Question 1

A recent compliance review revealed that several branch officers are using obsolete loan application forms, which do not include disclosures related to credit insurance sales. Which of the following steps should be taken FIRST?

Accepted Answer

The first step should be to determine whether the branches use a separate document for required credit insurance sales disclosure. If they do, then the use of obsolete loan application forms may not be a violation. If they do not, then corrective action needs to be taken, and the branches should be instructed to destroy all obsolete forms and use the current versions. Contacting the bank's primary regulator should come after this initial investigation.

Question 2

Which of the following is (are) NOT covered by the regulation?

Accepted Answer

The regulation covers banks that sell insurance or refer customers to someone who sells insurance. However, it does not cover sales of insurance to nonconsumers or for purposes other than personal, family, or household use.

Question 3

What is the maximum number of government securities transactions a bank may have and still remain exempt from the Government Securities Act?

Accepted Answer

The maximum number of government securities transactions a bank may have and still remain exempt from the Government Securities Act is 499 per year. Therefore, choice D is the correct answer.

Question 4

Which of the following entities is exempt from the requirements of the Government Securities Act?

Accepted Answer

National banks that purchase and sell government securities only in their fiduciary capacity on behalf of clients in their trust department are exempt from the requirements of the Government Securities Act. Choice A, C, and D all involve banks that are engaged in activities that would subject them to the requirements of the Act.

Question 5

Generally, a financial institution is required to ascertain if securities certificates they have taken by pledge, transfer, or otherwise have been reported as missing, lost, counterfeit, or stolen. When is it NOT required to take such actions?

Accepted Answer

When securities certificates are received directly from the issuer or issuing agent at issuance, there is no need to ascertain if they have been reported as missing, lost, counterfeit, or stolen because they are brand new and have not yet been in circulation.

Question 6

Transactions with which of the following government securities would NOT subject a bank to the registration requirements of the Government Securities Act?

Accepted Answer

U.S. Savings Bonds are non-marketable securities and are not subject to the registration requirements of the Government Securities Act.

Question 7

A compliance officer receives a call from a loan officer who asks for advice on what she should do with a stock certificate (1,437 shares of IBM) from a new loan customer who wants to pledge it in support of a loan that has been approved at your bank. What should the compliance officer tell her FIRST?

Accepted Answer

The compliance officer should advise the loan officer to contact the Securities Information Center (SIC) to determine if the certificate has been reported as lost, counterfeit, or stolen. This is because banks have a responsibility to ensure that they are not accepting collateral that has been fraudulently obtained or reported missing. Once the status of the certificate has been confirmed, the loan officer can then decide how to proceed with retaining the original or providing a copy in the loan file.

Question 8

How long after discovery does a bank have to report any lost or missing securities when criminal activity is suspected?

Accepted Answer

Banks are required to report any lost or missing securities when criminal activity is suspected within one business day to law enforcement agencies and appropriate regulatory authorities.

Question 9

When is it permissible for a bank that is a government securities broker or dealer to refrain from filing a Form G-FIN-5 or a Form MSD-5 when an employee terminates the associated person status?

Accepted Answer

When the employee remains employed by the bank and the bank notifies its regulatory agency, the bank can refrain from filing a Form G-FIN-5 or a Form MSD-5 when an employee terminates the associated person status. This is because the employee is still associated with the bank and the bank has notified its regulatory agency about the change in status.

Question 10

In which of the following situations is the bank NOT required to report lost or stolen securities?

Accepted Answer

The bank is not required to report lost or stolen securities only when the securities have no CUSIP numbers and were expected from another financial institution. In all other situations, the bank is required to report lost or stolen securities to appropriate authorities.

Question 11

When is it possible for a bank to be exempted from compliance with some of the Government Securities Act custodial regulations?

Accepted Answer

The answer of When is it possible for a bank...

Question 12

In which of the following activities may a bank engage and NOT be considered a municipal securities dealer?

Accepted Answer

Buying securities for the bank's own account does not involve acting as a dealer or underwriter for municipal securities. However, underwriting, providing advice, and engaging in research for municipal securities would require the bank to register as a municipal securities dealer.

Question 13

Which of the following actions is NOT a custodial requirement of the Government Securities Act?

Accepted Answer

The answer of Which of the following actions is NOT...

Question 14

Which of the following elements is NOT required to be in a repurchase agreement between a bank that is a government securities dealer and a counterparty?

Accepted Answer

A repurchase agreement does not require a statement that the bank is a regulated government securities dealer. The other elements are necessary to clarify the terms and conditions of the agreement.

Question 15

A bank that is a government securities broker accepts money from a customer for the purchase of securities on Monday and does not purchase the securities by the end of the day on Tuesday. Does the bank have any responsibilities under the Government Securities Act?

Accepted Answer

The Government Securities Act requires that if a bank does not purchase the securities by the end of the next business day, it must deposit the customer's money into an account for the customer.

Question 16

Under what circumstances will a G-FINW (a withdrawal as a government securities dealer) become effective in less than 60 days?

Accepted Answer

According to FINRA Rule 9131, a G-FINW normally becomes effective no sooner than 60 days after the notice is filed. However, the regulatory agency (FINRA) may determine that a shorter time period is appropriate based on the circumstances of the withdrawal. The other options listed (A, C, and D) are not valid reasons for a G-FINW to become effective in less than 60 days.

Question 17

Jayne Logan, a loan officer at State National Bank, has recently recruited Mr. David Roberts as a new loan customer. She has known Mr. Roberts for 10 years and handled his lending transactions at another bank where she previously worked. As his first transaction with State National Bank, Mr. Roberts pledges stock that is traded on the NYSE. The stock is received directly from Mr. Roberts, who has his secretary personally deliver it to the bank. Is the bank required, in this instance, to send a lost or stolen securities inquiry regarding the stock? Why or why not?

Accepted Answer

The answer of Jayne Logan, a loan officer at State...

Question 18

A bank representative is selling insurance products in, or on behalf of, the bank. What may the representative NOT require the customer to do?

Accepted Answer

A bank representative may not require a customer to purchase insurance from an affiliate of the institution, as this could be considered a tying arrangement, which is generally prohibited under banking regulations.

Question 19

A recent audit revealed that the bank's personal trust division was failing to determine whether securities being accepted from new trust customers have been reported as lost or stolen. To address the root cause of this problem, what should the compliance officer do FIRST?

Accepted Answer

The first step in addressing the root cause of this problem is to review the policies and procedures for accepting securities in new personal trust relationships to ensure securities verification. This will ensure that the trust division is following the correct procedure in verifying securities and prevent the issue from occurring in the future. Inquiring with the SIC or contacting the bank's primary regulator can be done afterward to further address the issue. Retraining may also be necessary, but reviewing policies and procedures should be the first step.

Question 20

If a bank is a government securities broker or dealer, what are its responsibilities when it obtains a Form G-FIN-4 or an MSD-4 from an employee?

Accepted Answer

The answer of If a bank is a government securities...

Exam 1: Certified Regulatory Compliance Manager