CFM Regulatory Compliance & Ethical Standards 5

Question 1

Under the Global Investment Performance Standards (GIPS), composite performance must include:

Accepted Answer

All fee-paying discretionary accounts managed to a similar strategy

Answer

GIPS requires that all fee-paying discretionary accounts managed according to a similar strategy be included in composites to prevent cherry-picking of results.

Question 2

A 'whistleblower' under the SEC's Dodd-Frank whistleblower program is entitled to:

Accepted Answer

An award of 10-30% of sanctions collected when the tip leads to a successful SEC enforcement action exceeding $1 million

Answer

The SEC whistleblower program awards 10-30% of monetary sanctions collected in successful enforcement actions exceeding $1 million based on original information provided.

Question 3

An investment fund that relies on the '3(c)(7)' exemption from Investment Company Act registration must limit its investors to:

Accepted Answer

Qualified purchasers owning at least $5 million in investments

Answer

The 3(c)(7) exemption is available to funds that sell exclusively to 'qualified purchasers,' which includes individuals owning at least $5 million in investments.

Question 4

The ethical principle of 'independence and objectivity' in fund management is most threatened when a manager:

Accepted Answer

Accepts excessive compensation or gifts that could influence investment recommendations

Answer

Accepting excessive compensation or gifts from interested parties compromises independence and objectivity by creating personal financial incentives that may bias recommendations.

Question 5

Which regulatory requirement applies when a hedge fund manager 'crosses' trades between two client accounts it manages?

Accepted Answer

Cross trades must be executed at a fair price and disclosed to both client accounts

Answer

Cross trades between client accounts are permissible only if conducted at a fair market price and properly disclosed to both parties involved in the transaction.

(CFM) Certified Fund Manager Practice Test

(CFM) Certified Fund Manager Practice Test

CFM Regulatory Compliance & Ethical Standards 5