Regulatory Compliance & Ethics Flashcards
7 cards from real Series 3 – The National Commodities Futures Test practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Regulatory Compliance & Ethics flashcards as text
Which action best satisfies the 'know your customer' obligation when opening a futures account?
Answer: Obtaining the customer's financial, investment experience, and risk information before recommending trades
Firms must learn customer essential facts to judge suitability and risk disclosure.
An associated person may be denied registration if the individual:
Answer: Is subject to statutory disqualification, such as a felony fraud conviction
Statutory disqualifications like fraud convictions can bar or condition registration.
A broker cross trades two customer orders by matching them off the exchange without open and competitive execution. This is generally:
Answer: Prohibited non-competitive trading
Futures trades must be executed openly and competitively on the exchange except for narrow permitted exceptions.
Which statement about order tickets is correct?
Answer: They must be time-stamped and accurately record the customer order
Accurate time-stamping prevents abuse such as cherry-picking and allocation favoritism.
Allocating profitable trades from a block order to the broker's own account and losing trades to customers is:
Answer: Cherry-picking, a fraudulent practice
Post-execution allocation must be fair; selecting winners for oneself is fraud.
A customer disputes a trade with an NFA member. The customer may pursue:
Answer: NFA arbitration, if it is not foreclosed by an agreement
NFA offers an arbitration forum for customer-member disputes, and customers cannot be forced into it as a condition of opening an account.
The primary purpose of the Commodity Exchange Act is to:
Answer: Deter market manipulation, protect customers, and ensure market integrity
The CEA aims to prevent price manipulation and fraud and protect market participants.
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Sources & references
Exam facts on this page (fees, format, dates, passing scores) are checked against these official sources; the date is our last check. Editorial policy
- finra.org — Score release, test dates, test delivery, fees, exam format, passing score · verified Oct 2026
- nfa.futures.org — Eligibility, score validity · verified Oct 2026