Regulatory Compliance & Ethics Flashcards

Which NFA rule requires members to observe high standards of commercial honor and just and equitable principles of trade?

Answer: Rule 2-4

NFA Compliance Rule 2-4 is the general ethical standard for members and associates.

Which NFA rule primarily governs communications with the public and promotional material?

Answer: Rule 2-29

Rule 2-29 prohibits misleading promotional material and requires balanced risk disclosure.

Promotional material may NOT:

Answer: Promise or guarantee profits or freedom from loss

Promises of profit or statements minimizing risk are fraudulent and prohibited.

Hypothetical performance results used in promotional material must be accompanied by:

Answer: A prominent statement of the inherent limitations of hypothetical results

Hypothetical results require a cautionary statement because they were not actually traded.

A customer's account is opened with a written power of attorney in favor of a broker. This account is:

Answer: A discretionary account

Giving a third party authority to trade without order-by-order approval creates a discretionary account.

Before an individual may open a speculative futures account, the firm generally must provide:

Answer: A risk disclosure statement and obtain a signed acknowledgment

Customers must receive and acknowledge the risk disclosure statement before account opening.

The CFTC's whistleblower program awards individuals who provide original information leading to sanctions over $1 million:

Answer: 10% to 30% of the sanctions

The Dodd-Frank whistleblower program pays 10% to 30% of monetary sanctions exceeding $1 million.