ACFE CFE - Law (Certified Fraud Examiner - Law) Practice Test 14

Question 130

A director secretly profits from a transaction presenting an undisclosed personal interest. Which core fiduciary duty is threatened?

  1. Scope of agency
  2. Duty of care
  3. Misappropriation of entrusted assets
  4. Duty of loyalty

Explanation

Correct Answer

D:

Fiduciaries generally must avoid unauthorized self-dealing and conflicts of interest that favor personal interests over those owed to beneficiaries.

Incorrect Answers

A:

Agency law examines actual, apparent or other legally recognized authority and possible principal liability, not simply the agent's job title; here the operative distinction is Duty of loyalty.

B:

Care duties require the legally specified level of prudence and informed decision-making; disloyalty is not essential to a careless-act claim; those prerequisites should not be confused with Duty of loyalty.

C:

Diversion of property held for another can implicate fiduciary duties and theft or fraud offenses depending on the source of entrustment and statute; duty of loyalty addresses the distinct legal requirement stated in the facts.

Question 131

A trustee makes a careless investment decision without reasonable inquiry despite no personal benefit. Which duty is potentially breached?

  1. Scope of agency
  2. Duty of care
  3. Misappropriation of entrusted assets
  4. Duty of loyalty
  5. Trade-secret misappropriation

Explanation

Correct Answer

B:

Care duties require the legally specified level of prudence and informed decision-making; disloyalty is not essential to a careless-act claim.

Incorrect Answers

A:

Agency law examines actual, apparent or other legally recognized authority and possible principal liability, not simply the agent's job title; that concept must be distinguished from Duty of care here.

C:

Diversion of property held for another can implicate fiduciary duties and theft or fraud offenses depending on the source of entrustment and statute; the circumstances point to Duty of care rather than that separate test.

D:

Fiduciaries generally must avoid unauthorized self-dealing and conflicts of interest that favor personal interests over those owed to beneficiaries; duty of care is the issue raised by the described conduct.

E:

A qualifying trade secret requires economic value from secrecy and reasonable protective measures; improper acquisition, use or disclosure can trigger remedies; the inquiry instead concerns Duty of care, with its own elements.

Question 132

A wealth-management fraud raises separate agency and property concerns. (1) A representative signs transactions outside the authority delegated by the account owner; which agency-law inquiry defines the boundary of that authority? (2) The representative then transfers property entrusted for clients into an undisclosed personal brokerage account; which kind of duty-based appropriation is involved? Choose TWO.

  1. Duty of loyalty
  2. Scope of agency
  3. Trade-secret misappropriation
  4. Misappropriation of entrusted assets
  5. Duty of care

Explanation

Correct Answers

B:

Agency law examines actual, apparent or other legally recognized authority and possible principal liability, not simply the agent's job title; it specifically answers numbered situation 1.

D:

Diversion of property held for another can implicate fiduciary duties and theft or fraud offenses depending on the source of entrustment and statute; it specifically answers numbered situation 2.

Incorrect Answers

A:

Fiduciaries generally must avoid unauthorized self-dealing and conflicts of interest that favor personal interests over those owed to beneficiaries; the separate questions call for scope of agency and misappropriation of entrusted assets, while no prompt asks for this additional rule.

C:

A qualifying trade secret requires economic value from secrecy and reasonable protective measures; improper acquisition, use or disclosure can trigger remedies; the separate questions call for scope of agency and misappropriation of entrusted assets, while no prompt asks for this additional rule.

E:

Care duties require the legally specified level of prudence and informed decision-making; disloyalty is not essential to a careless-act claim; the separate questions call for scope of agency and misappropriation of entrusted assets, while no prompt asks for this additional rule.

Question 133

An employee takes protected formulas learned under confidentiality obligations and secretly sells them. Which civil protection may apply?

  1. Trademark infringement
  2. Lawful reverse engineering
  3. Money laundering
  4. Trade-secret misappropriation
  5. Copyright infringement

Explanation

Correct Answer

D:

A qualifying trade secret requires economic value from secrecy and reasonable protective measures; improper acquisition, use or disclosure can trigger remedies.

Incorrect Answers

A:

Trademark law concerns source-identifying marks and consumer confusion, rather than ownership of confidential business know-how; trade-secret misappropriation raises a different threshold from this alternative.

B:

Trade-secret law generally does not prevent lawful independent discovery or reverse engineering of information not subject to an enforceable contrary duty; that concept must be distinguished from Trade-secret misappropriation here.

C:

Certain laundering offenses require specified predicate proceeds and prohibited financial conduct with the mental state described by the particular statute; the circumstances point to Trade-secret misappropriation rather than that separate test.

E:

Copyright protects original expression rather than general ideas, with infringement and defenses depending on the acts and jurisdiction; trade-secret misappropriation is the issue raised by the described conduct.

Question 134

A business independently reverse-engineers an unprotected public product through lawful means. Which limit may defeat a trade-secret theory?

  1. Trade-secret misappropriation
  2. Lawful reverse engineering
  3. Copyright infringement
  4. Trademark infringement

Explanation

Correct Answer

B:

Trade-secret law generally does not prevent lawful independent discovery or reverse engineering of information not subject to an enforceable contrary duty.

Incorrect Answers

A:

A qualifying trade secret requires economic value from secrecy and reasonable protective measures; improper acquisition, use or disclosure can trigger remedies; the inquiry instead concerns Lawful reverse engineering, with its own elements.

C:

Copyright protects original expression rather than general ideas, with infringement and defenses depending on the acts and jurisdiction; the relevant step in this scenario is Lawful reverse engineering.

D:

Trademark law concerns source-identifying marks and consumer confusion, rather than ownership of confidential business know-how; here the operative distinction is Lawful reverse engineering.

Question 135

A designer copies original creative expression from an internal manual without permission. Which intellectual-property right may be relevant?

  1. Trademark infringement
  2. Copyright infringement
  3. Trade-secret misappropriation
  4. Lawful reverse engineering

Explanation

Correct Answer

B:

Copyright protects original expression rather than general ideas, with infringement and defenses depending on the acts and jurisdiction.

Incorrect Answers

A:

Trademark law concerns source-identifying marks and consumer confusion, rather than ownership of confidential business know-how; copyright infringement addresses the distinct legal requirement stated in the facts.

C:

A qualifying trade secret requires economic value from secrecy and reasonable protective measures; improper acquisition, use or disclosure can trigger remedies; copyright infringement raises a different threshold from this alternative.

D:

Trade-secret law generally does not prevent lawful independent discovery or reverse engineering of information not subject to an enforceable contrary duty; that concept must be distinguished from Copyright infringement here.

Question 136

A sales employee falsely markets goods under a rival's protected mark in commerce. Which legal regime fits?

  1. Trade-secret misappropriation
  2. Copyright infringement
  3. Lawful reverse engineering
  4. Trademark infringement

Explanation

Correct Answer

D:

Trademark law concerns source-identifying marks and consumer confusion, rather than ownership of confidential business know-how.

Incorrect Answers

A:

A qualifying trade secret requires economic value from secrecy and reasonable protective measures; improper acquisition, use or disclosure can trigger remedies; trademark infringement is the issue raised by the described conduct.

B:

Copyright protects original expression rather than general ideas, with infringement and defenses depending on the acts and jurisdiction; the inquiry instead concerns Trademark infringement, with its own elements.

C:

Trade-secret law generally does not prevent lawful independent discovery or reverse engineering of information not subject to an enforceable contrary duty; the relevant step in this scenario is Trademark infringement.

Question 137

A broker knowingly conducts a transaction to disguise that proceeds arose from specified unlawful activity. Which federal financial crime may apply?

  1. Money laundering
  2. Suspicious activity reporting
  3. Structuring
  4. Beneficial ownership identification

Explanation

Correct Answer

A:

Certain laundering offenses require specified predicate proceeds and prohibited financial conduct with the mental state described by the particular statute.

Incorrect Answers

B:

Regulated entities may have reporting obligations for potentially suspicious conduct; disclosure rules and thresholds are jurisdiction-specific; those prerequisites should not be confused with Money laundering.

C:

Structuring seeks to evade transaction reporting requirements through deliberately arranged transactions, distinct from merely making small legitimate deposits; money laundering addresses the distinct legal requirement stated in the facts.

D:

Beneficial ownership focuses on persons who ultimately own or control an entity to address misuse of legal-person structures; money laundering raises a different threshold from this alternative.

Question 138

A cash business breaks large deposits into small amounts to evade reporting obligations. Which offense-related practice is involved?

  1. Beneficial ownership identification
  2. Structuring
  3. Suspicious activity reporting
  4. Money laundering

Explanation

Correct Answer

B:

Structuring seeks to evade transaction reporting requirements through deliberately arranged transactions, distinct from merely making small legitimate deposits.

Incorrect Answers

A:

Beneficial ownership focuses on persons who ultimately own or control an entity to address misuse of legal-person structures; the circumstances point to Structuring rather than that separate test.

C:

Regulated entities may have reporting obligations for potentially suspicious conduct; disclosure rules and thresholds are jurisdiction-specific; structuring is the issue raised by the described conduct.

D:

Certain laundering offenses require specified predicate proceeds and prohibited financial conduct with the mental state described by the particular statute; the inquiry instead concerns Structuring, with its own elements.

Question 139

A payment provider submits a report of suspicious transactions to the appropriate authority after required review. Which compliance mechanism applies?

  1. Structuring
  2. Money laundering
  3. Suspicious activity reporting
  4. Beneficial ownership identification

Explanation

Correct Answer

C:

Regulated entities may have reporting obligations for potentially suspicious conduct; disclosure rules and thresholds are jurisdiction-specific.

Incorrect Answers

A:

Structuring seeks to evade transaction reporting requirements through deliberately arranged transactions, distinct from merely making small legitimate deposits; here the operative distinction is Suspicious activity reporting.

B:

Certain laundering offenses require specified predicate proceeds and prohibited financial conduct with the mental state described by the particular statute; those prerequisites should not be confused with Suspicious activity reporting.

D:

Beneficial ownership focuses on persons who ultimately own or control an entity to address misuse of legal-person structures; suspicious activity reporting addresses the distinct legal requirement stated in the facts.

Question 140

A compliance team identifies the natural person ultimately controlling a shell-company customer. Which legal concept guides the inquiry?

  1. Structuring
  2. Suspicious activity reporting
  3. Money laundering
  4. Beneficial ownership identification

Explanation

Correct Answer

D:

Beneficial ownership focuses on persons who ultimately own or control an entity to address misuse of legal-person structures.

Incorrect Answers

A:

Structuring seeks to evade transaction reporting requirements through deliberately arranged transactions, distinct from merely making small legitimate deposits; that concept must be distinguished from Beneficial ownership identification here.

B:

Regulated entities may have reporting obligations for potentially suspicious conduct; disclosure rules and thresholds are jurisdiction-specific; the circumstances point to Beneficial ownership identification rather than that separate test.

C:

Certain laundering offenses require specified predicate proceeds and prohibited financial conduct with the mental state described by the particular statute; beneficial ownership identification is the issue raised by the described conduct.

Certified Fraud Examiner - Law (CFE - Law) Practice Tests