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Series 3 > Regulations > Flashcards

Regulations Flashcards

1
Q

NFA

A

1976 -Self regulatory regulates all persons conducting futures business with the public.

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2
Q

CFTC

A

Commodity Futures Trading Commission Act of 1974

independent agency of U.S government. 5 members 5 year term.

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3
Q

CFTC REAUTHORIZATION ACT

A

2008 enforce the Dodd-frank act - must register with the CFTC as “RFEDS”- retail foreign exchange dealers if you did retail forex transactions business. Registered FCMS are permitted to engage in forex without registering as RFEDS. AP must pass both Series 3 & 34.

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4
Q

Who regulates stock index futures & stock index futures options?

A

CFTC (FUTURES)

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5
Q

Front running

A

Putting orders ahead of customers

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6
Q

Customer protection procedure

A

FCM must separate customer assets from the firms & firm cannot use customer funds for business or own trades

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7
Q

Future exchanges

A

Must b licensed with CFTC. CFTC designates particular exchanges as contract markets for specific commodities

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8
Q

NFA Form 8-R (know your customer type of thing)

A

10yr Employment history 5yr residential 4 AP

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9
Q

Reporting limits

A

Max net number of contracts one trader or customer can hold on same side of a comd without having to file daily report(all long & short positions options also)

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10
Q

Special accounts

A

Weekly reports of accounts exceeding reporting levels

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11
Q

Position Limits

A

Bona Fide hedgers dont have position limits only to speculators

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12
Q

How many days does a bona hedger have to notify CFTC of intent exceed position limit?

A

At least 30days b4 establishing

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13
Q

commissions became negotiable?

A

March 1978

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14
Q

Cftc reparations program

A

Thru a ‘Alj’ preceding of 30k> wide vary if sanctions suspending! revoking !civil penalties & deny trading privileged all exchanges.
Inexpensive way to resolve disputes between future & options customers & registered trading professionals 2yr statue of limitation
Voluntary summery or formal

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15
Q

Decisions by ALJ appealed by?

A

Commission and then US court of Appeals

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16
Q

Criminal proceeding penalty?

A

Us district court felony punishable by fines or 5yrs prison or both . misdemeanor punishable up to 1yr prison.

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17
Q

Statue of limitation

A

Complaints must be filled within 2yrs of date violation occurred or 2yrs the offended party should have known about violation.

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18
Q

Who is required to be NFA members

A

FCM IB CPO CTA AP

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19
Q

ALJ

A

Administrative law judge

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20
Q

Ap dual registration

A

Yes long as NFA is notified each member must certify they know of each other and supervise the AP

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21
Q

Appealed denial of registration to NFA ?

A

Must b filed within 30 days to the CFTC

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22
Q

Bucket orders

A

Hold but not execute

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23
Q

Churning

A

Excessive transactions for them commissions boy

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24
Q

Members & Ap share customers profits& loss?

A

Yea w written consent

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25
Q

Can promo say “Endorsed by NFA”

A

Nope

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26
Q

Can you terminate a membership under investigation

A

Nope

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27
Q

Can you do business with suspended members

A

Nope

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28
Q

Discretionary account

A

Must b in writing, grant power of attorney, Ap must have 2yrs experience as a RcR or b a CTA. Firms must supervise INTENSELY must b approved by a supervisor after order is FILLED. MUST REGULARLY review activity.MUST KEEP RECORD OF REVIEWS.

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29
Q

RcR

A

Registered commodities representative

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30
Q

Account transfer

A

FCM has 2days to confirm positions and 3days to transfer customers assets. 5days TOTAL AFTER WRITTEN REQUEST.

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31
Q

3rd party control

A

Not customer nor firm but a family member or some1 else makes trades for customer. EXTRA CARE AND ADDITIONAL RECORDS REQUIRED . WRITTEN PROOF & confirm disclosure documents received

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32
Q

NFA Promo Rule 2-29 Apply to

A

Sales literature ,seminars, advertising newspapers radio tv,newsletters,sales scripts ,internet material , performance charts & graphs

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33
Q

Approval of promo material?

A

Supervisory approval other than the employee who developed it. Main office must approve b4 branch& below locations distribute it.

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34
Q

Copy’s of promo material maintained?

A

3yrs from date of use. May file copy’s with the NFA

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35
Q

Timetable for promo material requirements

A

Each member keep file of promotional item and copy of supervisory review & approval .Readily assessible 3yrs from last used date & maintained total of 5yrs

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36
Q

Review of promo material

A

NFA does require to submit unless disciplinary action but will review takes up 2 21days.

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37
Q

2-29 fairness

A

Members provide customers with info they need writes of promo use standards and honesty as if it was you seeking investments

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38
Q

When do you use Disclaimers (promo)

A

Using hypothetical results, less than 1 yr exp trading customer accounts ,1year or less exp allocating assets

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39
Q

Responsibility of promo material

A

The member. The Ap prepare the AP & member

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40
Q

Truth & balance OF pROMO

A

Promo material Must b accurate probability of profit must have equal statement covering risk of loss

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41
Q

TV & radio promo

A

If you “pay” it’s promo

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42
Q

Infomercials pROMO

A

Popular form of promo must have disclaimer at beginning & end of show

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43
Q

Misleading words in Promo

A

Proven & unlimited shouldn’t b used

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44
Q

Options promo

A

Must disclose limited risk on long positions only must disclose can lose entire premium and uncover calls unlimited risk

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45
Q

Know your customer

A

Annual income, networth, investment exp & investment goals

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46
Q

Risk disclosure

A

Must b signed b4 trading. Explain risk of trading futures and potential loss of all and addition funds. They understand . Must b kept in customers files.

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47
Q

Account statements time

A

Monthly statements unless no trades or open positions then quarterly

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48
Q

Future option disclosure

A

Must mention loss of entire premium. Seller unlimited risk, separate option document or generic disclosure document with both

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49
Q

Confirmations time

A

Written confirms of trades no later than next business day

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50
Q

Firm Records

A

Copy of monthly statements, daily record,property/securities deposited, account card,

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51
Q

Firm records time

A

5yrs and must b easily accessible for 2yrs

52
Q

Customer agreement

A

Gives right to liquidate portion or all positions if margin is not met. & if customer dies

53
Q

Supplemental agreement

A

Fund transfer form - transfer between securities account & futures account

54
Q

FCM &IB fees

A

Must b made to customer b4 account is open. All fees cost and charges. In writing how & when they apply and amounts

55
Q

Disclosure exceptions

A

CTA disclosed all cost to customer “writing”
Member of NFA
Not an individual “corp,partnership”

56
Q

CTA

A

Any1 paid to give advice on trading commodities paid to analyses or reports on commodities. Trades futures on behalf of clients

57
Q

Disclosure - CTA

A

Business activity last 5years
Past trading perfm
If has no trading experience as a cta

58
Q

Hold customers assets-CTA

A

No unless organizations is a FCM register as a CTA

59
Q

Register as a CPO -CTA

A

Not required unless engaged in forming or operating commodity pools

60
Q

Exempt CTA

A

Advice affect cash market,Ap acting 4 CTA ,advice less than 15 clients during 12mths. IB, Ltm, non profit farm/trade

61
Q

CTA disclosures

A

Business exp 5years trading perfm 5years & current year.

Criminal ,civil, adm action 5years.

62
Q

Perfm record & disclosure updates

A

Every 9 months no value older than 3months must b submitted to CFTC at least 21 days b4 public

63
Q

Available time for inspection of records

A

72 hours of CFTC request

64
Q

CPO

A

Organize commodity pools to speculate in futures , general partner or general manager receives cash security / property to trade futures or options

65
Q

CPool

A

Monies from many investors pooled distributes profits & losses based on there investment interest invested . Limited partnership

66
Q

CPO disclosure list

A

Main office of pool & CPO know CPO & CTA APs trade decision maker, executing FCM ,what comd traded, 1st date doc will b used ,disclaimer of CFTC approval.

67
Q

Business activities of CPO disclosed how far back tho

A

5years

68
Q

CPO disclosure

A

10% CTA holding & any parties holding 10% or greater must identified . Must disclose the size of pool

69
Q

CPO disclosure 2

A

Min funds required to begin trading, max funds pool take, max time for holding funds b4 trading, how deposits r returned if pool doesn’t receive enough funds to open

70
Q

CPO prior perfm

A

Must not b older than 3mths,
Most recent 5yrs
&year to date

71
Q

Cpool less that 5years disclose business of how long

A

Year to date for anything less than 5yrs

72
Q

Less than 12moths cpool performance disclosed what

A

Entire operating history ,CPO history of all other pools past 3yrs. Separate pool perfm
Hypothetical trading is a pool track record must b disclosed

73
Q

CPO not previously traded disclaimer

A

pSorry, we couldn’t play that audio. Try checking your language settings or send us some feedback if this happens frequently.

74
Q

CPO perfm update

A

Monthly begin & end value, current #units held by clients, +&- from capital . Worst drawdown & peak for current year, & 5yr current & 5yr net asset value, ROR.

75
Q

CPO reporting times

A

500k >Monthly less <500k quarterly reports

76
Q

CPO disclosure

A

Criminal / adm action against CPO ,CTA, AP & FCM disclosed .
Cost of pool , commissions, or fees paid ,
Amount trading profit required to break even
How often distribute profits & capital
Fed income tax consequence for type of distribution
Redeem interest & restrictions ex end of year or quarterly

77
Q

Can commingle assets of different pools

A

No each pool on entitles can’t combine assets

78
Q

Disclosure appearance

on ddoc

A

Tabular form columns on Front page -title DILUTION TABLE with base figure for comparison purposes =net proceeds minus fees to show capital available for trading

79
Q

Department of compliance NFA

A

Department of compliance

80
Q

Seek injunctive relief

A

CFTC only not NFA

81
Q

Regional business conduct committees

A

Conducts investigations by CFTC request ,discovery of NFA , or by order of NFA director of compliance that a violations has occurred ,may have occurred, or about to.

82
Q

Respondent

A

Party charged

83
Q

Respondent response time to complaint

A

Written answer to NFA within 30days of date or admission of guilt & waive hearing

84
Q

Who to file appeal with after decision? Time

A

Appeals committee within 15days

85
Q

Review appeals committee action

A

Through CFTC within 30days of any action by committee a

86
Q

Appeals made

A

Ultimately in US courts of Appeals

87
Q

Regional business conduct committee penalties

A 
Expulsion
Suspension 
Barring 4ever
Reprimand 
Fines up to 250k
Cease &amp; desist action
88
Q

Member responsibility action

A

Act immediately certain violations detrimental to public interest

89
Q

Code of arbitration

A

Settle claims without court

Generally people who are not exchange members

90
Q

of arbitrators

A

<50k >100k 1 but may be 3 if all parties request in writing
100> 3
No more 50 and more 25 = written submission
25k less summary proceeding “no hearing “

91
Q

Arbitration time frame

A

2 years date complaining party knew ( should have known)

92
Q

Arbitration findings

A

Binding NO APPEAL

Failure to pay awards or fines suspension of NFA membership

93
Q

Arbitration claim form

A

35days receiving notice of intent to arbitrate abandonment

94
Q

Mediation

A

settlement process no1 wins cheaper
Indy 3rd party works to find solution
No solution proceed to arbitration

95
Q

Floor gov committee

A

Floor gov committee

96
Q

Execute trades on exchange floor

A

Only floor traders ,brokers registered with CFTC

97
Q

Wash sales

A

No change of ownership

98
Q

Exchanges

A

Select commodities they seek designation as contract market .
Propose specify contract terms
Specifics price limit
T-bond =3points

99
Q

Exchange margin requirements

A

Must report activity daily 1936 act let exchanged set margin requirements . Under extra circumstances CFTC can set requirements

100
Q

Exchange committee

A

To protect interest of members and customers

101
Q

Business conduct committe

A

Investigates transactions of member firms and their customers

102
Q

Arbitration committee

A

Hears disputes between exchange members

2 same exchange matters goes to a.c of that exchange t

103
Q

NFA arbitration

A

Dispute involving any other parties,trade complaints & charges

104
Q

Hypothetical track record

A

3 mths

105
Q

Complaining party

A

Complainant

106
Q

Omnibus account

A

Intense supervise used by intro member to execute clear their customer trades not in their name

107
Q

Promo material & oral communications

A

Subject to same standards rule 2-29

108
Q

Promoting selective trades

A

Cherry Picking

109
Q

Find errors on disclosure doc

A

Must be corrected in 21 days after discovery

110
Q

Fungibility

A

Trade same instrument interchangeably across exchanges

Ex options on stocks

111
Q

CTA & CPO use disclosure documents

A

9mths

112
Q

Customer account material change

A

15 days or when aware

113
Q

Termination of ap

A

File a 8T form

114
Q

Can Cta Advise more than 1 pool without registering As a CPO

A

Yes

115
Q

Cta & CPO disclosure document submit

A

21 days b4 use
2 copy CFTC
1 NFA

116
Q

First party to review complaints

A

Director of compliance

117
Q

Director of compliance

A

Reports valid complaints to regional committee

118
Q

Member responsibility action (MRA)

A

require approval of NFA president
Board of directors
Or executive committee

119
Q

Copy’s of written complaint forward

A

To NFA not CFTC

120
Q

U.S. & foreign contracts

A

Must b segregated

121
Q

Cta abbreviation or simplified disclose doc

A

For QEP or advisor managed accounts

122
Q

QEP

Qec

A

Qualified eligible participants

Clients

123
Q

Disciplinary process

A

Director of compliance submits violation to business conduct committee
Business committee compliant issued written outline of violation to member. Member must answer & 30days can request a hearing before a NFA Hearing Panel
If not settle panel issues decision . Compliant may Appel to NFA Appeals Committee which is Board members created to hear matters
Appeals Committee decision is FINAL subject to review by CFTC fines can’t exceed 250k

124
Q

Part 2

A

Summary action taken by president with executive committee to protect the markets /members /customers
No practice to hold hearing b4 it’s taken

125
Q

Arbitration proceeding

A

Settle customer claims & grievance
Code of arbitrations provides framework for procedure
Is mandatory when a Demand for Arbitration is filed by customer
NFA member Arbitration Rules arbitration between NFA members is mandatory also
Arbitrations claims decided by panels of 1-3 arbitrators appointed by BFA secretary have right to request a non member panel
Small claims with written submission
No appeals permitted
Meditation less expensive and no 1 wins just a agreement

126
Q

Offer to settle

A

No admit or deny of violation

Series 3 (2 decks)

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