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CFE /
Exam-
/ /
Legal
/ /
Elements
/ /
of Fraud 3 Questions With Correct Answers
/ // // // // // //
What /
/is /
/churning? //- /
/CORRECT /
/ANSWERS(S)✔✔The /
/excessive /
/trading /
/of //
a/
/customer //account //to //generate //commissions //while //disregarding //the //customer's //interests.
What //are //suitability //violations //by //securities //broker-
dealers? //- //CORRECT //ANSWERS(S)✔✔When //securities //broker-
dealers /
/recommend //investments //or //investment //strategies //that //are //unsuitable //for //their //clients
What //is //the //"know //your //customer" //rule //for //securities //broker-
dealers? //- //CORRECT //ANSWERS(S)✔✔Securities //broker-
dealers /
/must /
/know /
/their /
/customer /
/financially /
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/to /
/effectively /
/service /
/the /
/customer's /
/account //and //to //minimize //the //risk //of //recommending //an //inappropriate //investment.
What /
/is /
/insider /
/trading? //- //CORRECT //ANSWERS(S)✔✔Trading //in //securities //based //on //material, //non-
public //information
What /
/is /
/futures /
/contract? //- /
/CORRECT /
/ANSWERS(S)✔✔A /
/legally /
/binding /
/commitment /
/to /
/make /
/delivery /
/(i.e., //sell) //or //to //take //delivery //of //(i.e. //buy) //a //given //quantity //and //quality //of //a //commodity
//at //a //specified //price //and //on //a //specified //future //date
What /
/is /
/stock? //- /
/CORRECT /
/ANSWERS(S)✔✔An //equity //that //represents //a //right //of //ownership //in //an //enterprise.
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What /
/are /
/bonds /
/(in //
a/
/securities /
/context)? //- /
/CORRECT //ANSWERS(S)✔✔Securities //that //have //a //stated //interest //rate //that //is //paid //semi-
annually //until //maturity.
What /
/is /
/an /
/option /
/contract? //- /
/CORRECT //ANSWERS(S)✔✔A //contract //that //confers //the //right- //not //an //obligation-
to /
/the /
/option /
/buyer //to //take //delivery //of //(i.e., //buy) //and //imposes //obligations //on //the //option //seller
What //are //certificates //of //deposit //(CD's) //- //CORRECT //ANSWERS(S)✔✔Interest-
bearing /
/investment /
/products /
/that //provide //limited //access //to //the //money //invested //and //a //modest //rate //of //interest.
What /
/is //
a/
/general /
/partnership? //- /
/CORRECT //ANSWERS(S)✔✔An //association //of //2 //or //more //persons //acting //as //co-
owners //in //a //business //for //profit.
CFE /
Exam-
/ /
Legal
/ /
Elements
/ /
of Fraud 3 Questions With Correct Answers
/ // // // // // //
What /
/is /
/churning? //- /
/CORRECT /
/ANSWERS(S)✔✔The /
/excessive /
/trading /
/of //
a/
/customer //account //to //generate //commissions //while //disregarding //the //customer's //interests.
What //are //suitability //violations //by //securities //broker-
dealers? //- //CORRECT //ANSWERS(S)✔✔When //securities //broker-
dealers /
/recommend //investments //or //investment //strategies //that //are //unsuitable //for //their //clients
What //is //the //"know //your //customer" //rule //for //securities //broker-
dealers? //- //CORRECT //ANSWERS(S)✔✔Securities //broker-
dealers /
/must /
/know /
/their /
/customer /
/financially /
,//////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
/to /
/effectively /
/service /
/the /
/customer's /
/account //and //to //minimize //the //risk //of //recommending //an //inappropriate //investment.
What /
/is /
/insider /
/trading? //- //CORRECT //ANSWERS(S)✔✔Trading //in //securities //based //on //material, //non-
public //information
What /
/is /
/futures /
/contract? //- /
/CORRECT /
/ANSWERS(S)✔✔A /
/legally /
/binding /
/commitment /
/to /
/make /
/delivery /
/(i.e., //sell) //or //to //take //delivery //of //(i.e. //buy) //a //given //quantity //and //quality //of //a //commodity
//at //a //specified //price //and //on //a //specified //future //date
What /
/is /
/stock? //- /
/CORRECT /
/ANSWERS(S)✔✔An //equity //that //represents //a //right //of //ownership //in //an //enterprise.
, //////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
What /
/are /
/bonds /
/(in //
a/
/securities /
/context)? //- /
/CORRECT //ANSWERS(S)✔✔Securities //that //have //a //stated //interest //rate //that //is //paid //semi-
annually //until //maturity.
What /
/is /
/an /
/option /
/contract? //- /
/CORRECT //ANSWERS(S)✔✔A //contract //that //confers //the //right- //not //an //obligation-
to /
/the /
/option /
/buyer //to //take //delivery //of //(i.e., //buy) //and //imposes //obligations //on //the //option //seller
What //are //certificates //of //deposit //(CD's) //- //CORRECT //ANSWERS(S)✔✔Interest-
bearing /
/investment /
/products /
/that //provide //limited //access //to //the //money //invested //and //a //modest //rate //of //interest.
What /
/is //
a/
/general /
/partnership? //- /
/CORRECT //ANSWERS(S)✔✔An //association //of //2 //or //more //persons //acting //as //co-
owners //in //a //business //for //profit.
