Series 3 – The National Commodities Futures Test Client Relationship Management 4

Question 1

A customer fails to meet a margin call by the deadline. What may the FCM do under the account agreement?

Accepted Answer

Liquidate positions to cover the deficiency

Answer

The account agreement allows the FCM to liquidate positions to protect itself from the deficiency.

Question 2

An AP enters a trade in a non-discretionary account without the customer's prior approval. This is best described as what?

Accepted Answer

Unauthorized trading

Answer

Trading without specific prior authority in a non-discretionary account is unauthorized trading.

Question 3

A customer asks the AP to guarantee that the account will not lose money. What is the proper response?

Accepted Answer

Decline, because guarantees against loss are prohibited

Answer

CFTC rules prohibit guaranteeing a customer against loss.

Question 4

Can a firm require a new retail customer to sign a pre-dispute arbitration agreement as a condition of opening an account?

Accepted Answer

No, the agreement cannot be mandatory

Answer

Under CFTC Rule 180.3, a customer cannot be required to agree to pre-dispute arbitration to open an account.

Question 5

Excessive trading in a discretionary account primarily to generate commissions is known as what?

Accepted Answer

Churning

Answer

Churning is trading excessive in size or frequency to benefit the broker through commissions.

Series 3 – The National Commodities Futures Test Practice Test