CSCP CSCP Surveillance & Monitoring 1

Question 1

What is the primary purpose of a trade surveillance system in a broker-dealer?

Accepted Answer

To detect potentially manipulative or abusive trading activity

Answer

Trade surveillance systems are designed to identify patterns that may indicate market manipulation, insider trading, or other regulatory violations.

Question 2

Which regulatory body requires broker-dealers to establish written supervisory procedures (WSPs) for their surveillance programs?

Accepted Answer

FINRA

Answer

FINRA Rule 3110 requires member firms to establish, maintain, and enforce written supervisory procedures tailored to the nature of the firm's business.

Question 3

What does 'layering' refer to in the context of market surveillance?

Accepted Answer

Placing and quickly canceling orders to create a false appearance of market depth

Answer

Layering is a form of market manipulation where a trader places multiple orders and cancels them before execution to create the illusion of supply or demand.

Question 4

Under FINRA Rule 3120, what must a firm's CEO or equivalent certify annually?

Accepted Answer

The firm's supervisory control system is reasonably designed to achieve compliance

Answer

FINRA Rule 3120 requires annual CEO certification that the firm's supervisory control policies and procedures are reasonably designed to achieve compliance with applicable rules.

Question 5

Which of the following is an example of 'spoofing' under the Dodd-Frank Act?

Accepted Answer

Bidding or offering with intent to cancel before execution to move prices

Answer

Spoofing under Dodd-Frank is defined as bidding or offering with intent to cancel the bid or offer before execution, and it is explicitly prohibited.

(CSCP) Certified Securities Compliance Professional Practice Test

(CSCP) Certified Securities Compliance Professional Practice Test

CSCP CSCP Surveillance & Monitoring 1