Regulatory Compliance & Ethical Standards Flashcards

Under the U.S. Foreign Corrupt Practices Act (FCPA), which of the following is TRUE regarding facilitation payments?

Answer: They are permitted for routine governmental actions but this exception is narrowly construed

The FCPA contains a narrow exception for facilitating payments to expedite routine non-discretionary governmental actions, though this exception has been increasingly scrutinized.

A bank's compliance testing reveals that loan officers in one branch systematically deny qualified minority applicants. This MOST likely violates which regulation?

Answer: Equal Credit Opportunity Act (ECOA) and Fair Housing Act

Systematic denial of qualified minority applicants constitutes illegal redlining or disparate treatment, violating both ECOA and the Fair Housing Act.

The 'materiality' threshold in financial reporting is BEST defined as:

Answer: Information whose omission or misstatement could influence users' economic decisions

Materiality is a qualitative and quantitative concept defined as information whose omission or misstatement could influence the decisions of reasonable users.

Which regulatory body is primarily responsible for enforcing the Commodity Exchange Act and overseeing derivatives markets in the U.S.?

Answer: Commodity Futures Trading Commission (CFTC)

The CFTC has primary jurisdiction over U.S. derivatives markets, including futures, options, and swaps under the Commodity Exchange Act.

Whistleblower protections under the Dodd-Frank Act are designed to:

Answer: Protect employees who report violations of securities laws to the SEC from employer retaliation

Dodd-Frank's whistleblower provisions protect employees from retaliation and provide financial awards to those who report securities law violations to the SEC.

A risk architect reviewing a third-party vendor agreement notices it lacks a right-to-audit clause. This is MOST concerning because:

Answer: The institution cannot independently verify the vendor's compliance and controls

A right-to-audit clause is essential for verifying third-party controls; without it, the institution has no independent means to validate vendor compliance.

Under SR 11-7 (Model Risk Management guidance), 'model risk' arises primarily from:

Answer: Adverse consequences from decisions based on incorrect or misused model outputs

SR 11-7 defines model risk as the potential for adverse consequences when models are incorrect, misapplied, or their limitations are not understood.