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Series 3 Regulations questions and answers already solved 2024
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Series 3 Regulations questions and answers already solved 2024
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Series 3 Regulationsthe commodity futures modernization act of 2000 (CFMA) - correct answer
✔extended the CFTCs (Commodity Futures trading commission) life
indefinitely and established the legal framework for the next generation of
futures contracts
qualified eligible participants - correct answer ✔CFTC and SEC gives special
attention to investors with a net worth of at least $1 million.
-CFTC calls them qualified eligible participants when they participate in
commodity pools and the SEC calls them accredited investors
Major offences of governing exchanges - correct answer ✔1. executing
fictitious or false trade
2. manipulating or attempting to manipulate prices (spreading false
information or cohering the market)
3 attempting extortion (blackmail)
4. intending to default on a purchase or sale
5 for a clearing member failure to maintain min financial requirements
6. refusal to submit to arbitration or comply with the final arbitration award
minor offenses of governing exchanges - correct answer ✔1. dishonorable or
uncommercial conduct
2 conduct impairing the good name of the exchange
disputes arising from errors or improper conduct by member firms and or their
account executives are resolved by - correct answer ✔Arbitration committee
-floor brokers are financially responsible for their errors in order execution
,Registered Commodity Representative (RCR) - correct answer ✔-
designation given to account executives by the exchanges, as distinguished
from associated person AP) a CFTC designation
-an RCR conducts business on behalf of his employer firm
-to become an RCR an applicant must pass the NCFE and register with the
exchange within 2 years
-responsible for soliciting business, knowing the customer, collecting margin,
submitting proper orders, and recommending trades to their clients
the clearing member who sponsors the RCR is responsible for what - correct
answer ✔responsible to the exchange for the acts of the RCR, and must
report any infraction of rules or termination of employment of its RCRs
exceptions to restrictions on RCR activities - correct answer ✔-there is not a
ban on commission sharing among brokers
-profit sharing with customers is also permissible, providing prior written
permission is secured
Futures Commission Merchant (FCM) - correct answer ✔- refers to
individuals, corporations, partnerships, that are engaged in soliciting or
accepting orders for the purchase or sale of futures contracts
-they are the one who accepts money, securities, or property, to margin or
guarantee the trades that have been accepted.
duties of the FCM (brokerage house) - correct answer ✔-report daily
positions in excess of set reporting levels for all traders
- maintain their funds in accounts separate from customers funds. to do
otherwise is commingling
-NOT permit an wash sales or fictitious sales
, -prohibit a floor broker or electronic platform user from trading for his own
account while holding a customers order for the same trade, or taking the
opposite side of any trxn for one of his customers
-NOT do any churning
-timestamp each floor executed order within one min of receipt
-maintain trading records for 5 years
-file a form electronically for each month with both the CFTC and NFA
wash sale - correct answer ✔simultaneous purchase and sale of the same
futures contract on the same exchange
churning - correct answer ✔excessive trading that does not fulfill the clients
investment goals, but merely generates commissions
introducing broker (IB) - correct answer ✔any person not registered as an
associated person of an FCM who solicits or accepts orders for purchase or
sale of any futures contract, but who does not accept any money, securities,
or property to margin, guarantee, or secure any results trades or contracts.
adjusted net capital is calculated by - correct answer ✔adjusted net
capital=current assets - liabs - charges against capital
special account - correct answer ✔-an account which has a reportable
position in either futures or options
-each exchange must submit reports for each special account indicating
changes in the account
-special reports must be filed on each business day
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