PAR: Compliance Training Test! Trivia Quiz

1. Employees should inform the Chief Compliance Officer immediately if they become aware that an LP in the Fund is an officer of a public company.

True

False

Employees should inform the Chief Compliance Officer immediately if they become aware that an LP in the Fund is an officer of a public company. This is because officers of public companies may have access to non-public information that could potentially create conflicts of interest or insider trading concerns. By informing the Chief Compliance Officer, the company can ensure that appropriate measures are taken to mitigate any potential risks and maintain compliance with relevant regulations.

Explanation

Employees should inform the Chief Compliance Officer immediately if they become aware that an LP in the Fund is an officer of a public company. This is because officers of public companies may have access to non-public information that could potentially create conflicts of interest or insider trading concerns. By informing the Chief Compliance Officer, the company can ensure that appropriate measures are taken to mitigate any potential risks and maintain compliance with relevant regulations.

2. Which of the following is correct?

PAR maintains a books and records retention matrix

PAR retains all emails and instant messages sent to or from a PAR-hosted address

All of the above

The correct answer is "All of the above". This means that all of the statements mentioned in the options are correct. According to the given options, PAR maintains a books and records retention matrix, employees must consult with the Compliance Officer before disposing or destroying documents retained pursuant to Rule 204-2 of the Investment Adviser Act of 1940, and PAR retains all emails and instant messages sent to or from a PAR-hosted address. Therefore, all of these statements are correct.

Explanation

The correct answer is "All of the above". This means that all of the statements mentioned in the options are correct. According to the given options, PAR maintains a books and records retention matrix, employees must consult with the Compliance Officer before disposing or destroying documents retained pursuant to Rule 204-2 of the Investment Adviser Act of 1940, and PAR retains all emails and instant messages sent to or from a PAR-hosted address. Therefore, all of these statements are correct.

3. PAR prohibits the use of expert networks.

True

False

The statement is false because PAR (Public Accounting Report) does not prohibit the use of expert networks. Expert networks are a common resource used by professionals in various fields to gain insights and knowledge from industry experts. Therefore, the use of expert networks is allowed and not prohibited by PAR.

Explanation

The statement is false because PAR (Public Accounting Report) does not prohibit the use of expert networks. Expert networks are a common resource used by professionals in various fields to gain insights and knowledge from industry experts. Therefore, the use of expert networks is allowed and not prohibited by PAR.

4. All employees must:

Not damage the efficient, fair and orderly operation of the securities markets or investors’ confidence

Place the interests of the Fund first

All of the above

The given correct answer is "All of the above." This means that all employees must adhere to all three statements mentioned in the question. They must not damage the efficient and fair operation of the securities markets or investors' confidence, ensure that their entertainment activities do not pose reputational risk to the company or its employees, and prioritize the interests of the Fund.

Explanation

The given correct answer is "All of the above." This means that all employees must adhere to all three statements mentioned in the question. They must not damage the efficient and fair operation of the securities markets or investors' confidence, ensure that their entertainment activities do not pose reputational risk to the company or its employees, and prioritize the interests of the Fund.

5. Under the Violation and Suspicious Activity Reporting policy, only actual and not suspected Violations will be escalated and investigated.

True

False

According to the Violation and Suspicious Activity Reporting policy, both actual violations and suspected violations will be escalated and investigated. This means that any suspicious activity, even if it is not confirmed as a violation, will still be taken seriously and looked into. Therefore, the correct answer is False.

Explanation

According to the Violation and Suspicious Activity Reporting policy, both actual violations and suspected violations will be escalated and investigated. This means that any suspicious activity, even if it is not confirmed as a violation, will still be taken seriously and looked into. Therefore, the correct answer is False.

6. A portfolio manager must seek pre-approval before placing a trade that could cause the Fund to cross the threshold of 10% ownership or more of any class of series of stock in any security, in any issuer.

True

False

The statement is true because a portfolio manager is required to seek pre-approval before making a trade that would result in the Fund owning 10% or more of any class or series of stock in any security or issuer. This requirement is in place to ensure transparency and prevent any potential conflicts of interest or market manipulation. By seeking pre-approval, the portfolio manager can demonstrate that they have considered the potential impact of the trade and have obtained the necessary authorization to proceed.

Explanation

The statement is true because a portfolio manager is required to seek pre-approval before making a trade that would result in the Fund owning 10% or more of any class or series of stock in any security or issuer. This requirement is in place to ensure transparency and prevent any potential conflicts of interest or market manipulation. By seeking pre-approval, the portfolio manager can demonstrate that they have considered the potential impact of the trade and have obtained the necessary authorization to proceed.

7. Because PAR's prime brokers have the authority to re-hypothecate shares held by the Fund in margin accounts, the number of shares eligible to vote by the Fund on the record date may be less than the actual number of shares held by the Fund.

True

False

The statement is true because prime brokers have the authority to re-hypothecate shares held by the Fund in margin accounts. This means that the Fund's shares can be used as collateral for loans by the prime brokers. As a result, the number of shares eligible to vote by the Fund on the record date may be less than the actual number of shares held by the Fund. This is because some of the shares may be pledged as collateral and not available for voting purposes.

Explanation

The statement is true because prime brokers have the authority to re-hypothecate shares held by the Fund in margin accounts. This means that the Fund's shares can be used as collateral for loans by the prime brokers. As a result, the number of shares eligible to vote by the Fund on the record date may be less than the actual number of shares held by the Fund. This is because some of the shares may be pledged as collateral and not available for voting purposes.

8. According to PAR's Data Security Policy, which of the following statements is false:

Any email sent by an Employee containing personal information must be encrypted.

According to PAR's Data Security Policy, computers of employees, including the Chief Compliance Officer, who have immediate access to personal information will not be configured to automatically lock after 15 minutes of non-use.

Explanation

According to PAR's Data Security Policy, computers of employees, including the Chief Compliance Officer, who have immediate access to personal information will not be configured to automatically lock after 15 minutes of non-use.

9. PAR values Level 3 assets by using publicly available market quotes.

True

False

The statement is false because Level 3 assets are valued using unobservable inputs, such as internal models and assumptions, rather than publicly available market quotes. Level 3 assets are the most illiquid and difficult to value, requiring more subjective judgment.

Explanation

The statement is false because Level 3 assets are valued using unobservable inputs, such as internal models and assumptions, rather than publicly available market quotes. Level 3 assets are the most illiquid and difficult to value, requiring more subjective judgment.

10. A portfolio manager may not participate in a secondary offering if the Fund:

Has ever shorted the stock

Has shorted the stock anytime in the previous year prior to the pricing date

Is net short the position at the time of the registration period

Has shorted the stock 5 days before the pricing date

If the Fund has shorted the stock 5 days before the pricing date, the portfolio manager may not participate in a secondary offering. This implies that if the Fund has taken a short position in the stock within the 5 days leading up to the pricing date, the portfolio manager is not allowed to participate in the offering. This restriction may be in place to prevent conflicts of interest or potential manipulation of the stock price by the portfolio manager.

Explanation

If the Fund has shorted the stock 5 days before the pricing date, the portfolio manager may not participate in a secondary offering. This implies that if the Fund has taken a short position in the stock within the 5 days leading up to the pricing date, the portfolio manager is not allowed to participate in the offering. This restriction may be in place to prevent conflicts of interest or potential manipulation of the stock price by the portfolio manager.

11. The Fund is prohibited from participating in IPOs.

True

False

The statement is true because the Fund is not allowed to participate in Initial Public Offerings (IPOs). This means that the Fund cannot purchase shares of a company when it first goes public and starts trading on the stock exchange. The reason for this prohibition may vary depending on the specific regulations or investment strategy of the Fund. However, it is common for certain types of funds, such as mutual funds or index funds, to have restrictions on participating in IPOs to maintain their investment objectives or to prevent potential conflicts of interest.

Explanation

The statement is true because the Fund is not allowed to participate in Initial Public Offerings (IPOs). This means that the Fund cannot purchase shares of a company when it first goes public and starts trading on the stock exchange. The reason for this prohibition may vary depending on the specific regulations or investment strategy of the Fund. However, it is common for certain types of funds, such as mutual funds or index funds, to have restrictions on participating in IPOs to maintain their investment objectives or to prevent potential conflicts of interest.

12. PAR Employees need permission to trade which type of security in their personal accounts?

A. ETFs

B. Bonds

B. Call options on single name secuirities

D. B and C

E. Mutual Funds

PAR Employees need permission to trade bonds and call options on single name securities in their personal accounts. This is because these types of securities have higher risks and potential conflicts of interest compared to other options such as ETFs or mutual funds. By requiring permission, the company can ensure that employees are not engaging in any activities that may compromise their objectivity or integrity in their professional roles.

Explanation

PAR Employees need permission to trade bonds and call options on single name securities in their personal accounts. This is because these types of securities have higher risks and potential conflicts of interest compared to other options such as ETFs or mutual funds. By requiring permission, the company can ensure that employees are not engaging in any activities that may compromise their objectivity or integrity in their professional roles.

13. PAR has a duty to seek the lowest execution price for trades on behalf of the Fund on all trades.

True

False

The statement is false because PAR does not have a duty to seek the lowest execution price for trades on behalf of the Fund on all trades. While seeking the lowest execution price may be a common goal, it is not an absolute duty. PAR may consider other factors such as liquidity, market conditions, and the Fund's specific investment objectives when executing trades. Therefore, the statement is incorrect.

Explanation

The statement is false because PAR does not have a duty to seek the lowest execution price for trades on behalf of the Fund on all trades. While seeking the lowest execution price may be a common goal, it is not an absolute duty. PAR may consider other factors such as liquidity, market conditions, and the Fund's specific investment objectives when executing trades. Therefore, the statement is incorrect.

14. To meet custody requirements, annual financial statements are distributed to the Fund's limited partners:

60 days of the end of Fund’s fiscal Year

120 days of the end of Fund’s fiscal Year

30 days of the end of Fund’s fiscal Year

Twice a year

Annual financial statements are distributed to the Fund's limited partners 120 days after the end of the Fund's fiscal year. This allows sufficient time for the Fund to complete its financial reporting and auditing processes before providing the statements to the limited partners. It also ensures that the limited partners receive the most up-to-date and accurate financial information about the Fund's performance within a reasonable timeframe.

Explanation

Annual financial statements are distributed to the Fund's limited partners 120 days after the end of the Fund's fiscal year. This allows sufficient time for the Fund to complete its financial reporting and auditing processes before providing the statements to the limited partners. It also ensures that the limited partners receive the most up-to-date and accurate financial information about the Fund's performance within a reasonable timeframe.

15. Which of the following items are permitted to be included in the Fund's marketing materials:

Economic or financial conditions affecting any assumptions in the materials

Representations of future gains, income or expenses

Discussion of benefits of an investment without giving equal prominence to the risks or limitations associated therewith

A history of capital growth

A history of capital growth is permitted to be included in the Fund's marketing materials.

Explanation

A history of capital growth is permitted to be included in the Fund's marketing materials.

16. Portfolio managers and traders are expressly prohibited from trading any security that does NOT appear on the:

Restricted List

Investible Securities List

Focus List

All of the above

Portfolio managers and traders are only allowed to trade securities that are listed on the Investible Securities List. This list likely includes securities that have been deemed suitable for investment by the organization or fund. The Restricted List would include securities that are prohibited from trading due to certain restrictions or regulations. The Focus List would include securities that are being closely monitored or given special attention by the organization or fund. Therefore, the correct answer is the Investible Securities List, as this is the only list that portfolio managers and traders can trade securities from.

Explanation

Portfolio managers and traders are only allowed to trade securities that are listed on the Investible Securities List. This list likely includes securities that have been deemed suitable for investment by the organization or fund. The Restricted List would include securities that are prohibited from trading due to certain restrictions or regulations. The Focus List would include securities that are being closely monitored or given special attention by the organization or fund. Therefore, the correct answer is the Investible Securities List, as this is the only list that portfolio managers and traders can trade securities from.

17. PAR has an anti-money laundering policy because:

It has a high risk of money laundering activity

It is required to do so under the USA Patriot Act

As a matter of best practices

It is required by the Investment Advisers Act of 1940

PAR has an anti-money laundering policy as a matter of best practices. Implementing such a policy is considered a standard and recommended practice in order to prevent and detect any potential money laundering activities. While the other options mention specific requirements or regulations, the fact that PAR has chosen to adopt an anti-money laundering policy as a best practice indicates that they are voluntarily taking proactive measures to ensure compliance and protect their business from the risks associated with money laundering.

Explanation

PAR has an anti-money laundering policy as a matter of best practices. Implementing such a policy is considered a standard and recommended practice in order to prevent and detect any potential money laundering activities. While the other options mention specific requirements or regulations, the fact that PAR has chosen to adopt an anti-money laundering policy as a best practice indicates that they are voluntarily taking proactive measures to ensure compliance and protect their business from the risks associated with money laundering.