Practice Test Geeks(AIP) Accredited Investment Professional Certification Practice Test
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Risk Assessment & Regulatory Compliance Flashcards

7 cards from real AIP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. Which Basel III regulatory framework metric measures a bank's ability to survive a 30-day liquidity stress scenario by requiring sufficient high-quality liquid assets?

    Answer: Liquidity Coverage Ratio (LCR)

    The Liquidity Coverage Ratio (LCR) requires banks to hold enough high-quality liquid assets to cover 30 days of net cash outflows under a stress scenario.

  2. An investor holds a bond portfolio and is concerned about rising interest rates. Which risk metric would best quantify the portfolio's sensitivity to interest rate changes?

    Answer: Modified duration

    Modified duration measures the percentage change in a bond's price for a 1% change in yield, making it the primary metric for interest rate sensitivity.

  3. The SEC's Rule 206(4)-7 under the Investment Advisers Act requires registered investment advisers to adopt and implement written compliance policies and procedures. Who must annually review these policies?

    Answer: The Chief Compliance Officer

    Rule 206(4)-7 requires RIAs to designate a Chief Compliance Officer who is responsible for administering the compliance program and conducting an annual review of its adequacy.

  4. A hedge fund uses leverage by borrowing $50 million to supplement $100 million in equity. If portfolio losses reduce equity to $70 million while debt remains at $50 million, what is the leverage ratio?

    Answer: 1.71x

    Leverage ratio = Total Assets / Equity = ($70M + $50M) / $70M = $120M / $70M ≈ 1.71x.

  5. Which of the following best describes 'regulatory risk' in the context of investment management?

    Answer: The risk that changes in laws or regulations will adversely affect investment returns or firm operations

    Regulatory risk is the risk that legislative or regulatory changes — such as new capital requirements or trading restrictions — will negatively impact investments or business operations.

  6. Under the Employee Retirement Income Security Act (ERISA), plan fiduciaries are held to what standard when making investment decisions for a pension plan?

    Answer: The prudent expert standard — acting as a knowledgeable fiduciary would

    ERISA's prudent expert standard requires fiduciaries to act with the care, skill, prudence, and diligence of a knowledgeable person familiar with investment matters.

  7. A broker-dealer's anti-money laundering (AML) program must include which of the following elements under the Bank Secrecy Act?

    Answer: Internal policies, independent testing, designated AML officer, and ongoing employee training

    A compliant BSA/AML program for broker-dealers must include written internal policies, independent testing of the program, a designated AML compliance officer, and ongoing training for appropriate personnel.