CTP Regulatory Compliance and Ethics 1 — Questions and Answers
Question 1: Which regulatory body has primary oversight of swap markets under the Dodd-Frank Wall Street Reform and Consumer Protection Act?
- Securities and Exchange Commission (SEC)
- Commodity Futures Trading Commission (CFTC) (Correct answer)
- Federal Reserve Board
- Office of the Comptroller of the Currency (OCC)
Correct answer: Commodity Futures Trading Commission (CFTC)
The CFTC has primary authority over swap markets under Dodd-Frank, while the SEC oversees only security-based swaps.
Question 2: Under Basel III, what is the minimum Common Equity Tier 1 (CET1) capital ratio that banks must maintain as a percentage of risk-weighted assets?
- 2.0%
- 4.0%
- 4.5% (Correct answer)
- 6.0%
Correct answer: 4.5%
Basel III requires banks to hold a minimum CET1 ratio of 4.5% of risk-weighted assets to absorb losses before other capital tiers.
Question 3: What does Sarbanes-Oxley Act Section 404 primarily require of public companies?
- Annual disclosure of executive compensation packages
- Management assessment and auditor attestation of internal controls over financial reporting (Correct answer)
- Quarterly CEO certification of cash flow statements
- Real-time disclosure of all material events within 48 hours
Correct answer: Management assessment and auditor attestation of internal controls over financial reporting
SOX Section 404 mandates that management assess and external auditors attest to the effectiveness of internal controls over financial reporting.
Question 4: Which U.S. regulation primarily requires financial institutions to implement Anti-Money Laundering (AML) programs and Know Your Customer (KYC) procedures?
- Gramm-Leach-Bliley Act
- Bank Secrecy Act (BSA) (Correct answer)
- Electronic Funds Transfer Act
- Sarbanes-Oxley Act
Correct answer: Bank Secrecy Act (BSA)
The Bank Secrecy Act requires financial institutions to establish AML programs including KYC procedures to verify customer identity and detect suspicious activity.
Question 5: What is the primary purpose of filing a Suspicious Activity Report (SAR) with FinCEN?
- To report large cash transactions exceeding $10,000 in a single day
- To alert regulators about transactions that may indicate money laundering or financial fraud (Correct answer)
- To disclose foreign bank account holdings to the Treasury Department
- To report wire transfers exceeding $3,000 to foreign recipients
Correct answer: To alert regulators about transactions that may indicate money laundering or financial fraud
SARs are filed to report transactions or patterns of activity that may indicate money laundering, fraud, or other financial crimes to the Financial Crimes Enforcement Network.
Question 6: Under the Dodd-Frank Act, which statement best describes OTC derivative transaction reporting requirements?
- All OTC derivative transactions must be reported to a swap data repository regardless of size (Correct answer)
- Only transactions with notional value exceeding $1 billion require reporting
- Only financial end-users must report OTC derivatives; non-financials are exempt
- Reporting is required only for standardized derivatives, not customized contracts
Correct answer: All OTC derivative transactions must be reported to a swap data repository regardless of size
Under Dodd-Frank, all OTC derivative transactions must be reported to a swap data repository to promote market transparency and systemic risk monitoring.
Question 7: What is the primary role of the Office of Foreign Assets Control (OFAC) in treasury compliance?
- Administering tax treaties between the U.S. and foreign governments
- Enforcing economic and trade sanctions against targeted foreign countries, entities, and individuals (Correct answer)
- Regulating foreign currency exchange rates and international monetary policy
- Overseeing the export of controlled technologies to foreign nations
Correct answer: Enforcing economic and trade sanctions against targeted foreign countries, entities, and individuals
OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals, requiring treasury professionals to screen payments against its SDN list.
CTP Regulatory Compliance and Ethics 1
Which regulatory body has primary oversight of swap markets under the Dodd-Frank Wall Street Reform and Consumer Protection Act?