Series 24 Domain 4: Supervision of Trading and Market Making Activities Welcome to your Series 24 Domain 4: Supervision of Trading and Market Making Activities 1. Series 24: Supervision of Trading and Market Making Activities In market making activities, what is the primary responsibility of a supervisor when managing a trader who continuously fails to update bid-ask spreads according to market conditions? Re-train the trader on market fundamentals Terminate the trader's employment Ignore as long as overall profitability is not affected Temporarily suspend the trader's market making ability None 2. Series 24: Supervision of Trading and Market Making Activities What should a supervisor do if they discover a trader engaging in front running customer orders? Monitor the trader's future transactions more closely Report the activity to FINRA and take disciplinary action Advise the trader informally to cease such activities Assess whether the front running was profitable before deciding on action None 3. Series 24: Supervision of Trading and Market Making Activities Which of the following is the most appropriate action for a supervisor when a trader consistently fails to meet the required spread quota? Issue a formal warning and monitor the trader's performance Decrease the trader's base salary Re-assign the trader to another department Provide performance coaching and possibly adjust the quota None 4. Series 24: Supervision of Trading and Market Making Activities What is the required procedure if a discrepancy is found in the record of executed trades versus reported trades by a trader? Immediately report to the trade surveillance committee Conduct an internal audit of the specific trader's transactions Ignore unless the discrepancy recurs Adjust the trader's records to match the reported trades None 5. Series 24: Supervision of Trading and Market Making Activities What is the appropriate supervisory response when proprietary trading results consistently deviate significantly from risk management guidelines? Review and adjust the trading strategies and risk parameters Increase the risk limits to accommodate new trading levels Dismiss the trader responsible for the deviations Approve the deviations as long as they are profitable None 6. Series 24: Supervision of Trading and Market Making Activities If a trader uses non-public information to influence market prices, what is the first action a supervisor should take? Consult with the legal department for appropriate action Reprimand the trader to discourage future incidents Review the profitability of the trades before deciding Ignore the issue unless the trader repeats the offense None 7. Series 24: Supervision of Trading and Market Making Activities What must a supervisor do if they detect an anomaly in algorithmic trading patterns that could suggest manipulative practices? Shut down the trading algorithm immediately Analyze the trading patterns with the IT department Report the anomaly to regulatory authorities without further investigation Wait to see if the anomaly corrects itself None 8. Series 24: Supervision of Trading and Market Making Activities In the context of market making, how should a supervisor respond to consistent complaints from customers about slippage in their trade executions? Investigate the execution processes and compliance with best execution standards Tell customers that slippage is a normal part of trading Reduce the trader's bonus based on customer satisfaction Ignore the complaints as long as the firm remains profitable None 9. Series 24: Supervision of Trading and Market Making Activities When a trading error occurs that affects multiple accounts, what should be the first step a supervisor takes? Determine the extent of the impact and correct the error Notify all affected clients immediately Disciplinary action against the trader who made the error Cover the losses using the firm's funds without notifying clients None 10. Series 24: Supervision of Trading and Market Making Activities What is the most appropriate supervisory action if a supervisor finds that a trader has been misleading clients about the potential returns of certain trades? Immediately suspend the trader pending further investigation Offer the clients a discount on future trades Document the incident and provide corrective training Reassign the trader to another department without client contact None 11. Series 24: Supervision of Trading and Market Making Activities How should a supervisor handle a situation where a trader is consistently not adhering to the firm's established trading limits? Adjust the limits to better align with the trader's strategies Implement stricter monitoring and reporting requirements for the trader Immediately report the trader to regulatory authorities Encourage other traders to adopt similar strategies if profitable None 12. Series 24: Supervision of Trading and Market Making Activities In response to discovering unauthorized trading activities, what is the initial step a supervisor must take? Reprimand the trader involved Confirm the details and scope of the unauthorized activities Notify the affected clients immediately Adjust the trading strategy to include the unauthorized activities None 13. Series 24: Supervision of Trading and Market Making Activities When a trading pattern suggests potential wash trading, what should the supervisor's first response be? Disregard as long as it does not affect the firm's net positions Initiate an internal investigation to confirm the activities Encourage the trader to continue if it enhances liquidity Report to the SEC as a precautionary measure None 14. Series 24: Supervision of Trading and Market Making Activities If a supervisor observes a pattern of trade allocations favoring certain accounts over others, what is the most appropriate course of action? Dismiss the issue unless client complaints arise Redistribute the favorable trades evenly among all clients Conduct a thorough review of trade allocation practices Increase incentives for traders to balance future allocations None 15. Series 24: Supervision of Trading and Market Making Activities What action is required when a supervisor identifies that traders are not maintaining adequate documentation of their trade justifications? Overlook minor documentation errors if trades are profitable Mandate immediate retraining on compliance and documentation requirements Reduce the traders' trading limits until documentation improves Promote the traders to encourage better performance None 16. Series 24: Supervision of Trading and Market Making Activities In the scenario where a trader executes trades that consistently cause significant market impact, what should the supervisor do? Instruct the trader to increase the size of the trades further Ignore the impact as long as the trades are within risk limits Analyze the trades to determine if they violate market manipulation rules Congratulate the trader for their aggressive market stance None 17. Series 24: Supervision of Trading and Market Making Activities What should a supervisor do if they notice that a trader is deliberately delaying the execution of client orders to benefit from price movements? Monitor the situation to determine if it happens repeatedly Adjust the execution algorithm to prevent future delays Initiate disciplinary proceedings against the trader Increase surveillance on all traders to prevent such behavior None 18. Series 24: Supervision of Trading and Market Making Activities In cases where a supervisor finds out about unauthorized speculative trading by a trader, what is the most immediate response? Reevaluate the firm's risk management strategies Record the incident for future reference Suspend the trader to investigate the breach Assess the impact on market conditions before taking action None 19. Series 24: Supervision of Trading and Market Making Activities When it is discovered that a trader has not been adhering to the SEC's Fair Dealing Rule in executing client orders, what is the most effective response? Schedule training sessions for all traders on regulatory compliance Implement automated systems to monitor adherence Reassign the trader to a non-trading role Review and enhance compliance protocols None 20. Series 24: Supervision of Trading and Market Making Activities What is required of a supervisor when they observe that traders are using outdated market data for decision-making? Schedule immediate system upgrades Organize a meeting to discuss the potential impacts Overlook the issue if it does not impact overall profitability Train traders on the importance of using current data None 21. Series 24: Supervision of Trading and Market Making Activities When a trader consistently fails to report all required transaction details to the trade reporting facility, what is the correct supervisory action? Implement a more robust compliance monitoring system Apply a financial penalty to the trader for non-compliance Conduct a review of all the trader's past reports Both A and C None 22. Series 24: Supervision of Trading and Market Making Activities What action should a supervisor take if they detect that a trader is engaging in "painting the tape" to create a misleading appearance of trading activity? Monitor the trader's activities to gather more evidence Report the activity to the compliance department and regulatory authorities Warn the trader informally to cease the activity Review the firm's trading policies to understand the lapse None 23. Series 24: Supervision of Trading and Market Making Activities When it is discovered that a trader has falsified trade documentation to hide losses, what is the most critical action for the supervisor? Implement more stringent trade documentation protocols Report the trader to the compliance department for further action Arrange for an immediate audit of all recent trades by the trader Offer the trader a chance to explain the discrepancies None 24. Series 24: Supervision of Trading and Market Making Activities What should a supervisor do if they discover that a trader has been engaging in unauthorized after-hours trading? Disregard the actions as long as they do not affect the firm's opening positions Monitor the trader's activities for a short period to gather more information Immediately suspend the trader and review all after-hours trades Encourage the trader to limit after-hours activities to urgent situations None 25. Series 24: Supervision of Trading and Market Making Activities How should a supervisor react to finding out a trader is not segregating client assets as required by regulation? Immediately retrain the trader on proper asset segregation Review all client accounts managed by the trader for further non-compliance Issue a formal warning and increase supervision Report the non-compliance to the compliance officer and initiate an audit None 26. Series 24: Supervision of Trading and Market Making Activities If a supervisor finds that a trader is using a high-risk strategy not approved by the firm, what should be the immediate action? Document the strategy for review by the risk management team Allow the strategy temporarily to see if it yields high returns Order the trader to cease using the strategy immediately Discuss the strategy in a team meeting to evaluate its risks and benefits None 27. Series 24: Supervision of Trading and Market Making Activities What is the correct supervisory response when a trader is found to have repeatedly ignored stop-loss orders set by clients? Reevaluate the electronic trading systems for faults Conduct an interview with the trader to understand the reasons Issue a disciplinary action and retrain the trader on adherence to client instructions Increase the frequency of compliance audits on all trading activities None 28. Series 24: Supervision of Trading and Market Making Activities What is the recommended supervisory action if a pattern of late reporting of trades is observed among traders? Send reminders about timely reporting requirements Overlook the issue if the trades are profitable Conduct training sessions on the importance of timely reporting Initiate an audit of all recent trades and enforce compliance None 29. Series 24: Supervision of Trading and Market Making Activities In cases where a supervisor finds out about unauthorized speculative trading by a trader, what is the most immediate response? Reevaluate the firm's risk management strategies Record the incident for future reference Suspend the trader to investigate the breach Assess the impact on market conditions before taking action None 30. Series 24: Supervision of Trading and Market Making Activities In response to discovering unauthorized trading activities, what is the initial step a supervisor must take? Reprimand the trader involved Confirm the details and scope of the unauthorized activities Notify the affected clients immediately Adjust the trading strategy to include the unauthorized activities None 1 out of 30 Time is Up! Time's up
