CFM Regulatory Compliance & Ethical Standards

Question 1

What is the main objective of financial regulations?

Accepted Answer

To ensure transparency and protect investors

Answer

Financial regulations are designed to maintain market integrity, protect investors, and ensure fair trading practices.

Question 2

Which regulatory body oversees securities markets in the U.S.?

Accepted Answer

SEC

Answer

The Securities and Exchange Commission (SEC) is responsible for enforcing federal securities laws and regulating the securities industry.

Question 3

Why is ethical behavior critical in investment management?

Accepted Answer

It supports long-term client relationships and fiduciary duties

Answer

Ethical behavior builds trust with clients and ensures adherence to professional standards and fiduciary responsibilities.

Question 4

What is the purpose of the Know Your Customer (KYC) rule?

Accepted Answer

To prevent financial crimes through proper client identification

Answer

KYC helps financial institutions verify client identities and prevent fraud, money laundering, and terrorist financing.

Question 5

Which law aims to combat insider trading?

Accepted Answer

Securities Exchange Act of 1934

Answer

The Securities Exchange Act of 1934 provides the legal foundation to regulate insider trading and other fraudulent market activities.

(CFM) Certified Fund Manager Practice Test