Basics Flashcards
Subordinated Loan
A loan with the condition that the lender accept payment priority after all other creditors. Established for a minimum of one year.
Aggregate Indebtness -AI
An unsecured liability or secured with customer’s stock which is not owned by the BD. if it is secured with it’s own trading inventory, it would not form part of AI.
Rule 200
Order marking, defines who is determined to own a security, and when a BD is detemined to own a security. Under this rule a BD must mark all securities as either Long or Short.
Rule 203 Borrowing and Delivering requirements
Instances in which a security is sold Long, the BD must make delivery of the security by settlement date. It may not borrow for settlement unless an exception is met.
Reg SHO
Prior to affecting a short sale, a BD must locate securities that can be used for delivery on settlement date.
How many days may a BD permit to have a failed settlement in a threshold security before it must “buy in” and close out the position?
13 days. The close out must take place no later than the start of the trading day after the 13th settlement day.
What is the order flow for a transaction in a BD?
Order and execution dpt.
Purchase and sales dpt.
Margin dept.
Cashier dept.
A DVP account the BD has how many days to deliver the securities for payment before it must file to FINRA for an extention?
35 calendar days. The regular Reg-T payment deadline does nor apply, because it is delivery vs payment. However, if securities have not been delivered by the 35 days, it must file for an extension.
What is freeriding?
When a customer buys a security and sells it without making the proper payment for the purchase.
Rule 15c2-1 is concerned with hypothecation of customer securities. The rule has certain practices which are considered fraudulent.
- commingling securities without the permission of the customer:
- commingling of customer securities with non-customers and those of the BD
- hypothecating customer securities for a sum that exceeds the total indebtness of all customers.
Rule 15c3-3 permits BDs to use stock up to 140% of the customers debit balance as collateral for a bank loan. The BD may only borrow the amount it lent to customers.
The BD may not borrow more than it lent its customers. The 140% rule applies to the amount of stock that may be used as collateral, not the amount that may be borrowed.
The minimum initial margin deposit must be ?
$2,000 no matter if the security purchased is less than that
Find the value at which a maintenance call will be issued
Multiply Debit bal by 4/3 (1.3333)
The minimum maintenance requirement in the short account is?
30% of the market value
Determine how high the market value of the stock sold short can go to be at 30% maintenance level multiply
Multiply the CR balance by 10/13 (.7692)
