Code Of Ethics Policy And Procedure! Compliance Training Quiz
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Test your understanding of the code of ethics policy and procedure in this compliance training quiz. There are a set of rules that are expected to be followed in financial institutions so that one can obtain certain types of finances. Using the quiz below, you will get to test your understanding of some of these finances. Try it out and refresh your understanding!
- 1.
You want to participate in a secondary offering. You can't participate if the fund:
- A.
Has ever shorted the stock
- B.
Has shorted the stock anytime in the previous year prior to the pricing date
- C.
Is net short the position at the time of the registration period
- D.
Has shorted the stock 5 days before the pricing date
Correct Answer
D. Has shorted the stock 5 days before the pricing dateExplanation
If the fund has shorted the stock 5 days before the pricing date, it means that they have borrowed and sold the stock with the expectation that its price will decrease. This indicates that the fund has a negative outlook on the stock and may not be a suitable investment for someone wanting to participate in a secondary offering.Rate this question:
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- 2.
You want to use an Expert Network. In order to comply with our policy you must:
- A.
Have a member of Compliance or Legal sit in on conversations with the experts
- B.
Maintain records of all calls and meetings with participants in expert networks
- C.
Request compliance policies and procedures followed by the expert network firm
Correct Answer
B. Maintain records of all calls and meetings with participants in expert networksExplanation
The correct answer is to maintain records of all calls and meetings with participants in expert networks. This is necessary in order to comply with the policy. Having a member of Compliance or Legal sit in on conversations with the experts and requesting compliance policies and procedures followed by the expert network firm are also important steps, but they are not mentioned in the question as requirements for compliance with the policy.Rate this question:
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- 3.
You are traveling and need to speak to Jeff or Dave regarding an order. You may send them a question via text message regarding the order if you then later call him or email him to place the order?
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Sending a text message regarding the order does not guarantee that you will be able to speak to Jeff or Dave later. The question states that you may send them a question via text message, but it does not specify that they will respond or be available to speak later. Therefore, it is not a reliable method to ensure communication with them for placing the order.Rate this question:
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- 4.
Any form of loan by an Employee to a limited partner or vendor or by a limited partner or vendor to an Employee is not allowed unless approved in advance by the Compliance Officer.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
This statement states that any form of loan between an employee and a limited partner or vendor, or vice versa, is not allowed unless it has been approved in advance by the Compliance Officer. Therefore, the correct answer is True, indicating that the statement is accurate.Rate this question:
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- 5.
For which of the following securities do you not need to obtain pre-approval to trade in your personal account?
- A.
Single name equity security
- B.
Options on currencies
- C.
Treasury bond
- D.
Interest in a hedge fund
Correct Answer
C. Treasury bondExplanation
Pre-approval is not required to trade in a Treasury bond in your personal account.Rate this question:
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- 6.
Some of your friends in the investment industry are interested in investing in PAR. You put together a spreadsheet showing your performance stats to send them all along with PAR's prospective LP presentation. This is permitted, as long as you let Compliance or Legal know you're sending out this information and the name of the prosepctive LPs.
- A.
True
- B.
False
Correct Answer
B. False -
- 7.
You indavertently become in possession of material non-public information ("MNPI") regarding a stock that you cover. You have logged countless hours building models and studying this stock. You are permitted to continue trading in this name as long as you do not make trade based on the MNPI.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
It is not true that you are permitted to continue trading in a stock for which you have material non-public information (MNPI), even if you do not make trades based on that information. Trading in a stock while in possession of MNPI is considered insider trading and is illegal.Rate this question:
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- 8.
Employees are required to report to Legal or Compliance immediately upon coming into possession of MNPI.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Employees are required to report to Legal or Compliance immediately upon coming into possession of MNPI. This means that if an employee obtains material non-public information (MNPI), they must inform the Legal or Compliance department right away. MNPI refers to any information that has not been publicly disclosed and could potentially impact the value of a company's securities. Reporting such information promptly ensures that the necessary actions can be taken to comply with legal and regulatory requirements, such as preventing insider trading or maintaining confidentiality.Rate this question:
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- 9.
You are in violation of federal securities laws if you disclose MNPI to another person who is:
- A.
A member of your family
- B.
A person who uses that information for his or her profit
- C.
A member of another hedge fund
- D.
A person who you know covers that stock
Correct Answer
B. A person who uses that information for his or her profitExplanation
If you disclose material nonpublic information (MNPI) to someone who uses that information for their own financial gain, you are in violation of federal securities laws. This means that if you share MNPI with someone and they use it to make a profit, you have broken the law. It is important to keep MNPI confidential and not share it with anyone who might use it for personal gain.Rate this question:
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- 10.
You receive a gift of a bottle of wine from a broker that has never given you anything in the past. You must receive consent from Compliance to keep the gift if:
- A.
You suspect the bottle of wine has a value of more than $300
- B.
You are friends with the broker that gave it to you
- C.
You use this broker frequently
- D.
You suspect the bottle of wine costs more than $100
Correct Answer
A. You suspect the bottle of wine has a value of more than $300 -
- 11.
A broker calls you to tell you he has three tickets to the Red Sox game that he can't use because his child is sick and offers them to you. You go to the game and take your wife and two kids. You are in compliance with the Code of Ethics.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Bringing your wife and two kids to the game with the tickets offered by the broker is a violation of the Code of Ethics. The Code of Ethics generally prohibits accepting gifts or benefits that could compromise one's professional judgment or create a conflict of interest. In this case, using the tickets for personal enjoyment and bringing family members along could be seen as a personal benefit that compromises professional integrity. Therefore, the statement is false.Rate this question:
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- 12.
In order for a personal trading account to qualify as an Exempted Account under our Code of Ethics, you must first obtain from the broker that manages the account a letter that describes the nature of the account and confirms your inability to directly or indirectly influence or control any activity, trading or investing in the account.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
To qualify as an Exempted Account under the Code of Ethics, a personal trading account must meet certain criteria. One of the requirements is obtaining a letter from the account's broker that explains the account's nature and confirms the account holder's inability to influence or control any activity, trading, or investing in the account. Therefore, the statement is true.Rate this question:
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- 13.
You are aware that another employee has MNPI and has not yet reported it to Compliance. The employee never reports having the MPNI to Compliance and because you didn't have MNPI you didn't report it either. It is later discovered that you in fact knew the other employee had MNPI and did not report it. You are now potentially subject to immediate dismissal from your job.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
If you are aware that another employee has material non-public information (MNPI) and you do not report it to Compliance, you are potentially subject to immediate dismissal from your job. This is because failing to report MNPI is a violation of ethical and legal obligations, and can lead to severe consequences. Therefore, the statement "True" is correct in this context.Rate this question:
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- 14.
In all circumstances, PAR has a duty to seek the lowest execution price for trades on behalf of the fund.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
PAR does not always have a duty to seek the lowest execution price for trades on behalf of the fund. While it is generally expected that PAR would seek the best possible execution price, there may be circumstances where other factors such as speed, size, or specific instructions from the fund may take precedence over obtaining the lowest price. Therefore, the statement is false.Rate this question:
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- 15.
Portfolio managers and traders are expressly prohibited from trading any security that does NOT appear on the:
- A.
Restricted List
- B.
Focus List
- C.
Investible Securities List
- D.
PAR's portfolio List
Correct Answer
C. Investible Securities ListExplanation
The correct answer is "Investible Securities List". This list includes securities that portfolio managers and traders are allowed to trade. It is specifically stated that they are prohibited from trading any security that does not appear on this list. Therefore, the Investible Securities List is the appropriate answer.Rate this question:
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Current Version
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Feb 18, 2024Quiz Edited by
ProProfs Editorial Team -
May 16, 2012Quiz Created by
Sarly