Series 99 Operational Risk & Controls 3

Question 1

Under SEC Rule 17a-3, a broker-dealer is required to maintain which of the following records?

Accepted Answer

Blotters, ledgers, order tickets, and customer account records

Answer

SEC Rule 17a-3 requires broker-dealers to create and maintain specific records including blotters, ledgers, memoranda of orders, and customer account information.

Question 2

Which operational risk scenario represents a 'vendor or third-party risk'?

Accepted Answer

A clearing firm's technology outage delaying settlement for a correspondent broker-dealer

Answer

Vendor risk arises when a third-party service provider's failure disrupts the firm's operations, such as a clearing firm outage affecting correspondents.

Question 3

The Basel II/III operational risk framework defines operational risk as losses resulting from which of the following?

Accepted Answer

Inadequate or failed internal processes, people, systems, or external events

Answer

The Basel Committee defines operational risk as the risk of loss from inadequate or failed internal processes, people, systems, or external events, excluding strategic and reputational risk.

Question 4

A broker-dealer experiences a fat-finger trade error where a trader entered 1,000,000 shares instead of 10,000. Which control would MOST directly prevent this type of error?

Accepted Answer

Pre-trade order size limits and validation checks

Answer

Pre-trade controls such as order size limits and validation checks prevent erroneous orders from reaching the market before execution.

Question 5

SEC Rule 17a-4 primarily governs:

Accepted Answer

The preservation and retention period for required books and records

Answer

SEC Rule 17a-4 specifies the retention periods and storage requirements for the records that broker-dealers are required to create under Rule 17a-3.

(Series 99) Operations Professional Exam Practice Test

(Series 99) Operations Professional Exam Practice Test

Series 99 Operational Risk & Controls 3