Investment Jobs Investment Compliance Test 2

Question 1

What is 'front-running' in securities markets?

Accepted Answer

A broker trading for their own account based on advance knowledge of pending client orders

Answer

Executing trades at the beginning of the trading session

Answer

Prioritizing institutional orders over retail orders

Answer

Placing orders before earnings announcements

Question 2

Under ERISA, what is the 'prudent expert rule' for plan fiduciaries?

Accepted Answer

Fiduciaries must act with the care, skill, prudence, and diligence of a knowledgeable person familiar with such matters

Answer

Fiduciaries must hire outside experts for all investment decisions

Answer

Only certified financial planners can manage ERISA plan assets

Answer

All ERISA investments must be approved by the Department of Labor

Question 3

What is a 'Suspicious Activity Report' (SAR) and when must it be filed?

Accepted Answer

A report filed with FinCEN when a transaction involves $5,000 or more and is suspected to involve illegal activity

Answer

A report filed with the SEC when unusual market volatility is detected

Answer

A quarterly compliance attestation filed with FINRA

Answer

A report filed with the FBI regarding potential securities fraud

Question 4

What is the Volcker Rule and which type of activity does it primarily prohibit?

Accepted Answer

It prohibits banks from proprietary trading and limits investments in hedge/PE funds

Answer

It prohibits banks from charging excessive fees; targets retail banking practices

Answer

It prohibits high-frequency trading; targets algorithmic traders

Answer

It prohibits short selling; targets market manipulation

Question 5

What is 'soft dollar' arrangement in investment management compliance?

Accepted Answer

Using client brokerage commissions to pay for research and services beyond trade execution

Answer

Paying commissions in foreign currency to avoid disclosure requirements

Answer

Reducing management fees in exchange for longer client lock-up periods

Answer

Fee-sharing arrangements between investment advisers and brokers

Question 6

What is 'best execution' obligation for broker-dealers?

Accepted Answer

The duty to seek the most favorable terms reasonably available when executing client orders

Answer

The requirement to execute all trades at the lowest possible commission

Answer

The requirement to use the fastest available trading technology

Answer

The obligation to execute trades only on registered exchanges