Deck 5: Professional Conduct and Regulation

Question 1

What financial institution type is insured for losses up to $100,000?

A)Credit Unions
B)Brokerage Companies
C)Insurance Companies
D)Trust Companies

Answer 1

Credit Unions

Question 2

What financial institution is associated with the McCarran-Ferguson Act?

A)Credit Unions
B)Brokerage Companies
C)Insurance Companies
D)Trust Companies

Answer 2

Insurance Companies

Question 3

What financial institution is the primary source for mortgage loans?

A)Credit Unions
B)Brokerage Companies
C)Insurance Companies
D)Trust Companies

Answer 3

Trust Companies

Question 4

What type of financial institution primary function is to trade stocks?

A)Credit Unions
B)Brokerage Companies
C)Insurance Companies
D)Trust Companies

Question 5

Who enforces and administers consumer protection laws?

A)Internal Revenue Service
B)Federal Trade Commission
C)Fair Credit Commission
D)Equal Credit Commission

Question 6

What Federal Trade Commission Statue protects individuals from lost or stolen credit card penalties?

A)Truth in Lending Act
B)Fair Credit Billing Act
C)Equal Credit Opportunity Act
D)Credit Protection Act

Question 7

What Federal Trade Commission Statue forces the disclosure of finance charges?

A)Truth in Lending Act
B)Fair Credit Billing Act
C)Equal Credit Opportunity Act
D)Credit Protection Act

Question 8

What Federal Trade Commission Statue focuses on discrimination?

A)Truth in Lending Act
B)Fair Credit Billing Act
C)Equal Credit Opportunity Act
D)Credit Protection Act

Question 9

Based on the CFP Board's Principles, which of the following is demanded by integrity?

A)Candor
B)Personal gain
C)Legitimate differences of opinion
D)Subordination of personal principles

Question 10

The CFP Board requires that certificants do what as part of Principle 3 - Competence?

A)Treat others as you would want to be treated
B)Be impartial
C)Keep each client's account as long as the client wants
D)Consult or refer to others when you do not know something

Question 11

Which of the following certificants is following the CFP Board's Principles?

A)Sam went to school with his client, William. Because of an old rivalry, Sam gives William advice that he knows is not accurate.
B)Natalie does not like her client, Bert, who wants advice on planning for the next year's tax return. She researches the U.S. Tax Code and gives him the information, plus the reference for later use.
C)Karen's assistant booked too many appointments for the day. Karen rushes through each client, giving them information without asking all of her normal questions. She is able to meet with all of her clients on that day.
D)Bill's clients, Sarah and Paul, divorce each other. Bill continues to keep both of them as clients without telling them.

Question 12

Which of the following is NOT a Principle outlined by the CFP Board?

A)Compassion
B)Confidentiality
C)Diligence
D)Fairness

Question 13

According to the CFP Board's Code of Conduct, which of the following must a certificant do?

A)Lend money to clients when necessary
B)Borrow money from clients
C)Combine a client's property with his or her employer's property
D)Return a client's property upon the client's request

Question 14

Which of the following is true regarding establishing a relationship with a client?

A)The scope of engagement must be in writing and signed by both the Certified Financial Planner and the client
B)The Certified Financial Planner should identify the scope of engagement alone, after consulting with the client
C)The Certified Financial Planner should let the client know all compensation arrangements
D)The scope of engagement cannot change after the initial establishment of the relationship

Question 15

What, according to the Financial Planning Practice Standards, is vitally important in determining what activities the financial planner should do for the client?

A)The practitioner's recommendations
B)The process of creating timelines
C)The process of mutually defining goals, needs, and priorities
D)The client's current financial state

Question 16

During analysis and evaluation of the client's information, the financial planner should seek to understand the client's financial situation. Then, determine how well the client's resources and current financial actions can meet the client's goals, needs, and priorities. This relates to three of the Code of Ethics principles. Which of the following is NOT one of those principles?

A)Objectivity
B)Competence
C)Diligence
D)Confidentiality

Question 17

Which of the following is true regarding developing a client's financial planning recommendations?

A)You should not consider the client's current course of action when developing financial planning recommendations.
B)You cannot provide a general recommendation; all recommendations must be specific.
C)Your recommendations may differ from other practitioners, as long as they reasonably meet the client's goals.
D)After considering recommendations, you can never request that a client change one of the mutually agreed goals.

Question 18

Which of the following is one of the CFP Board's Financial Planning Practice Standards?

A)The financial planning practitioner should alone define any monitoring responsibilities
B)The financial planning practitioner and the client shall mutually define the scope of the engagement before any financial planning service is provided
C)The financial planning practitioner shall obtain quantitative information and documents during the course of implementing the engagement
D)The financial planning practitioner shall evaluate the client's goals, needs, and priorities without considering the client's current financial situation

Question 19

What is the name of the committee that is responsible for reviewing and acting on possible violations of the Code of Ethics and Rules of Conduct?

A)Disciplinary and Ethics Commission
B)Certified Financial Planner Ethics Board
C)Board of Ethics Directors
D)Ethics Commission

Question 20

Which of the following is NOT grounds for discipline?

A)Any act that violates the Code of Ethics
B)Any act that violates the criminal laws of the United States
C)Failure to respond to a request by the CFP Board staff
D)Failure to meet a goal agreed to with a client

Question 21

If the DEC determines that suspension is required, what is the maximum period of suspension?

A)1 year
B)3 years
C)5 years
D)10 years

Question 22

When the CFP Board Counsel receives information requiring an investigation, what is the first step in the investigation?

A)The CFP Board Counsel calls the respondent, requesting records for the investigation
B)The CFP Board Counsel provides written notice to the respondent, giving 30 days to respond
C)The CFP Board Counsel temporarily suspends the respondent until the investigation is complete
D)The CFP Board Counsel provides written notice to the respondent, giving 20 days to respond

Question 23

Which of the following is NOT one of the forms of discipline?

A)Fines and penalties
B)A private letter of reproach
C)A public letter of reproach
D)Additional continuance of education

Question 24

When Congress passes a law that affects financial institutions, what is the first thing that happens after the President signs the law?

A)Regulated institutions make necessary changes to comply with the law
B)The Federal Reserve drafts regulations to show how the law should be implemented
C)The American public is invited to comment or make suggestions on the law
D)The Federal Reserve Banks train examiners on how to evaluate whether financial institutions comply with the law

Question 25

What of the following is NOT a requirement under the Equal Credit Opportunity Act?

A)No creditor can discriminate on the basis of race, color, religion, national origin, sex, marital status, or age
B)No creditor can retain a record of a credit application
C)All creditors must notify applicants of any actions they take on any applications
D)All creditors must supply applicants with a copy of any appraisal report that is used for a credit transaction

Question 26

Under the Home Mortgage Disclosure Act, financial institutions must publicize certain information concerning home purchase loans, home improvement loans, refinances, and applications. How often must the financial institution record reportable transactions?

A)Monthly
B)Quarterly
C)Bi-annually
D)Annually

Question 27

Which regulation requires anyone initiating a debit from a consumer's bank account to notify the consumer of the type of transaction?

A)Reserve Requirements of Depository Institutions
B)Disclosure and Reporting of CRA-Related Agreements
C)Electronic Fund Transfers
D)Collection of Checks and Other Items by Federal Reserve Banks and Funds Transfers through Fedwire

Question 28

What financial regulatory agency oversees firms that offer securities to the public?

A)Commodity Futures Trading Commission
B)Office of Thrift Supervision
C)Financial Industry Regulatory Authority
D)Office of the Comptroller of the Currency

Question 29

What does the Truth in Lending regulation do?

A)Ensure that financial institutions disclose certain information to potential borrowers
B)Ensure that potential borrowers are required to disclose certain information to financial institutions
C)Require that financial institutions supply denied borrowers with specific information as to why the application was denied
D)Ensure that borrowers can cancel any loan within 10 days of the loan

Question 30

What agency is responsible for ensuring that businesses act fairly in commerce?

A)Federal Commerce Commission
B)United States Treasury Department
C)Federal Bureau of Investigation
D)Federal Trade Commission

Question 31

If a national bank has investment discretion over funds held for investment, what can the bank NOT do with those funds?

A)Keep the funds uninvested for an unspecified length of time
B)Deposit the funds in a savings account in the same bank
C)Deposit the funds in a savings account of an affiliated deposit institution
D)Draw interest on any uninvested funds kept in a bank account

Question 32

How long must a national bank keep records of any fiduciary account?

A)5 years from the transaction date
B)5 years from the date the fiduciary account is closed
C)3 years from the transaction date
D)3 years from the date the fiduciary account is closed

Question 33

How often must a Certified Financial Planner/Investment Adviser, file Form ADV (registration form) with the SEC, reporting contact information and assets under your management?

A)Annually
B)Quarterly
C)Monthly
D)Weekly

Question 34

If there are limitations on your recommendation to a client based on business or regulatory requirements, what should you do?

A)Do what is best for the client, regardless of the requirements
B)Refer the client to another practitioner
C)Disclose any limitations to the client
D)Assume that the client knows the regulations and proceed with the best available options

Question 35

In which case does the CFP Board determine that a practitioner is a fiduciary?

A)When the client hires the practitioner in any capacity
B)When the practitioner performs financial planning activities
C)When the practitioner performs any activities other than financial planning activities
D)When the client explicitly gives the practitioner "fiduciary" status in writing