Practice Test Geeks(CFM) Certified Fund Manager Practice Test
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Regulatory Compliance & Ethical Standards Flashcards

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

Read the first 7 Regulatory Compliance & Ethical Standards flashcards as text

  1. A CFM candidate witnesses a colleague misrepresenting fund performance to a prospective client. According to ethical standards, the candidate should:

    Answer: Report the misconduct to the compliance department or a supervisor

    Ethical standards require reporting observed misconduct through proper channels, such as compliance or management, to prevent harm to clients.

  2. Which regulatory body oversees commodity pool operators (CPOs) and commodity trading advisers (CTAs) in the United States?

    Answer: CFTC (Commodity Futures Trading Commission)

    The CFTC has jurisdiction over commodity pool operators and commodity trading advisers dealing in futures, options, and swaps.

  3. The 'best execution' obligation requires a fund manager to:

    Answer: Seek the most favorable terms reasonably available for fund transactions

    Best execution requires seeking the most favorable overall terms available, considering price, execution quality, speed, and other factors—not merely the lowest commission.

  4. Soft dollar arrangements are regulated under Section 28(e) of the Securities Exchange Act. Under this safe harbor, fund managers may use client commissions to pay for:

    Answer: Research and brokerage services that benefit the advised accounts

    Section 28(e) provides a safe harbor allowing fund managers to use client commissions for research and brokerage services that directly benefit the managed accounts.

  5. An investment fund is subject to AML (Anti-Money Laundering) requirements primarily under which law?

    Answer: The Bank Secrecy Act and USA PATRIOT Act

    AML requirements for investment funds derive primarily from the Bank Secrecy Act and the USA PATRIOT Act, requiring customer identification and suspicious activity reporting.

  6. Which of the following best describes the 'prudent investor' standard under the Uniform Prudent Investor Act (UPIA)?

    Answer: Fiduciaries must consider the entire portfolio and risk/return objectives when making investment decisions

    The UPIA's prudent investor standard requires fiduciaries to consider the entire portfolio's risk and return objectives, not evaluate individual investments in isolation.

  7. Under Regulation D of the Securities Act of 1933, private fund offerings are exempt from registration if sold exclusively to:

    Answer: Accredited investors meeting income or net worth thresholds

    Regulation D exempts private placements from SEC registration when securities are sold to accredited investors who meet income ($200K+) or net worth ($1M+) thresholds.