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Regulatory Compliance & Ethical Standards Flashcards

9 cards from real CFM practice questions. Tap to flip, then mark Knew It or Still Learning โ€” missed cards come back until you master them.

Read the first 9 Regulatory Compliance & Ethical Standards flashcards as text
  1. What is the main objective of financial regulations?

    Answer: To ensure transparency and protect investors

    Financial regulations are designed to maintain market integrity, protect investors, and ensure fair trading practices.

  2. Which regulatory body oversees securities markets in the U.S.?

    Answer: SEC

    The Securities and Exchange Commission (SEC) is responsible for enforcing federal securities laws and regulating the securities industry.

  3. Why is ethical behavior critical in investment management?

    Answer: It supports long-term client relationships and fiduciary duties

    Ethical behavior builds trust with clients and ensures adherence to professional standards and fiduciary responsibilities.

  4. What is the purpose of the Know Your Customer (KYC) rule?

    Answer: To prevent financial crimes through proper client identification

    KYC helps financial institutions verify client identities and prevent fraud, money laundering, and terrorist financing.

  5. Which law aims to combat insider trading?

    Answer: Securities Exchange Act of 1934

    The Securities Exchange Act of 1934 provides the legal foundation to regulate insider trading and other fraudulent market activities.

  6. What is a fiduciary duty in finance?

    Answer: A legal and ethical obligation to prioritize client interests

    Fiduciary duty is the obligation to act in the best interests of clients, putting their needs ahead of personal gain.

  7. Which regulation requires investment advisers to disclose conflicts of interest?

    Answer: Investment Advisers Act of 1940

    The Investment Advisers Act of 1940 mandates that advisers fully disclose any potential or actual conflicts of interest to clients.

  8. How should a fund manager handle material nonpublic information?

    Answer: Avoid trading and maintain confidentiality

    Material nonpublic information must not be used for trading decisions or shared until it becomes public to prevent insider trading.

  9. What role does continuing education play in regulatory compliance?

    Answer: It is required to remain knowledgeable and compliant

    Continuing education ensures professionals stay updated on evolving regulations, maintaining compliance and professional competence.