CSCP CSCP Surveillance & Monitoring 2

Question 1

What is 'wash trading' in securities markets?

Accepted Answer

Entering offsetting buy and sell orders to create artificial volume

Answer

Wash trading involves simultaneously buying and selling the same security to generate activity without a real change in ownership, creating misleading volume.

Question 2

Under SEC Rule 17a-8, broker-dealers must file Suspicious Activity Reports (SARs) for transactions that:

Accepted Answer

Involve possible money laundering or securities fraud of $5,000 or more

Answer

SEC Rule 17a-8 requires broker-dealers to file SARs for transactions of $5,000 or more that involve potential money laundering, fraud, or other illegal activity.

Question 3

Which surveillance alert would most directly detect potential 'marking the close' activity?

Accepted Answer

Unusual trading volume in the final minutes of the trading session

Answer

Marking the close involves trading at the end of the day to artificially influence closing prices, making end-of-session volume spikes a key surveillance indicator.

Question 4

What is the role of a Chief Compliance Officer (CCO) in a surveillance escalation process?

Accepted Answer

To receive escalated alerts and determine whether regulatory reporting or further investigation is required

Answer

The CCO serves as the final decision-maker for escalated alerts, determining if the activity warrants regulatory filings, discipline, or further review.

Question 5

A pattern where a broker consistently recommends securities shortly after purchasing them in their personal account is known as:

Accepted Answer

Scalping

Answer

Scalping occurs when a registered representative recommends securities to customers after personally acquiring them, profiting from the price increase caused by those recommendations.

(CSCP) Certified Securities Compliance Professional Practice Test

(CSCP) Certified Securities Compliance Professional Practice Test

CSCP CSCP Surveillance & Monitoring 2