The Middle and Back Offices

Question 1

middle office has the following four main areas of

responsibility:

Answer 1

1. Compliance
2. Legal
3. Auditing
4. Accounting

Question 2

What does bearer form mean?

Answer 2

the security certificate being exchanged at the cage was negotiable and payable to the bearer

Question 3

firm’s compliance function focus on three primary areas

Answer 3

1. Licensing and regulatory reporting
2. Sales and marketing, and client service
3. Portfolio management

Question 4

investment guidelines and restrictions for each portfolio are a combination of the following

Answer 4

1. Investment restrictions stated in the applicable securities regulations.
2. Investment guidelines and restrictions negotiated with each investor.

Question 5

What is straight-through processing (STP)

Answer 5

information database designed around steps to execute, record and settle a security trade

Question 6

STP system processing steps (5)

Answer 6

1- portfolio manager enters the detail of transaction into the STP system.
2- System determines if transaction is compliant
3- Upon receiving the trade, the trader places it
4- Upon execution, the trade is then entered into the STP system
5- The trade is transmitted electronically to all parties

Question 7

The executed trade is then transmitted electronically to four parties:

Answer 7

The portfolio manager (who initiated the trade)
The firm’s back office for trade settlement
The firm’s custodians
The trade’s counterparty (broker/dealer)

Question 8

primary roles and responsibilities of a firm’s accounting function (3)

Answer 8

Financial accounting services
Fund accounting
Unit holder record keeping

Question 9

What do financial accounting services provide?

Answer 9

information about the firm’s financial affairs and

condition for the benefit of its owners, creditors and regulators.

Question 10

Fund accounting must incorporate and report on the following information for each fund (5)

Answer 10

Fund contributions and withdrawals
Security holdings and market value
Security transactions
Income earned (dividends and interest received)
Fund expense accruals

Question 11

Key best practices related to the compliance function

Answer 11

• Leadership
• Communications with regulators
• Prior approval of new investment products
• Prior approval when contracting new distributors
• Straight-through processing (STP) system
• Personal trading pre-approval