CSCP Compliance Programs & Risk Management 5

Question 1

A compliance officer at a dually registered firm (broker-dealer and investment adviser) must be aware that which regulatory body has primary jurisdiction over the investment adviser side of the business?

Accepted Answer

SEC or state securities regulators, depending on AUM

Answer

Investment advisers are regulated by the SEC if they have $110 million or more in AUM (or meet other federal thresholds), or by state securities regulators below that threshold — not by FINRA, which regulates broker-dealers.

Question 2

Which of the following scenarios represents a 'compliance culture' failure rather than a procedural gap?

Accepted Answer

Senior management actively discourages escalation of compliance concerns to avoid business disruption

Answer

When senior management discourages escalation, the firm's tone-at-the-top undermines compliance culture — this is a culture failure, as opposed to a documentation or process deficiency.

Question 3

What is the primary purpose of a Suspicious Activity Report (SAR) filed by a broker-dealer?

Accepted Answer

To alert FinCEN of transactions that may involve money laundering or other financial crimes

Answer

SARs are filed with FinCEN (via the BSA E-Filing System) to report transactions that a broker-dealer knows, suspects, or has reason to suspect involve money laundering, tax evasion, or other financial crimes.

Question 4

In conducting a compliance risk assessment, which approach involves assigning numeric values to the probability and severity of risks to produce a ranked list?

Accepted Answer

Quantitative risk assessment

Answer

Quantitative risk assessment assigns numerical scores or monetary values to likelihood and impact, producing ranked risk scores, while qualitative assessment uses descriptive categories like 'high/medium/low.'

Question 5

Under FINRA Rule 3110, branch office inspections must be conducted at what minimum frequency for non-OSJ branch offices with one or more registered persons?

Accepted Answer

Annually

Answer

FINRA Rule 3110 requires firms to inspect non-OSJ branch offices with at least one registered person on an annual basis, while OSJs must also be inspected annually.

(CSCP) Certified Securities Compliance Professional Practice Test

(CSCP) Certified Securities Compliance Professional Practice Test

CSCP Compliance Programs & Risk Management 5