Cannon III || Accurately Solved.
Trust department assets should be held under joint custodian and adequately controlled by an
appropriate accounting system and operating procedures. In addition, trust department assets
should be verified as part of the departmental audit required by federal and state regulators.
Which of the following are considered assets subject to control and audit verification? correct
answers Life insurance policies with no stated cash surrender value.
Free-riding occurs in directed accounts when customer trade large amounts of securities without
having or depositing the necessary funds or collateral in their account. Which of the following
procedures will effectively detect potential or actual occurrences? correct answers Periodically
review overdraft activity and follow up on trends of large overdrafts in directed accounts with
heavy trading volumes.
In evaluating controls over the securities trading function for fiduciary accounts, the trust auditor
should consider which of the following control objectives? correct answers Separation between
investment decisions, trade execution, and trade settlement.
When auditing the withdrawal of participants from collective investment funds, the trust auditor
should criticize which of the following arrangements? correct answers Withdrawals made in kind
as approved by a majority of the participants in violation of state law.
Appraisals of real property held in collective investment funds should be valued at market based
on an appraisal not older than: correct answers one year
All of the following statements about various types of risk are true EXCEPT? correct answers
Currency risk is the risk of the uncertainty of returns caused by the possibility of a major change
in the political or economic environment of a country.
The Federal Reserve Board has issued guidance on essential risk management practices for
private banking activities (SR 97-19). The paper was entitled, "Guidance on Sound Risk
Management Practices Governing Private Banking Activities." The Fed's guidance was prompted
by concerns that: correct answers banks, in an effort to attract private banking business and to
serve the wealthy, may expose themselves to reputation, legal risks, and short-change money
laundering controls.
You wish to recommend to management, via an audit report, that a trust company/risk
management function be implemented. From the list below, select the MOST pressing reason to
support this recommendation? correct answers The requirements imposed on senior management
, to certify the effectiveness of compliance programs as mandated by the Federal Deposit
Insurance Corporation Improvement Act of 1991.
When conducting an audit or compliance review of proprietary mutual funds held by qualified
plans for which the Bank is trustee, you express concern about the following information in the
prospectus which indicates a prohibited transaction has occurred: correct answers The bank
receives a 12b-1 fee.
When investing fiduciary funds in 12b-1 mutual funds as discretionary trustee, which of the
following would be performed by the bank? correct answers Provide disclosure of the 12b-1 fees
received by the trustee in the periodic statements provided to fiduciary account parties in interest.
Which of the following provides a fiduciary of a retirement plan relief from prohibited
transactions? correct answers A prohibited transaction exemption
A bank may act as an investment advisor to a mutual fund as one of its fiduciary powers under
12 USC 92a. When acting in this capacity, which situation would be considered self-dealing?
correct answers Investing discretionary trust assets in the mutual fund without specific authority
in the governing instrument, court order, local law, or written consent of all beneficiaries, but
rebate the pro rata portion of the advisory fees to the account.
In a national bank, the purchase of assets from the commercial department as investments for
trust accounts is prohibited by 12 CFR 9.12. Which of the following would constitute
unacceptable authorization for such a transaction? correct answers Ex-party court order
Which of the following stock items received for transfer would be classified as "non-routine"?
correct answers A security of an issue which within the previous 15 days was offered to the
public, pursuant to a registration statement effective under the Securities Act of 1933
When is a bank transfer agent required to notify the SEC and their primary regulatory agency
that they have not met turnaround requirements? correct answers If 75% of routine items did not
meet routine turnaround performance requirements for two consecutive months
Regular cash dividends reinvested as corpus for a simple irrevocable trust: correct answers Is an
improper conversion of trust income to corpus unless a timely beneficiary disclaimer has been
obtained.
When serving in the capacity of custodian for a personal trust account, the tax form that a bank
may be required to complete and provide to the client would be: correct answers Form 1099
Trust department assets should be held under joint custodian and adequately controlled by an
appropriate accounting system and operating procedures. In addition, trust department assets
should be verified as part of the departmental audit required by federal and state regulators.
Which of the following are considered assets subject to control and audit verification? correct
answers Life insurance policies with no stated cash surrender value.
Free-riding occurs in directed accounts when customer trade large amounts of securities without
having or depositing the necessary funds or collateral in their account. Which of the following
procedures will effectively detect potential or actual occurrences? correct answers Periodically
review overdraft activity and follow up on trends of large overdrafts in directed accounts with
heavy trading volumes.
In evaluating controls over the securities trading function for fiduciary accounts, the trust auditor
should consider which of the following control objectives? correct answers Separation between
investment decisions, trade execution, and trade settlement.
When auditing the withdrawal of participants from collective investment funds, the trust auditor
should criticize which of the following arrangements? correct answers Withdrawals made in kind
as approved by a majority of the participants in violation of state law.
Appraisals of real property held in collective investment funds should be valued at market based
on an appraisal not older than: correct answers one year
All of the following statements about various types of risk are true EXCEPT? correct answers
Currency risk is the risk of the uncertainty of returns caused by the possibility of a major change
in the political or economic environment of a country.
The Federal Reserve Board has issued guidance on essential risk management practices for
private banking activities (SR 97-19). The paper was entitled, "Guidance on Sound Risk
Management Practices Governing Private Banking Activities." The Fed's guidance was prompted
by concerns that: correct answers banks, in an effort to attract private banking business and to
serve the wealthy, may expose themselves to reputation, legal risks, and short-change money
laundering controls.
You wish to recommend to management, via an audit report, that a trust company/risk
management function be implemented. From the list below, select the MOST pressing reason to
support this recommendation? correct answers The requirements imposed on senior management
, to certify the effectiveness of compliance programs as mandated by the Federal Deposit
Insurance Corporation Improvement Act of 1991.
When conducting an audit or compliance review of proprietary mutual funds held by qualified
plans for which the Bank is trustee, you express concern about the following information in the
prospectus which indicates a prohibited transaction has occurred: correct answers The bank
receives a 12b-1 fee.
When investing fiduciary funds in 12b-1 mutual funds as discretionary trustee, which of the
following would be performed by the bank? correct answers Provide disclosure of the 12b-1 fees
received by the trustee in the periodic statements provided to fiduciary account parties in interest.
Which of the following provides a fiduciary of a retirement plan relief from prohibited
transactions? correct answers A prohibited transaction exemption
A bank may act as an investment advisor to a mutual fund as one of its fiduciary powers under
12 USC 92a. When acting in this capacity, which situation would be considered self-dealing?
correct answers Investing discretionary trust assets in the mutual fund without specific authority
in the governing instrument, court order, local law, or written consent of all beneficiaries, but
rebate the pro rata portion of the advisory fees to the account.
In a national bank, the purchase of assets from the commercial department as investments for
trust accounts is prohibited by 12 CFR 9.12. Which of the following would constitute
unacceptable authorization for such a transaction? correct answers Ex-party court order
Which of the following stock items received for transfer would be classified as "non-routine"?
correct answers A security of an issue which within the previous 15 days was offered to the
public, pursuant to a registration statement effective under the Securities Act of 1933
When is a bank transfer agent required to notify the SEC and their primary regulatory agency
that they have not met turnaround requirements? correct answers If 75% of routine items did not
meet routine turnaround performance requirements for two consecutive months
Regular cash dividends reinvested as corpus for a simple irrevocable trust: correct answers Is an
improper conversion of trust income to corpus unless a timely beneficiary disclaimer has been
obtained.
When serving in the capacity of custodian for a personal trust account, the tax form that a bank
may be required to complete and provide to the client would be: correct answers Form 1099
