the customer is short
If a pool has been operating for six years, the disclosure document must show the performance for the life of the pool.
True
False
An NFA member that is under review by the Business Conduct Committee is subject to a trading restriction until the matter is resolved.
True
False
An IB may accept funds in its own name.
True
False
A decision by the Arbitration Committee may be appealed to the Appeals Committee.
True
False
A registered commodities solicitor may enter an order for a customer who is currently undermargined if the customer assures him that a remittance is under way.
True
False
Your firm is registered as a CPO and has been operating a number of pools. The oldest pool has been in operation for 20 months. Which TWO of the following statements regarding performance disclosures in the Risk Disclosure Document?
Must be made for the lifetime of the pool being offered.
Must be made for all the other pools operated by the firm.
Must be made for only the pool being offered.
Not required since the pools are under three years old.
When a NFA member is under investigation by the compliance staff of the NFA, the member may resign from membership.
True
False
Your firm is an IB that has an agreement with an FCM for trade execution. Your IB has eight branch offices and a total of eighteen registered commodity representatives in these offices. According to CFTC and NFA requirements, the minimum adjusted net capital of your IB must be:
$45,000
$48,000
$54,000
$500,000
In order for trader to exceed speculative position limits, she must register with the CFTC.
True
False
A CFTC enforcement action can result in a fine of up to $140,000.
True
False
As part of the disclosure requirements to investors, CPOs and CTAs must address up-front fees and expense. The disclosures are normally found on the cover of the disclosure document and would include all of the following information EXCEPT:
Organizational expense of the pool
Offering fees charged by the CPO
Net proceed avialable for investment
Account balances after one year of investing
A pension fund manger can use a short hedge in stock index futures to protect the value of his portfolio.
True
False
When preparing an order ticker for a transaction, a time stamp would not be required when the order was
Received by the firm
Transmitted to an options exchange
Executed(if known)
Confirmed to the client
To advertise the results of specific accounts NFA members must be able to shoe that the results are comparable to all similar accounts.
True
False
A FCM that makes an option trade for a customer must confirm the trade to the customer no later than:
The same day as the tranasction
The next day after the transaction
Three business days after the transaction
Five business days after the transaction
A customer gives discretionary authority in an individual account to an AP. The power of attorney authorizes the representative to execute trades:
With the prior approval of the customer for each transaction
Without prior approval of the customer
For the spouse of the customer
For the dependent children of the customer
If fees are determined on per-basis or round-turn basis, a customer must receive a detailed explanation in writing
True
False
One of the important considerations for commodity pool participants is liability that they assume when investing in a pool. Which of the following statements is TRUE regarding the liabilities of a commodity pool participant.
The potential liability of a pool participant may be greater than their original investment.
A participant may never lose more than his original investment
If the pool enter spread positions they always have less risk than simple long or short positions.
If the pool uses stop-loss orders, they will always limit potential losses to the intended amount.
An FCM is required to report to the CFTC all purchase and sales that occur in the account of a bona fide hedger on a daily basis once he has reached the position reporting level.
True
False
Joan passed her Series 3 exam 10 month ago. Her supervisor has assigned six existing customer to Joan, two of which are discretionary accounts. Which of the following statements is TRUE regarding the transfer of these account to Joan.
Joan may handle all six accounts
Joan may handle the discretionary accounts only.
Joan may handle the non-discretionary accounts only.
The representative may not handle any of the accounts.
Which of the following choices pertains to the Risk Disclosure Statement?
It is sent to all customers, whether they are speculators or hedgers.
It must be signed by the customer.
It must contain a statement similar to the following: "Spread positions may not be safer than long or short positions"
All of the above
Promotional material includes standardized oral presentations.
True
False
If a CTA handle a managed account, it is the CTS's responsibility to insure that its clients receive monthly account statments
True
False
32 days ago, your IB received a notice from an FCM, which provide a capital guarantee to your firm, stating that it had dropped below its required minimum capital requirement. What is the status of your guarantee arrangement with this FCM?
The guarantee arrangement will terminate if the capital problem is not corrected.
The guarantee arrangement is no longer in effect.
No action is required by the FCM after thirty days.
The IB is not affected by the capital problems of the FCM.
Generally accepted accounting principles must be used in preparing the actual performance record of a commodity pool.
True
False
The NFA requires, for a discretionary account, that the AP handling the account have been continuously registered for a minimum of one year and have worked in such registered capacity for that period.
True
False
A hedged position does not guarantee full price protection against adverse price movements because
The basis may change
The actual position held inventory may not be an exact multiple of the future contract
The basis grade may differ from the hedger's cash position
All of the above
Which of the following situations would give a CPO an exemption from registraion
The CPO operates fewer than five pools at a time.
The CPO is compensated less than $50,000 for operating the pool.
There are fewer than 35 pool participants.
Total pool contributions are $360,000 and there are 8 participants.
Your firm has various trading programs available for use by its investors. Under the terms of the trading programs, they can maximize investment returns and achieve optimum portfolio balance through aggressive asset allocation. If your firm offers these programs to new customers, what information must be disclosed?
The name of all past participants in these plans
A five-year performance history of customer account directed by the firm
Performance results for the life of the pan if less than five years
The SEC registration and approval documents for the plans
A customer fails to meet a margin call. In this case, the FCM:
May lend the customer the amount due, but is required to charge interest
May liquidate all or part of the customer's position to meet the amount of the call
May not take any action unless the member firm contacts the customer to notify her that the margin deposit is late
Will liquidate the customer's position and keep the entire proceeds in the account
Your firm has been using a particular trading system for the past eight months. Which of the following statements is TRUE regarding hypothetical trading results.
No reference may be made to any hypothetical trading results.
Actual trading results must be incorporated in the hypothetical examples.
The firm must suspend use if the trading system when the hypothetical results are released.
The firm must send a copy of the hypothetical trading results to all its customers.
The CPO disclosure document must disclose at least quarterly the number of outstanding units.
True
False
The purpose of entering a stop-loss order is to:
Protect against a declining market in a long position
Protect against a rising market in a short position
Guarantee a profit on a long postion
Create a specific price for filling an order
Which of statements is true regarding discretionary accounts?
They must be renewed by the member firm
They must be renewed by the customer.
They must be renewed by the NFA.
They need not ever be renewed.
Your firm is offering interests in a commodity pool that has not yet begun operations. What is the disclosure requirement for this pool?
There is not disclosure document requirement since operations have not begun
A statement that the pool operation has begun and the pool has no history must be made
Disclosure must be made after the pool has been in operation at least three years
A disclosure of the names of all pool participants must be made
If a commodity pool operator charges an up-front fee for pool participation, what effect would it have on the rate of return in order to achieve the break-even point?
The rate of return would have to be higher to achieve the break-even point
The rate of return would have to be lower to achieve the break-even point
There would be no effect on the rate of return when calculating the break-even point
The break-even calculation does not consider the rate of return
The NFA board of directors may take an action against a member, requiring that the firm immediately cease doing business, prior to holding a hearing on the matter.
True
False
Your client from London imports cocoa from Ghana and pays for the imports in British pounds. He would hedge against a decline in the value of the pound by buying British pounds futures.
True
False
Your firm deals exclusively with investors who defined as qualified eligible persons under CFTC regulations. When sending promotional material to them, which of the following statements is TRUE regarding the disclaimers made by the firm?
Investors must be given a copy of any hypothetical trading results
Investors must be given the historical performance results of any trading programs
The firm is not required to give any disclaimers to these investors.
The firm must file all promotional material with the CFTC before distribution.
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