Practice Test Geeks(CFM) Certified Fund Manager Practice Test
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Regulatory Compliance & Ethical Standards Flashcards

7 cards from real CFM 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 & Ethical Standards flashcards as text

  1. A fund manager discovers that a trade error resulted in a gain that was allocated to the fund instead of the manager's error account. Ethical standards require the manager to:

    Answer: Report the error to compliance and correct the allocation appropriately

    Trade errors must be reported to compliance and corrected so that funds are neither advantaged nor disadvantaged by manager mistakes.

  2. The SEC's Regulation Best Interest (Reg BI) primarily applies to which type of financial professional?

    Answer: Broker-dealers making recommendations to retail customers

    Reg BI requires broker-dealers to act in the best interest of retail customers when making investment recommendations, imposing a standard higher than suitability.

  3. When allocating IPO shares across multiple client accounts, a fund manager must ensure the allocation is:

    Answer: Fair and consistent with the manager's pre-established allocation policy

    Fair allocation of IPO shares requires adherence to a pre-established, documented allocation policy that treats all eligible accounts equitably.

  4. Under the Dodd-Frank Act, advisers to private funds with over $150 million in private fund AUM must:

    Answer: Register with the SEC as investment advisers

    The Dodd-Frank Act eliminated the private adviser exemption for most private fund advisers with over $150M in private fund AUM, requiring SEC registration.

  5. Which practice violates the prohibition on market manipulation under SEC Rule 10b-5?

    Answer: Coordinating with others to artificially inflate a stock's price through matched trades

    Matched trades coordinated to artificially inflate prices constitute market manipulation, which is expressly prohibited under SEC Rule 10b-5.

  6. A fund manager's personal trading in securities held by the fund could violate which ethical principle?

    Answer: The duty of loyalty by placing personal interests ahead of client interests

    Personal trading in fund securities may violate the duty of loyalty if it allows the manager to profit at the expense of clients or creates conflicts of interest.

  7. The Form ADV Part 2 document, required by SEC rules, must be provided to advisory clients and contains:

    Answer: A narrative description of the adviser's business, fees, conflicts, and disciplinary history

    Form ADV Part 2 (the 'brochure') requires advisers to provide clients a narrative disclosure of business practices, fees, conflicts of interest, and disciplinary history.