Chapter 7 Practice Question Answers
1. Answer: B. Fred must file Form 7-R for his sole proprietorship and Form 8-R for himself. Registered FCMs file a Form 101 with the CFTC when they carry reportable positions. Non-guaranteed IBs must file Form 1-FR-IB with the NFA semiannually to report their current financial condition.
2. Answer: A. A futures commission merchant must pay a one-time nonrefundable fee of $500 for each Form 7-R filed. Introducing broker, commodity pool operator, and commodity trading advisor applicants must pay $200 for each Form 7-R filed. The NFA requires an annual maintenance fee of $100 for each registration category as an FCM, IB, CPO, or CTA.
3. Answer: D. An $85 nonrefundable fee is applied to each Form 8-R filed for registering a principal or associated person.
4. Answer: B. The risk disclosure document must be made available to each customer and to the general public by posting a copy on its website. The document provides material information regarding its risks, creditworthiness, and its principal liabilities. The financial detail of a FOCUS report is not required in the risk disclosure.
5. Answer: C. While it is true that the risk disclosure statement discusses the risks of trading on margin, and that by signing the acknowledgement the customer is stating that he understands those risks, it is only upon signing the commodity customer agreement that the customer has actually agreed to maintain the required margin and be subject to margin calls and potential liquidation.
6. Answer: D. Items II and III are required of discretionary accounts and items I and IV arent. A discretionary account is one in which the member firm has the customer’s written authorization to trade in the customer’s account without permission before each order is placed. Trades must be made within a defined trading strategy and must be regularly reviewed by the firm. However, the NFA does not require firms to pre-approve its traders’ order