Series 99 Operational Risk & Controls 2

Question 1

Which of the following BEST describes a 'key risk indicator' (KRI) in broker-dealer operations?

Accepted Answer

A forward-looking metric that signals potential operational risk before a loss event

Answer

KRIs are forward-looking metrics that provide early warning signals of rising operational risk exposure before losses materialize.

Question 2

A broker-dealer discovers that a back-office employee has been processing trades without proper supervisory approval for three months. This is BEST classified as:

Accepted Answer

Internal fraud risk

Answer

Unauthorized transactions by an internal employee without supervisory sign-off fall under internal fraud or unauthorized activity, a core category of operational risk.

Question 3

Under FINRA rules, a firm's supervisory control system must include which of the following?

Accepted Answer

Testing and verification that supervisory procedures are being followed

Answer

FINRA Rule 3120 requires firms to test and verify that their supervisory procedures are in place and being followed at least annually.

Question 4

Which control type is designed to DETECT an operational failure after it has already occurred?

Accepted Answer

Detective control

Answer

Detective controls identify problems or failures that have already occurred, such as reconciliations, audits, and exception reports.

Question 5

A broker-dealer's reconciliation process reveals a $50,000 discrepancy between the firm's books and the DTC's position records. The FIRST step the operations department should take is:

Accepted Answer

Investigate the source of the break and escalate per the firm's escalation policy

Answer

The first step is always to investigate the discrepancy to determine its cause and then escalate according to established firm procedures.

(Series 99) Operations Professional Exam Practice Test

(Series 99) Operations Professional Exam Practice Test

Series 99 Operational Risk & Controls 2