CFP Regulatory Frameworks & Compliance 5

Question 1

Under FINRA Rule 3110, a member firm's supervisory system must include which of the following as a minimum requirement?

Accepted Answer

Written supervisory procedures (WSPs) tailored to the firm's business

Answer

FINRA Rule 3110 requires each member to establish and maintain written supervisory procedures reasonably designed to achieve compliance with applicable securities laws and regulations.

Question 2

A client wishes to roll over funds from an employer 401(k) plan to a traditional IRA. Under Reg BI and DOL PTE 2020-02, the adviser's recommendation to roll over must consider all of the following EXCEPT:

Accepted Answer

The adviser's interest in increasing AUM-based fees

Answer

Reg BI and PTE 2020-02 require rollover recommendations to be based on the client's best interest; the adviser's self-interest in growing AUM cannot drive the recommendation.

Question 3

The '40 Act (Investment Company Act of 1940) requires registered investment companies to have a board of directors where at least what percentage of directors must be independent (non-interested)?

Accepted Answer

50%

Answer

The Investment Company Act of 1940 requires that at least 40% of an investment company's board consist of independent (non-interested) directors, though SEC rules effectively require 50% for certain relief.

Question 4

Under Regulation S-P (Privacy of Consumer Financial Information), a financial institution must provide customers with an opt-out notice when the institution intends to share nonpublic personal information with:

Accepted Answer

Nonaffiliated third parties for purposes outside permitted exceptions

Answer

Reg S-P requires opt-out notices before sharing customer NPI with nonaffiliated third parties for non-excepted purposes; sharing with affiliates or for legal compliance does not require opt-out rights.

Question 5

Which provision of the Tax Cuts and Jobs Act of 2017 most directly affects financial planners advising clients who pay significant state and local taxes?

Accepted Answer

The $10,000 cap on the state and local tax (SALT) deduction

Answer

The TCJA capped the SALT deduction at $10,000 per year, significantly limiting the tax benefit for high-income clients in high-tax states.

CFP - Certified Financial Planner Practice Test

CFP - Certified Financial Planner Practice Test

CFP Regulatory Frameworks & Compliance 5