CFM Regulatory Compliance & Ethical Standards 2

Question 1

Under the Investment Advisers Act of 1940, which activity requires SEC registration as an investment adviser?

Accepted Answer

Managing a private hedge fund with 15 or more clients and $110M+ AUM

Answer

Advisers managing over $110 million AUM with 15+ clients generally must register with the SEC under the Investment Advisers Act of 1940.

Question 2

The CFM Code of Ethics requires fund managers to disclose conflicts of interest:

Accepted Answer

Promptly and fully before the conflict can affect investment decisions

Answer

Ethical standards require prompt and full disclosure of conflicts before they can influence investment decisions affecting clients.

Question 3

A fund manager receives a large gift from a broker-dealer whose services the fund uses. What is the most appropriate ethical response?

Accepted Answer

Decline or return the gift and report it to the compliance officer

Answer

Accepting gifts from service providers creates a conflict of interest; the appropriate action is to decline or return it and notify compliance.

Question 4

Which SEC rule requires fund managers to adopt written compliance policies and procedures?

Accepted Answer

Rule 206(4)-7

Answer

SEC Rule 206(4)-7 requires registered investment advisers to adopt and implement written compliance policies and procedures reasonably designed to prevent violations.

Question 5

Front-running in fund management occurs when a manager:

Accepted Answer

Trades in personal accounts ahead of executing known fund orders to profit from price movement

Answer

Front-running is the illegal practice of trading personal accounts based on advance knowledge of pending fund orders that will move the market.

(CFM) Certified Fund Manager Practice Test

(CFM) Certified Fund Manager Practice Test

CFM Regulatory Compliance & Ethical Standards 2