Practice Test Geeks(CEP) Certified Equity Professional Practice Test
← All CEP Flashcard Decks

Regulatory Compliance & Standards Flashcards

7 cards from real CEP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Regulatory Compliance & Standards flashcards as text

  1. Under Section 16(b) of the Securities Exchange Act, a 'short-swing profit' is recoverable if a purchase and sale occur within:

    Answer: 6 months

    Section 16(b) requires insiders to disgorge any profits from matching purchases and sales (or sales and purchases) within any six-month period.

  2. A company grants performance share units (PSUs) that vest based on TSR relative to peers. Under ASC 718, the fair value of these PSUs should be measured using:

    Answer: A Monte Carlo simulation

    Market conditions like relative TSR require a Monte Carlo simulation to capture the probability-weighted distribution of outcomes when measuring fair value under ASC 718.

  3. The Sarbanes-Oxley Act Section 304 allows the SEC to require a CEO or CFO to reimburse the company for incentive compensation if the company is required to restate financials due to:

    Answer: Material noncompliance with financial reporting requirements resulting from misconduct

    SOX Section 304 clawback applies when financial restatement results from material noncompliance with reporting requirements due to misconduct.

  4. Under the SEC's 2022 clawback rules (implementing Dodd-Frank Section 954), listed companies must recover erroneously awarded incentive compensation from covered executives within:

    Answer: The three fiscal years preceding the restatement

    The Dodd-Frank clawback rule requires recovery of excess compensation paid during the three fiscal years preceding the date the company is required to prepare the restatement.

  5. A 10b5-1 trading plan must be established when the insider:

    Answer: Does not possess material nonpublic information

    A valid 10b5-1 plan must be adopted at a time when the person is not aware of material nonpublic information to provide an affirmative defense against insider trading claims.

  6. Which IRS code section governs the $1 million deductibility limit on compensation paid to covered employees of public companies?

    Answer: IRC Section 162(m)

    IRC Section 162(m) limits the corporate tax deduction for compensation paid to covered employees (CEO, CFO, and three other highest-paid officers) to $1 million per year.

  7. Under IRC Section 409A, deferred compensation that fails to meet documentary or operational requirements is subject to immediate income inclusion plus an additional penalty tax of:

    Answer: 20%

    Section 409A imposes ordinary income tax plus a 20% additional penalty tax (plus interest) on deferred compensation that fails to comply with its requirements.