ARM - Successful Compliance Strategy

The Chief Compliance Officer's responsibilities include all of the following, EXCEPT:

A. Acting as a liaison for compliance issues B. Monitoring compliance programs C. Promoting education of compliance requirements D. Being the legal expert on employment laws

Which one of the following regulatory approaches provides an organization with more certainty and greater predictability?

A. Principles-based B. Rules-based C. Risk-based D. Evidence-based

Compliance

An organization's adherence to external legal and regulatory requirements as well as to internal policies and standards.

Risk-based regulation

A risk management approach to allocating resources to address risks in a way that will achieve the greatest good.

There are four major objectives of a compliance program. Which one of the following would not be considered an objective?

A. Notifying the United States Sentencing Commission of all reported incidents B. Receive benefits from external sources for having an effective compliance program such as regulatory approval C. Provide assurance to key stakeholders that the firm is in compliance with all laws, regulations and policies D. Create a culture that encourages compliance and oversight within the firm A

Be-Ne-Lux Insurance is an insurer operating in Belgium, the Netherlands, and Luxembourg. Be-Ne-Lux is subject to the Solvency II standards. Company managers believed the company was adequately financed, however it was determined that the company did not have adequate assets based on the uncertainty of its operating performance. The standard that Be-Ne-Lux failed to meet is

A. Own risk and solvency assessment. B. Risk-based capital. C. Basel II. D. Underwriting leverage. A

Evidence-based regulation

A regulatory approach that collects and uses objective performance data to set, evaluate, and improve policies.

Rules-based regulation

A regulatory approach that establishes a detailed set of specific rules to govern conduct.

Principles-based regulation

A regulatory approach that specifies desired outcomes and allows the regulated entity broad discretion in achieving that outcome.

Solvency II is a new regulatory standard in the European Union (EU) to establish principles for risk management and consistency in regulation for which one of the following industries?

A. Banking B. Transportation C. Insurance D. Health care C

Which one of the following statements is true regarding Basel III?

A. Basel III was developed to reduce the likelihood of insurer insolvency, market disruption, and consumer loss. B. Basel III is a regulatory standard for banks of the European Union and the United Kingdom. C. Basel III was developed to address both the risk of individual organizations and systemic risk in the banking sector. D. Basel III is a voluntary standard for the insurers which encourages senior management to take the lead in establishing a strong risk management culture. C

Which one of the following is an example of a principles-based traffic control regulation?

A. Driver must drive at a speed within the posted speed limit B. Driver must maintain a reasonable following distance appropriate to speed and conditions C. Driver must maintain liability insurance that meets the state minimum financial responsibility limit D. Driver and passengers must wear a safety belt when the car is in motion B

Sims Cinnamon Rolls and Donuts creates confectionery masterpieces for business conventions. Knowing how much a warm cinnamon roll or fresh donut means to a conventioneer just arriving from out of town, Sims' decides to implement a standard that 100% of its orders be delivered 60 minutes before the start of each convention. This is an example of which of the following kinds of compliance requirements?

A. External and Voluntary B. Internal and Voluntary C. Internal and Mandatory D. External and Mandatory B

Claim representative Klee is reviewing an auto liability claim concerning a two-car collision that has just been assigned to him. He discovers that the insured was clearly 100 percent at fault for the accident and although nobody was injured, it is company policy for him to set a $500 reserve. Klee sets the reserve and then calls the insured driver involved in the accident for a recorded statement. During the conversation with the insured driver, Klee takes it upon himself to recommend a company-approved collision center where the insured driver can have her vehicle repaired to pre-accident condition. Klee's application of setting reserves and mentioning the collision repair center would best represent which two compliance requirements in this case?

A. External and voluntary B. Internal and voluntary C. External and mandatory D. Internal and mandatory B

The Federal Sentencing Guidelines require a senior manager to have responsibility for the organization's entire compliance program. The individual selected is typically from which one of the following functions of the organization?

A. Human development B. Legal C. Operations D. Internal audit D

One of the major objectives of a compliance program is to receive benefits from external sources. Which one of the following is an example of a potential benefit from an external source?

A. Improved employee health and safety B. Increased product safety C. Reductions in insurance premiums D. Reductions in corporate taxes C

Examples of Principles-Based Regulations include all of the following, EXCEPT:

A. Insurance companies must retain sufficient capital to ensure that policyholder obligations are met. B. Investors having material influence over the management of a publicly traded company must publicly disclose that control to all stakeholders in the firm. C. Restaurant employees must wash their hands every time they use the restroom. D. Corporations must fairly and accurately report on the financial condition of the firm to all stakeholders. C

When comparing principles-based regulation with rules-based regulation, which one of the following statements is correct?

A. Principles-based regulation emphasizes conformity rather than the outcome. B. Principles-based regulation tends to use a one-size-fits-all approach. C. Principles-based regulation responds more quickly to a changing environment. D. Principles-based regulation requires less communication between the regulator and regulated entity. C

One of the key department players in compliance program implementation is Internal Audit. As such, the main responsibility of Internal Audit involves which of the following?

A. Product safety and environmental control B. Employee health and safety C. Compliance with employment laws D. Oversight of financial compliance D

Bo's Diving Adventures (BDA) is one of the largest recreational SCUBA diving businesses in the world. While enjoying much success in the diving aspect of its business, it has had its challenges adhering to the different government and industry regulations over the years. The board of directors decided to hire a Chief Compliance Officer (CCO) to remedy this issue and ensure that each diving excursion the company charts is in full compliance with all regulations regardless of destination. After a week on the job the new CCO has discovered that the number one non-compliance issue over the past few years could be rectified with better internal training. As such, the BEST move the CCO should make would be which of the following?

A. Replace the current head of Human Resources for allowing the non-compliance issues to fester. B. Sit down with the head of Human Resources and outline a comprehensive training program for all employees which address the non-compliance issues. C. Make a phone call to the National Diving Control Board and refute the non-compliance citations. D. Approach the board of directors to cease all diving excursions until each employee is better trained. B

Which one of the following is an example of a compliance requirement that is internal and mandatory?

A. Requiring employees to conserve energy by turning off the lights at the end of the day B. Requiring all employees working in the foundry to wear hearing protection C. Requiring all employees to consider car-pooling with other employees D. Requiring that all full-time employees have workers compensation insurance B

Which one of the following regulatory approaches allocates resources based on the concept of achieving the greatest potential good while simultaneously minimizing the overall costs?

A. Risk-based regulation. B. Rules-based regulation C. Performance-based regulation D. Evidence-based regulation A

Based on Basel III principles, which one of the following groups should take the lead in establishing a strong risk management culture?

A. Senior management B. Board of directors C. Employees D. Risk managers B

Which one of the following statements about standards—risk management, Solvency II, and Basel II and III— is true?

A. The Basel II and Basel III standards apply to all European corporations no matter the sector of the economy in which the corporation operates. B. The Solvency II standards were approved by the U.S. Congress and now must be satisfied by all U.S. insurers. C. The Solvency II standards were promulgated to strengthen U.S. regulation and supervision of the banking sector. D. Many risk management standards, such as ISO 31000, are voluntary. B

All of the following are true regarding the Federal Sentencing Guidelines, EXCEPT:

A. They are mandatory. B. They establish minimum components for an effective compliance program. C. They can be used by federal courts. D. They require an organization to have written standards and procedures. A

Chief compliance officer (CCO)

The individual tasked with ensuring the organization's compliance with external requirements such as laws and regulations as well as compliance with internal policies and procedures.

Regulatory arbitrage

The practice of circumventing unfavorable regulations by exploiting gaps and inconsistencies in competing regulatory systems.