WMS Regulatory Framework & Compliance 2

Question 1

Under Regulation Best Interest (Reg BI), broker-dealers must act in a client's best interest at the time of a recommendation. Which disclosure document is required to summarize this obligation?

Accepted Answer

Form CRS (Client Relationship Summary)

Answer

Form CRS is the mandated disclosure document that broker-dealers and investment advisers must provide to retail investors under Reg BI and related SEC rules.

Question 2

Which federal act requires wealth managers who custody client assets to undergo an annual surprise examination by an independent public accountant?

Accepted Answer

Investment Advisers Act of 1940

Answer

The Investment Advisers Act of 1940 and its custody rule (Rule 206(4)-2) require RIAs that have custody of client assets to arrange for annual surprise examinations.

Question 3

A client asks their wealth manager to move funds into an account held by a third party they have never met. Under BSA/AML rules, the most appropriate first step is to:

Accepted Answer

Conduct enhanced due diligence and assess for suspicious activity

Answer

Unusual instructions involving unknown third parties are red flags; the adviser must conduct enhanced due diligence and potentially file a Suspicious Activity Report (SAR) if warranted.

Question 4

FINRA Rule 4512 requires member firms to make reasonable efforts to obtain which information for each customer account?

Accepted Answer

Essential facts including investment objectives, financial situation, and risk tolerance

Answer

FINRA Rule 4512 mandates that firms collect essential customer information such as investment objectives, financial situation, and risk tolerance to know their customers.

Question 5

Which of the following best describes a 'material non-public information' (MNPI) breach in the context of wealth management compliance?

Accepted Answer

Trading on information about a merger obtained from a corporate insider before public announcement

Answer

Trading on MNPI obtained from insiders constitutes insider trading and violates Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5.

(WMS) Wealth Management Specialist Certification Practice Test

(WMS) Wealth Management Specialist Certification Practice Test

WMS Regulatory Framework & Compliance 2