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Series 30 study materials
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Series 30 practice questions

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Question 1Supervision and Branch Office Management

Under NFA rules, which individual must pass the Series 30 examination?

  1. An associated person who solicits retail customers from the main office
  2. A clerical employee who processes customer statements
  3. A floor broker who executes orders on the exchange floor
  4. The designated supervisor of an FCM branch office Correct answer.

Explanation

NFA rules require the person responsible for supervising a branch office of a futures commission merchant to be registered as a branch office manager and to pass the Series 30 examination. Individuals who only solicit customers are registered as associated persons and take the Series 3 examination.

Question 2Supervision and Branch Office Management

A futures firm opens a location where two associated persons solicit customer business and accept orders. How should this location be treated?

  1. A non-branch location because it is staffed by fewer than five associated persons
  2. A branch office because associated persons solicit customer business there Correct answer.
  3. A branch office only if the location is separately incorporated
  4. A non-branch location because no customer funds are held there

Explanation

A branch office is any location other than the main office where the firm conducts futures business with customers, including soliciting or accepting orders. The number of associated persons, the holding of customer funds, and the corporate form of the location do not determine branch office status.

Question 3Supervision and Branch Office Management

Under CFTC recordkeeping rules, how long must an FCM retain most books and records, and how must they be stored?

  1. Two years, with the first year readily accessible
  2. Five years, with the first two years readily accessible Correct answer.
  3. Three years, with all records readily accessible
  4. Five years, with all records kept only in off-site storage

Explanation

CFTC Rule 1.31 requires most books and records to be kept for five years, with the first two years readily accessible. After the first two years, records may be stored but must be produced promptly upon request.

Question 4Supervision and Branch Office Management

A branch manager learns that an associated person has been distributing a sales brochure that projects hypothetical returns. What is the supervisor's most appropriate action?

  1. Stop distribution until the material is reviewed and approved with required disclosures Correct answer.
  2. Forward the brochure to NFA and continue distribution while awaiting a response
  3. Allow distribution because hypothetical performance is permitted without restriction
  4. Permit distribution only to customers who have traded for at least one year

Explanation

NFA rules require promotional material to be approved by a qualified supervisor before it is used. Hypothetical or projected performance must be clearly labeled as such and accompanied by required disclosures, and the firm must retain copies of the material.

Question 5Supervision and Branch Office Management

An FCM receives a written complaint from a customer alleging unauthorized trading. What must the firm do?

  1. Forward it to the CFTC within 24 hours of receipt
  2. Discard it if the customer later closes the account
  3. Record, investigate, and retain a record of the complaint Correct answer.
  4. Act only if the customer files for arbitration

Explanation

NFA compliance rules require firms to supervise the handling of customer complaints; written complaints must be recorded, investigated, and the records retained for the required period. The obligation does not depend on whether the customer later closes the account or pursues arbitration.

Question 6Supervision and Branch Office Management

A newly hired employee has passed the Series 3 examination but registration with NFA is not yet effective. May the employee solicit customers?

  1. Yes, if the branch manager supervises the employee closely
  2. No, registration must be effective before soliciting Correct answer.
  3. Yes, for up to 30 days while the registration is pending
  4. No, unless the employee has a college degree

Explanation

NFA rules prohibit unregistered persons from soliciting customers or accepting orders. Passing a proficiency examination does not by itself make registration effective; the firm must file the registration and wait until it is effective.

Question 7Supervision and Branch Office Management

Which statement about fingerprinting of branch office personnel is correct?

  1. Fingerprinting is required only for employees who handle cash
  2. Fingerprinting is required only for main office staff
  3. Fingerprinting is required for registered APs and branch managers Correct answer.
  4. Fingerprinting is optional for branch managers

Explanation

NFA requires fingerprint cards for persons applying for registration, including associated persons and branch managers, and the results are submitted to NFA. The requirement is not limited to employees who handle cash or to main office staff.

Question 8Supervision and Branch Office Management

Which statement is correct about a branch office of an introducing broker that is guaranteed by a futures commission merchant?

  1. The branch office may solicit customers without a registered branch manager
  2. The IB must maintain its own net capital of $45,000
  3. The FCM is prohibited from reviewing the IB's sales literature
  4. The guarantee agreement is filed with NFA and the FCM assumes responsibility Correct answer.

Explanation

A guarantee agreement is filed with NFA, and the guarantor FCM assumes financial responsibility for the introducing broker's obligations. A guaranteed IB is generally exempt from net capital requirements, but the branch office still must have a registered branch manager and is subject to the FCM's supervisory oversight.

Question 9Supervision and Branch Office Management

Before an associated person may exercise discretion in a customer's account, the branch manager should confirm that:

  1. The account has a minimum balance of $100,000
  2. Written customer authorization and supervisory approval are in place Correct answer.
  3. The customer has signed a power of attorney but no supervisor approval is needed
  4. The AP has at least three years of futures experience

Explanation

CFTC and NFA rules require written authorization from the customer and written approval by a designated supervisor before discretionary trading begins. The approval must be obtained before any discretion is exercised.

Question 10Supervision and Branch Office Management

A branch office receives a customer check for margin. What is the proper handling of the check?

  1. Deposit it promptly into the segregated customer account Correct answer.
  2. Apply it to the AP's commission account
  3. Hold the check in the branch safe until month-end
  4. Deposit it into the firm's operating account and transfer it later

Explanation

Customer funds must be segregated and deposited promptly into the customer account; commingling customer funds with firm funds is prohibited. Delays in depositing customer funds can violate segregation requirements.

Question 11Supervision and Branch Office Management

A branch manager discovers that an AP has been making unauthorized trades in several accounts. The manager tells the AP to stop but takes no further action and does not report the conduct. Which statement best describes the manager's position?

  1. The manager is not liable because the AP acted without the manager's knowledge
  2. The manager is protected because a verbal warning was given
  3. The manager is liable only if the firm suffers a financial loss
  4. The manager faces potential liability for failing to supervise and report Correct answer.

Explanation

Branch managers have an affirmative duty to supervise, which includes investigating red flags and escalating misconduct. A verbal warning without investigation, documentation, or reporting may be inadequate and can lead to disciplinary action even if the manager did not personally trade.

Question 12Supervision and Branch Office Management

While reviewing employee trading accounts, a branch manager sees that an AP bought ten contracts immediately before entering a large customer buy order. What is the most likely supervisory concern?

  1. The AP made a profitable trade and should be commended
  2. The AP should be allowed to trade ahead of customers if profitable
  3. The AP may have engaged in front-running, which requires review Correct answer.
  4. The AP's trade was unrelated to the customer order

Explanation

Trading ahead of a customer order to profit from the expected price impact is front-running, a serious conflict of interest. Supervisors must review employee accounts and investigate suspicious timing relative to customer orders.

Question 13Supervision and Branch Office Management

An AP recommends a highly leveraged futures strategy to a retiree with limited income and no trading experience. How should the branch manager respond?

  1. Approve it if the customer signs a risk disclosure statement
  2. Question it and confirm the recommendation is suitable Correct answer.
  3. Approve it because futures are suitable for all investors
  4. Reject all trades by retirees

Explanation

NFA rules require associated persons to have a reasonable basis for recommendations and to consider the customer's financial situation, objectives, and experience. A signed risk disclosure does not cure an unsuitable recommendation.

Question 14Supervision and Branch Office Management

A supervisor notices an account with $50,000 equity generating $18,000 in commissions over three months through frequent in-and-out trading, with little change in the account's net position. This pattern most likely suggests:

  1. Normal market-making activity by the customer
  2. A need to increase trading to recover losses
  3. Possible churning, which warrants supervisory review Correct answer.
  4. A successful hedging strategy that requires no review

Explanation

High commissions relative to account equity, combined with frequent trading and no corresponding change in position, are red flags for churning or excessive trading. Supervisors should investigate and document their review.

Question 15Supervision and Branch Office Management

Which record must a branch office maintain for each customer order?

  1. Only the customer's verbal confirmation of the order
  2. An order ticket showing account, time, and terms Correct answer.
  3. The AP's personal notes describing the order
  4. A copy of the customer's tax return

Explanation

CFTC rules require records of orders that include account identification, the time the order was received, and the terms of the order. Verbal confirmations or personal notes alone do not satisfy the recordkeeping requirement.

Question 16Supervision and Branch Office Management

A branch office relocates to a new address but keeps the same branch manager. What action is required?

  1. Notify NFA so that branch office information stays current Correct answer.
  2. Notify only the landlord and the utility companies
  3. Close the office and register a new firm
  4. No action is required because the branch manager remains the same

Explanation

Firms must keep their NFA registration information current, including the addresses of branch offices. Failing to update this information can result in disciplinary action.

Question 17Supervision and Branch Office Management

Which best describes a branch manager's responsibility for compliance training?

  1. Training is required only after a violation occurs
  2. Ensure APs are trained on rules and procedures Correct answer.
  3. Only the main office compliance department is responsible
  4. Training is optional for experienced APs

Explanation

Supervisors are responsible for ensuring that personnel understand and follow applicable regulations and firm policies. Training is an ongoing supervisory tool and should not be treated as optional or purely reactive.

Question 18Supervision and Branch Office Management

How should a branch manager conduct review of email correspondence?

  1. Limited to emails sent to customers outside the state
  2. Periodic and documented for incoming and outgoing messages Correct answer.
  3. Delegated entirely to the APs who send the emails
  4. Performed only after a customer complaint is filed

Explanation

Supervisory procedures should include periodic review of correspondence to detect misrepresentations and unauthorized communications. The review should be documented to demonstrate that supervision occurred.

Question 19Supervision and Branch Office Management

A branch office manager who is frequently absent from the branch must:

  1. Allow the APs to self-supervise during absences
  2. Resign immediately and notify NFA
  3. Arrange qualified coverage or supervisory procedures Correct answer.
  4. Notify each customer in writing of the absences

Explanation

The duty to supervise continues during a manager's absence, so the manager must arrange for qualified supervisory coverage or effective procedures. Allowing associated persons to self-supervise is not adequate.

Question 20Supervision and Branch Office Management

Before a new customer account is opened, the branch manager should ensure that:

  1. Required customer information is collected and approved Correct answer.
  2. The customer deposits the maximum margin
  3. The customer has traded futures before
  4. The AP has known the customer for at least one year

Explanation

Firms must obtain essential customer information and follow their account approval procedures before opening an account. Prior trading experience or personal acquaintance with the AP is not a prerequisite.

Question 21Supervision and Branch Office Management

NFA requests documents from a branch office during an examination. What should the branch manager do?

  1. Destroy draft documents to avoid confusion
  2. Refuse until a court subpoena is issued
  3. Provide only documents that support the firm's position
  4. Cooperate fully and produce the requested records Correct answer.

Explanation

Firms must cooperate with NFA examinations and produce requested records. Selectively producing documents or destroying records can lead to serious sanctions, and NFA's examination authority does not require a court subpoena.

Question 22Supervision and Branch Office Management

A branch manager notices a customer frequently depositing large amounts of cash and wiring funds to unrelated third parties. What should the manager do?

  1. Escalate the activity to the AML compliance officer Correct answer.
  2. Ignore the activity if the customer is profitable
  3. Close the account without any further review
  4. Tell the customer the firm is reporting the activity

Explanation

Suspicious activity must be escalated under the firm's anti-money-laundering program, and the compliance officer determines whether a suspicious activity report is required. Tipping off the customer about a possible report is prohibited.

Question 23Supervision and Branch Office Management

An AP accepts a personal check from a customer's friend to fund the customer's account. What should the branch manager do?

  1. Accept it because funds are fungible
  2. Follow firm procedures for verification and documentation Correct answer.
  3. Deposit it into the AP's personal account first
  4. Refuse all third-party checks without exception

Explanation

Third-party deposits present anti-money-laundering and fraud risks, so firms should have procedures requiring verification and documentation of the source of funds. Neither automatic acceptance nor a blanket prohibition is the rule.

Question 24Supervision and Branch Office Management

Which practice would violate customer fund segregation?

  1. Using customer margin funds to pay the firm's office rent Correct answer.
  2. Depositing customer funds into a segregated account
  3. Transferring funds between customer accounts at the customer's request
  4. Withdrawing excess customer funds under CFTC rules

Explanation

Customer funds may not be used to pay the firm's obligations; commingling customer funds with firm funds is prohibited. Proper segregation and permitted withdrawals under CFTC rules are allowed.

Question 25Supervision and Branch Office Management

When a branch office closes, what should the firm do?

  1. Destroy all customer records at the closed office
  2. Notify NFA and properly handle records and accounts Correct answer.
  3. Keep the branch manager registered at the closed address
  4. Simply vacate the office without notifying anyone

Explanation

Firms must update NFA regarding branch office changes and ensure that customer records and accounts are handled properly. Records must be retained according to the applicable retention rules rather than destroyed.

Question 26Supervision and Branch Office Management

A futures commission merchant plans to open a new branch office that will solicit retail customers. Which requirement applies to the individual the firm designates as branch office manager?

  1. The individual must hold a general securities principal registration.
  2. The individual must be an officer or director of the futures commission merchant.
  3. The individual must be a licensed certified public accountant.
  4. The individual must be a registered AP qualified as a branch office manager. Correct answer.

Explanation

NFA rules require every branch office to have a designated manager who is registered as an associated person and who is qualified by passing the Series 30 examination in addition to the Series 3. Corporate title or an unrelated securities license does not satisfy the qualification requirement.

Question 27Supervision and Branch Office Management

Under NFA rules, how often must a member firm inspect each of its branch offices?

  1. Every three years, unless the office has a written customer complaint.
  2. Whenever the branch manager is replaced or the office relocates.
  3. At least once each calendar year. Correct answer.
  4. Only when NFA schedules an examination of the office.

Explanation

Each branch office must be inspected at least annually by a qualified person. The review covers the office's supervisory systems, recordkeeping, and handling of customer business.

Question 28Supervision and Branch Office Management

A branch office maintains customer order tickets and account records. What is the minimum retention period for these records?

  1. Five years, with the first two years readily accessible. Correct answer.
  2. Ten years, with all records kept on paper.
  3. Two years, kept in the branch office only.
  4. One year, with no accessibility requirement after that.

Explanation

Recordkeeping rules require that required books and records be retained for five years from the date the record is created, with the most recent two years readily accessible. Older records may be stored off-site but must still be produced on request.

Question 29Supervision and Branch Office Management

An associated person at a branch office wants to work as an insurance agent on weekends for an unrelated agency. What does proper supervision require?

  1. No action, because insurance sales are outside NFA jurisdiction.
  2. The AP may proceed provided the activity does not involve futures customers.
  3. The AP must obtain the firm's written approval after disclosing the activity. Correct answer.
  4. The AP must resign from the firm before accepting any outside work.

Explanation

Outside business activities must be disclosed to and approved in writing by the firm so that potential conflicts, time commitments, and liability exposure can be evaluated and documented. The approval should be recorded in the firm's books and records.

Question 30Supervision and Branch Office Management

A customer calls the branch to complain that an associated person executed trades without authorization. What should the branch office manager do first?

  1. Ask the AP to call the customer and settle the matter directly.
  2. Tell the customer the complaint must be submitted in writing to NFA.
  3. Log the complaint and refer it to firm compliance for investigation. Correct answer.
  4. Offer a partial refund if the customer withdraws the complaint.

Explanation

Complaints must be recorded and escalated to compliance, which investigates, responds to the customer, and determines whether regulatory reporting is required. Informal settlement or letting the accused AP handle the discussion undermines the supervisory record.

Question 31Supervision and Branch Office Management

An AP drafts a flyer advertising a new trading program and quoting hypothetical past results. Which step must occur before the flyer is used with prospective customers?

  1. It must be approved by a majority of the firm's associated persons.
  2. It may be used immediately if the results are labeled hypothetical.
  3. A qualified supervisor must review and approve it before distribution. Correct answer.
  4. It may be distributed once the AP gives a copy to the branch manager.

Explanation

Promotional material must be reviewed and approved in advance by a qualified supervisor who understands the rules governing hypothetical performance, required disclosures, and NFA filing obligations. Merely delivering a copy after the fact does not satisfy the approval requirement.

Question 32Supervision and Branch Office Management

The branch office manager will be away for a month and wants to hand off supervisory duties to another AP. Which approach satisfies regulatory expectations?

  1. Leaving the duties unassigned until the manager returns.
  2. A written designation of a qualified registered person. Correct answer.
  3. An email to branch staff announcing the temporary arrangement.
  4. Telephone instructions given to the AP on the first day of absence.

Explanation

Supervisory authority may be delegated only to a person who is registered and qualified for the function, and the arrangement should be documented in writing so that responsibility during the absence is unambiguous. Undocumented or informal handoffs leave the office effectively unsupervised.

Question 33Supervision and Branch Office Management

An AP tells the branch manager he wants to open a personal futures account at another firm. What is the appropriate response?

  1. The account requires the firm's prior written approval and ongoing review. Correct answer.
  2. Verbal permission from any registered representative is sufficient.
  3. The AP may open it if only small contracts are traded.
  4. The AP may trade anonymously so long as no customer accounts are involved.

Explanation

Employee and associated person trading accounts must be approved in advance and monitored so the firm can detect front-running, conflicts of interest, and misuse of nonpublic information. Written approval and periodic review create the audit trail supervisors need.

Question 34Supervision and Branch Office Management

What is expected of a branch office manager with respect to the firm's business continuity plan?

  1. Ensure branch staff are trained on the plan and can relocate operations. Correct answer.
  2. Keep the plan confidential from all branch personnel.
  3. Test the plan only after a disaster has occurred.
  4. Delegate responsibility for the plan entirely to the landlord.

Explanation

Business continuity planning requires that staff understand the plan, know their roles, and have contact information and alternate arrangements available. The branch manager is responsible for keeping that readiness current, not merely for holding a document on file.

Question 35Supervision and Branch Office Management

A branch office manager receives a request from an unaffiliated marketing vendor for the names and account balances of branch customers. What should happen?

  1. Do not release it without firm authorization and required consent. Correct answer.
  2. Provide the list because customer names are public information.
  3. Provide only the account balances and withhold the names.
  4. Release the data if the vendor promises not to resell it.

Explanation

Nonpublic personal information about customers may be shared only as permitted by the firm's privacy policy and applicable law, which generally requires privacy notices and, for sharing with nonaffiliated third parties, an opt-out or consent. Branch personnel must follow the firm's authorization process rather than making case-by-case judgments.

Question 36Supervision and Branch Office Management

When must a customer receive the futures and options risk disclosure statement?

  1. At or before the time the account is opened. Correct answer.
  2. Within 30 days after the first trade is executed.
  3. Only if the customer specifically requests a copy.
  4. Whenever the customer's equity falls below the maintenance level.

Explanation

The risk disclosure statement must be furnished to the customer and acknowledged at or before the time the account is opened, so the customer understands the risks before trading begins. It is not a follow-up document delivered after activity has started.

Question 37Supervision and Branch Office Management

Which responsibility does a branch office manager have under the firm's anti-money-laundering program?

  1. Filing suspicious activity reports directly with FinCEN without telling the firm.
  2. Granting customers exemptions from customer identification requirements.
  3. Escalating unusual activity to the firm's AML compliance officer. Correct answer.
  4. Approving wire transfers to high-risk jurisdictions personally.

Explanation

The branch applies the firm's customer identification procedures, monitors for suspicious activity, and escalates concerns to the AML compliance officer, who decides whether a report is filed. Filing and program-level decisions are centralized within the firm.

Question 38Supervision and Branch Office Management

A branch manager plans a two-week absence and asks an unregistered sales assistant to sign off on new account approvals. Which statement is correct?

  1. Only a registered, qualified supervisor may cover the duties. Correct answer.
  2. The assistant may sign off if the branch manager reviews the files afterward.
  3. The assistant may sign off if the customers are long-standing clients.
  4. The assistant may sign off because two weeks is a short period.

Explanation

Supervisory functions such as approving new accounts may be performed only by a person who is registered and qualified; they cannot be assigned to unregistered staff even temporarily, and after-the-fact review does not cure the deficiency.

Question 39Supervision and Branch Office Management

An AP who reports to the branch manager is the branch manager's sibling. How should the firm address supervision?

  1. The branch manager may supervise if the sibling signs a conflict waiver.
  2. No special handling is needed if the sibling's production is average.
  3. The sibling should be required to transfer to another firm.
  4. A different qualified supervisor should review the sibling's activity. Correct answer.

Explanation

Where a close personal relationship could impair supervisory objectivity, the firm should assign review of that person's activity to an independent qualified supervisor and document the arrangement. Production levels and private waivers do not resolve the underlying conflict.

Question 40Supervision and Branch Office Management

A firm's written supervisory procedures must address branch office supervision. Which element is essential?

  1. The name of the supervisor for each office and the reviews performed. Correct answer.
  2. The monthly profit-and-loss statement for each branch.
  3. A list of every customer who has complained in the past year.
  4. A schedule of branch office holiday closures.

Explanation

Written supervisory procedures must identify who is responsible for supervising each office and describe how supervision is carried out, including the nature and frequency of reviews, so responsibility is clear and verifiable. Financial statements and closure schedules do not establish a supervisory system.

Question 41Commodity Futures and Options Rules and Regulations (CFTC and NFA)

A futures commission merchant that is not also a registered securities broker-dealer must maintain adjusted net capital of at least which of the following amounts?

  1. $250,000
  2. $45,000
  3. $1,000,000 Correct answer.
  4. $5,000,000

Explanation

CFTC Rule 1.17 requires an FCM to maintain adjusted net capital equal to the greater of $1,000,000 or 8% of the total customer funds it is required to segregate. The $1,000,000 figure is the floor; a firm holding very large customer balances must hold more.

Question 42Commodity Futures and Options Rules and Regulations (CFTC and NFA)

Under CFTC Rule 1.31, books and records of a futures commission merchant must be kept for how long, and for what period must they be readily accessible?

  1. Five years, with the first two years readily accessible Correct answer.
  2. Two years, with the first year readily accessible
  3. Three years, with all records readily accessible for the full period
  4. Ten years, with the first five years readily accessible

Explanation

CFTC Rule 1.31 requires regulatory records to be retained for five years from the date the record was created. During the first two years of that period the records must be readily accessible for inspection by the CFTC and NFA.

Question 43Commodity Futures and Options Rules and Regulations (CFTC and NFA)

Before an FCM or introducing broker may exercise discretion over a customer's commodity interest account, the firm must do which of the following?

  1. Receive a power of attorney executed by the customer's attorney
  2. Verify that the customer has at least one year of trading experience
  3. Receive approval for the account from NFA
  4. Obtain the customer's written authorization Correct answer.

Explanation

CFTC Rule 166.2 permits discretionary trading only after the customer has given written authorization, and the account must be identified as discretionary in the firm's records. Oral instructions are not sufficient to establish discretionary authority.

Question 44Commodity Futures and Options Rules and Regulations (CFTC and NFA)

A customer instructs an associated person to execute simultaneous offsetting purchases and sales in the same contract month so that trading volume will appear on the market reports. This practice is best characterized as which of the following?

  1. Permissible if commissions are paid on both sides
  2. Permissible if the trades are reported to NFA
  3. Prohibited as a wash trade Correct answer.
  4. Permissible if two different floor brokers execute the orders

Explanation

Commodity Exchange Act Section 4c(a) and CFTC Rule 1.38 prohibit wash sales, meaning offsetting transactions executed for the same beneficial owner that create the appearance of trading but involve no change in market risk. Paying commissions or using separate brokers does not cure the violation.

Question 45Commodity Futures and Options Rules and Regulations (CFTC and NFA)

When an associated person's association with an NFA member firm ends, the member must file a notice of termination on the individual's behalf within which period?

  1. 60 days
  2. 30 days Correct answer.
  3. 90 days
  4. 10 days

Explanation

NFA registration rules require the member to file a Form 8-T with NFA within 30 days after an associated person ceases to be associated with the firm. Filing the notice promptly starts the clock on the individual's ability to transfer registration elsewhere.

Question 46Commodity Futures and Options Rules and Regulations (CFTC and NFA)

Under NFA Compliance Rule 2-29, sales literature and other promotional material prepared by a member firm must be which of the following?

  1. Filed with the CFTC within ten days of first use
  2. Used only in states where the member is registered
  3. Approved by a designated supervisory person before use Correct answer.
  4. Limited to the actual performance of the member's clients

Explanation

NFA Compliance Rule 2-29 makes the member responsible for all promotional material and requires that it be approved by a designated supervisory person before it is used. The member must also retain copies of the material and the approvals in its records.

Question 47Commodity Futures and Options Rules and Regulations (CFTC and NFA)

A commodity pool operator must deliver a disclosure document to a prospective pool participant and may not accept that person's funds until at least how long after delivery?

  1. 30 calendar days
  2. 7 calendar days
  3. 21 calendar days Correct answer.
  4. 14 calendar days

Explanation

CFTC Rule 4.21 requires delivery of the disclosure document and imposes a 21-calendar-day waiting period before the CPO may accept funds or otherwise bind the prospective participant. The waiting period gives the prospect time to review the document.

Question 48Commodity Futures and Options Rules and Regulations (CFTC and NFA)

Customer funds held by a futures commission merchant must be which of the following?

  1. Kept in segregated accounts separate from the firm's own funds Correct answer.
  2. Held in the firm's general operating account until month end
  3. Commingled with the firm's own funds to simplify accounting
  4. Deposited with an exchange clearinghouse in the firm's own name

Explanation

CFTC Rule 1.20 requires customer funds to be segregated from the firm's own funds and held in accounts designated as customer accounts. Commingling customer money with the firm's proprietary money is prohibited.

Question 49Commodity Futures and Options Rules and Regulations (CFTC and NFA)

An introducing broker that is not guaranteed by a futures commission merchant must maintain minimum adjusted net capital of at least which amount?

  1. $5,000
  2. $45,000 Correct answer.
  3. $1,000,000
  4. $250,000

Explanation

CFTC Rule 1.17 sets the minimum adjusted net capital for an introducing broker at $45,000, well below the FCM requirement. An IB that is guaranteed by an FCM is not subject to the minimum net capital requirement.

Question 50Commodity Futures and Options Rules and Regulations (CFTC and NFA)

Under CFTC Rule 1.39, dual trading by a floor broker is restricted in a designated contract market whose average daily trading volume meets or exceeds which threshold?

  1. 1,000 contracts
  2. 10,000 contracts Correct answer.
  3. 5,000 contracts
  4. 50,000 contracts

Explanation

CFTC Rule 1.39 prohibits dual trading in actively traded markets, defined by an average daily volume threshold of 10,000 contracts, subject to limited exceptions such as error trades and certain spread transactions. In those markets a floor broker may not fill a customer order while holding a proprietary order for the same contract.