Series 3 – The National Commodities Futures Test Client Relationship Management 5

Question 1

A corn farmer wants to lock in a selling price for the upcoming harvest. Which position suits this goal?

Accepted Answer

Short corn futures

Answer

A short hedge via selling futures protects against falling prices for a producer.

Question 2

Which type of participant is generally exempt from speculative position limits when positions qualify?

Accepted Answer

Bona fide hedgers

Answer

Bona fide hedging positions are exempt from federal speculative position limits.

Question 3

A retired customer with modest savings and low risk tolerance asks about highly leveraged speculative positions. What should the AP emphasize?

Accepted Answer

That only risk capital should be used and suitability must be considered

Answer

Customers should only speculate with risk capital, and recommendations must fit their profile.

Question 4

A customer requests a wire of funds to an unrelated third party with no clear business reason. What should the AP do?

Accepted Answer

Treat it as a possible red flag and escalate to compliance

Answer

Unusual third-party wires are AML red flags to escalate internally, without tipping off the customer.

Question 5

When must a futures firm generally provide an initial privacy notice to a new individual customer?

Accepted Answer

At the time the customer relationship is established

Answer

CFTC privacy rules require an initial notice when the customer relationship begins.

Series 3 – The National Commodities Futures Test Practice Test