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Series 24 MS > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

How much time or notice is a Firm required to give their client when change ‘house’ maintenance margin?

A

NO NOTICE is required. Firm can change maintenance margin at any time and is not required to give clients any notice.

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2
Q

Under SEC rules, a prospectus in use for more than 9 months cannot contain information more than:

A

16 Months

A prospectus in use for more than 9 months cannot contain information more than 16 months old. This rule applies primarily to mutual funds and to ensure that mutual fund prospectuses are relatively current.

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3
Q

Mutual Fund prospectuses cannot include financial information that is more than 12 months old?
TRUE or FALSE

A

FALSE

MF cannot have financial information that is more than 16 months old.

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4
Q

How frequently does the BCP need to be reviewed?

A

Required to be reviewed Annually

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5
Q

Can a subordinated loan be pre-paid before termination?

A

Only if it has been in existence for at least 1 year, not earlier.

Pre-Payment requires prior written Approval from FINRA

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6
Q

How many days must a client wait in selling Fund Shares in order to take the gains/proit?

A

7 days

Clients cannot flip Mutual Fund shares.

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7
Q

A person who owns 4% of the equity in a failed firm, would his accounts be covered by SIPC?

A

YES - 5% is the cut off for ownership.

  • Officers or Partners are not covered
  • Other members with Prop Accounts are not covered.
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8
Q

When relying on the FINRA list of common securities with eligible borrow, how old can the list be for an RR to rely on it?

A

no more than 24hrs old.

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9
Q

According to the SEC rules, what is the record retention requirement for Exception Reports?

A

18 Months

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10
Q

What are the Criminal Penalties for Insider Trading?

A

Imprisonment for 20 years
Fines up to $5 Million for natural persons
Fines up to $25 Million for other persons (business)

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11
Q

Where a broker dealer finds they are in Early warning, when must they report this to FINRA?

A

Within 24 hours

  • Net capital falls below 120% of minimum.
  • AI-to-NC exceeds 12:1
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12
Q

When must lost or stolen securities be reported to the SIC?

A

If no criminal action suspected, lost securities, 2 business days to locate. if still missing on 3rd day, MUST report to SIC AND Transfer Agent + FBI promptly.

if Criminal Action suspected, member has 1 day to report.

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13
Q

If a member’s net capital is below 125% of its minimum for more than 15 consecutive business days, what can FINRA require the member to do?

A

Reduce its business.

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14
Q

What are the thresholds for being able to charge Performance Fees?

A

$1 million under management with the investment adviser or

$2 million net worth (at the least)

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15
Q

How long is a Break Point Letter of Intent good for? and how far back can it be backdated?

A

Good for 13 Months

Backdate 90 Days

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16
Q

What are Asset based sales charges:

A

allows company to charge certain selling and distribution expense to tis assets; computed annually, and charged to shareholders quarterly.

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17
Q

Under Code of Procedures - where FINRA Enforcement issues a formal complaint, how long does the BD have to respond?

A

25 Days

2nd letter gives 14

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18
Q

A carrying firm must provide its customers with information on which of the following semiannually and annually?
Balance sheet.
Income statement.
Net capital.

A

Balance Sheet and
Net Capital
(unaudited semiannually and audited annually)

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19
Q

Under the Code of Procedures, What are the 3 Sanctions and max duration of suspension?

A

Censure
Fine
Suspension - for member or associated person up to 2 years.

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20
Q

When is the margin risk disclosure required to be given to clients:

A

Risk Disclosure:

  • Prior to or at the time of account opening
  • Annually Thereafter
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21
Q

In its notice to the SEC and FINRA reading termination of its independent accountant, a member must address all accounting and auditing disputes with its former accountant over the prior?

A

24 months.
all disputes over the 24-month period before termination must be addressed.

Firm must notify FINRA within 15days of termination

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22
Q

Under COP - if no response, under a second Notice form Enforcement, how long does respondent have to reply?

A

14 Days

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23
Q

What are the Civil Penalties for insider Trading violations

A

3x Profit make or losses avoided on person who committed violation

Greater of $1Million or 3x the profit made or losses avoided not eh Controlling person (someone who took no steps to prevent it)

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24
Q

For investment ‘funds’ what is the NAMING Rule?

A

Funds that use a name denoting sectors or products, must be 80% invested in those areas:
small-cap/mid-cap global, international

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25
Q

Records are generally kept for : Life, 6 years or 3 years,

what kind of records would be kept for ‘4’ years?

A

Written client Complaints received.

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26
Q

A Firm must establish Emergency Contact Persons: what are the criteria?

A

Must have 2 Associated persons as Emergency Contact Persons

  • At least 1 must be a member of the senior management and a registered principal.
  • if the other is not a registered principal, they must be a member of the senior management.
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27
Q

what kind of event would prompt a member firm to provide Blue Sheet information to SEC / FINRA

A

Insider trading inquiries result in FINRA /SEC requesting specific client information on ‘Blue Sheets’

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28
Q

Are Leap Options eligible for Margin?

A

YES
LEAPs options, which are long-term options, are marginable as long as there are more than 9 months to expiration. Reg T requirement is 75% of the premium.

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29
Q

Which of the following FRB rules governs the lending from banks to broker/dealers with securities as collateral for such loans?

A

REGULATION U

Bank-to-broker/dealer lending is covered under Regulation U. It also governs bank-to-customer lending when the proceeds are used to purchase securities.

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30
Q

What is the maximum fine $$ for a MRV (minor rule violation) under the COP

A

$2500 is the maximum fine assessed by NAC.

National Adjuditory Counsel imposes the fines.

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31
Q

An introducing firm that does NOT receive or hold customer securities has a minimum net capital requirement of

A

$5,000

if they were to receive customer securities = 50K

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32
Q

What are the 3 conditions for Repurchase Agreements?

A

Only good for Exempt Securities: US Gov or Municipal Bonds
Must be In Writing
Time and price must be specified

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33
Q

Are REITS considered Investment Companies as regulated by the Investment Company Act of 1940?

A

NO they are not.
they own commercial property or mortgages on the properties (or both)

  • REITS are Trusts (not limited partnership)
  • Publicly owned - must be registered with SEC & eligible for SIPC coverage.
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34
Q

What is the minimum net capital for Firms Acting as Prime Brokers?

A

$1.5 Million for Prime Brokers
$1 Million for executing dealers of a Prime Broker
$1 Block Positioning

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35
Q

The amount of a firm’s fidelity bond must be recalculated

A

each year upon the expiration of the bond

Fidelity bonds must be reviewed and renewed annually, within 60 days of the bond’s expiration date (anniversary date).

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36
Q

What are 4 conditions a fund must have if charging 8.5% max sales charge?

A

Break Points
Rights of accumulation
Dividend reinvestment
Cannot impose 12b-1 fees

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37
Q

What Rules are Captured under the Code of Procedure

A

FINRA rules
MSRB rules
Federal Securities Law

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38
Q

Employee Trading accounts require prior written approval, but what kind of transactions do not apply to Rule 3210

A

Unit Investment Trusts
Municipal fund securities
Section 529 Plans
Variable contracts

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39
Q

Under SEC rules, the minimum equity required to be held in a prime brokerage accounts is

A

$500,000

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40
Q

Under what condition are Broker-Dealers exempt from registering as Investment Advisers?

A

when BDs Investment Advice is incidental to the conduct of the BD’s business and who receive no special compensation for the advice.

member firms who offer WRAP programs are not exempt from registering.

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41
Q

For an established Carrying Firm: In the event of the following, when must FINRA be notified:

  • Net capital falls below 120% of minimum.
  • AI-to-NC exceeds 12:1.
A

These Represent Early Warning

Which is reported within 24 hours (not immediate).

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42
Q

Firms are required to report to FINRA their short positions, how frequently and by when?

A

Firms are required to report Twice / Month and must submit reports by 6pm of the 2nd business day after report.

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43
Q

A trailer commission is usually associated with which type of Mutual Fund?

A

12b-1 fees charged by mutual funds

Trailer commissions, also known as quarterly trailers, are associated with mutual funds that charge 12b-1 fees. These fees are charged periodically, and the registered representative who sold the fund receives a percentage. These fees, and their commissions, follow the initial sale.

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44
Q

Describe Soft Dollar Arrangements?

A

commission revenue directed to broker-dealers (“paying up”) by institutional investors in return for services such as research, Bloomberg, Wallstreet journal, trading system fees..

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45
Q

What is the required fidelity bond coverage for a firm with 250,000 min net capital?

A

FINRA’s chart indicates $600,000 for a firm with Net Capital between 250-300K

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46
Q

What is the Statutory limitations for a claim going to Arbitration?

A

6 years from the event.

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47
Q

What is the 140% Rule

A

The amount of customer securities that can be pledged to a bank for a loan is limited to 140% of the customers DEBIT BALANCE.
Ensures member does not borrow more from a bank, using customer securities as collateral.

The Firm can never borrow more than it reloans the customer

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48
Q

During Arbitration - where a customer asks for a copy of their pre dispute Arbitration agreement, how many days the the Dealer have to respond/provide?

A

10 Business Days to Respond

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49
Q

What is the maximum duration of a Temporary Subordinated Loan?

A

45 Days

Firms are only permitted to partake in 3 SL per year

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50
Q

What is the time limit for filing an SIPC claim?

A

clients have 6 months to file an SIPC claim.

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51
Q

How often are Broker Dealers required to conduct a Security COUNT?

A

Quarterly - if missing during a count, required to notify SIC.

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52
Q

An introducing broker/dealer that operates on a fully disclosed basis and does not hold any customer funds or securities - how frequently must they compute reserve requirements?

A

This dealer would be Exempt from the requirements given it operates on a fully disclosed basis and does not hold any client funds or securities.

It is exempt from the reserve requirements of SEC Rule 15c3-3.

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53
Q

what kind of funds are required to calculate their NAV at least once/day?

A

NAV of Redeemable Securities = must be calculated at least once / day.

Closed end funds (whose share are not redeemable) are not obligated under this rule.

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54
Q

What 2 entities are not included in the definition of Investment Companies?

A

Variable Annuities

Holding Companies

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55
Q

For Public Arbitrators, what is the cut off in years and % of time devoted to securities business that would eliminate such as Public Arbirator

A

15 years / 20%
Attorneys and Accountants who was for a total of 15 YEARS or more,
Devoting: 20% or more of professional Time

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56
Q

How long must copies of client Complaints be retained for?

A

4 Years

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57
Q

SEC Rule 10b-17 requires issuers of listed securities to advise the exchange of an upcoming record date at least how many days in advance of the record date?

A

10 Days (Issuers must notify the market where the security principally trades at least ten days in advance of the record date as to when that date will be. )

58
Q

What is the minimum AUM for an Investment Advisor to be required to register with the SEC and not at the state level?

A

$110 million or

Persons managing an ‘Investment Company’ registered under the Act of 1940.

59
Q

What is considered an “Interested Person”

A

with respect to investment companies: it includes:

  • affiliated person of the company
  • member of the affiliates immediate family
  • person who has been legal counsel during the last 2 fiscal years
  • Broker dealer who in last 2 years has maintained business relationship with the issuer
  • SEC determines people also
60
Q

What are 3 standard Conditions for Subordinated Loan

A

A minimum term of 1 year

in written form, valid and binding

Specific amount

61
Q

How long must customer Ledgers be retained?

ledgers are customer statements

A 
SIX Year Records
Ledgers
Blotters
Stock Records
Customer Account Records
62
Q

What is a Durable Power of Attorney?

A

Durable will sustains mental incompetency of the grantor and only be cancelled at the death of the grantor.
Non-Durable is cancelled when grantor is mentally incompetent.

63
Q

If securities are discovered missing as a result of a securities count, a report must be made to the Securities Information Center

A

within 10 business days of the count, if not resolved

When securities are discovered missing after a broker/dealer conducts a physical securities count (required quarterly), the broker has 10 business days in which to resolve the difference before reporting it.

64
Q

Can new issues be purchased on margin?

A

No

New issues must wait 30 days before becoming eligible for purchase on margin

65
Q

Minimum Maintenance Margin for Long Accounts? and Short Accounts

A

25% for Long Accounts

66
Q

What is the % of ownership to denote a person as being an Affiliated Person

A

5% or more - ownership

Any person who directly or indirectly owns, controls or holds, with power to vote 5% or more of the outstanding voting securities of a company.

67
Q

What types of investments are not covered under SIPC

A

Unregistered REITS
Future contracts
Limited Partnerships
Fixed Annuity contracts (these are insurance)

Options, CDs warrants, rights are all COVERED under SIPC

68
Q

Where a Firm notices weaknesses in a member’s accounting or safekeeping procedures and processes, what is the Notification Requirement to FINRA

A

Notify regulatory authorities within 24 hours

69
Q

What is the Minim Balance to Open a Margin Account and or a Day Trader Account

A

The minimum required to open an account for a regular margin customer is $2,000, compared to $25,000 for a pattern day trader. The maintenance percentage is the same (25%) for both.

70
Q

Where a firms Debt/Equity ratio exceeds 70%, a member firm is in violation of net capital rule, for how many days can it exceed 70%, before notifying FINRA =

A

90 Days

If a firm’s debt equity ratio (subordinated debt to total available capital) exceeds 70% for a period of more than 90 days, immediate notification to the regulatory authorities is required.

71
Q

Does a Broker Dealer need to report to FINRA a withdrawal of net capital greater than 30% of the brokers excess?

A

YES - BD must advise FINRA in writing at least 2 Days before the withdrawal.

rules i not applicable to small withdrawals, advances or loans under 500K.

Any deposits of less than 1 year are to be excluded from net capital computations.

72
Q

Under SEC rules, the minimum net capital requirement for a firm operating under a k(2)(i) exemption is

A

$100,000
A firm that clears its business on a fully disclosed basis is exempt k(2)(i) from the requirements of the customer protection rule. The minimum net capital requirement is $100,000 for these firms.

73
Q

Can Mutual Funds be purchased on margin?

A

No
After holding mutual funds for 30 days, a customer could use these shares to meet a Fed call on a subsequent purchase of stock.

74
Q

Under which circumstances would a member buying mutual fund shares from the principal underwriter be entitled to a discount from the POP?

A
  • buyer is a member firm,
  • a written selling agreement exists between the 2 firms,
  • the buying firm is filling customer purchase orders already received.
75
Q

Board of Directors for Mutual Funds have terms of how long?

A

1 - 5 year terms

one class must come up for reelection each year.

76
Q

In order to terminate 12b-1 fees, what kind of vote is required and by who?

A

To terminate 12b-1 charges,

a majority vote of the shareholders or

a majority vote of the outside directors is needed.

77
Q

Where a member firm has:
-Books and Records Not Current, and
- Net capital below minimum
What is the required Reporting TIME?

A

Immediate Reporting

78
Q

For a cash dividend received, what is the impact to SMA?

A

Cash dividends are credited to SMA, increasing the balance that can be borrowed.

they also reduce the Debit Balance

if the customer borrows the cash dividend within 30 days of receipt, the SMA balance is reduced to its prior level and the debit balance is increased to its prior level.

79
Q

A former client sends in a complaint alleging an advisor mislead their decision to buy securities. They bought form another dealer, but are sending a complaint to you- the supervisor; what responsibility does your firm have?

A

A person with whom a member firm has engaged in securities activities, such as solicitation, is considered a customer of the firm, and the firm is required to batch submit all written complaints involving associated persons or the firm through the Firm Gateway to FINRA by the 15th calendar day following the end of the calendar quarter.

80
Q

Under the Code of Arbitration, a respondent must answer within how many days after receiving a statement of claim?

A

45 DAYS
After receiving a statement of claim, a respondent has 45 calendar days to respond to both the director of arbitration and the claimant.

81
Q

How frequently must Carrying Firms computer the reserve requirements?

A

Each Week - at the close of business on Friday

Carrying firms make the determination of: monies owed by the member and monies owed by the customer.

82
Q

Are US Government and Municipal BONDS marginal?

A

YES

margin requirements on exempt securities are set by the SRO (not the FED).

83
Q

Under COP - what is the maximum fine for a Minor Rule Violation?

A

$2500

84
Q

What is the buying power of SMA?

A

A customer may use an SMA balance to buy twice that amount in securities.

85
Q

Is a principal required to review and approve a recommended purchase (or exchange ) new account package for a Variable Annuity for a client/

A

YES

must review for suitability and approve - as this is a security. Must be documented and signed by the Principal.

Must be done within 7 Days before sending it through to the insurance company.

86
Q

What is the Buying Power for Day Traders?

A

4x the maintenance margin excess (equity above 25% min margin)
for regular customers, buying power is 2x SMA

87
Q

What are the 3 ways the Firm Discloses to clients response action to BCP Events?

A

Disclosure is made in writing

  1. Account Opening Docs
  2. Posted on Firms Website
  3. Mailed to Customers on request
88
Q

Is a Prospectus required to be delivered for Publicly Traded Funds (closed-end funds) trading in the secondary market?

A

NO

Prospectus requirements entail: Mutual Fund, New Issues o registered common stock and UIT’s at the least

89
Q

Electronic Storage of Records requires what protocol?

A
  1. Dealer Members must notify FINRA at least 90 days before utilizing electronic storage
  2. Must be capable of maintaining in Non-rewriteable and non-erasable format.
90
Q

Can the SEC pay bounties for information related to Insider Trading cases?

A

Yes - SEC will pay up to 10% of the penalty for informants.

91
Q

What 2 types of transactions in Discretionary Accounts require Customer consent/Authorization

A
  • Related Issuers,
  • Control relationships
  • DPP -Direct Participation Programs
92
Q

Under COP - if a pre hearing is to be scheduled, when will it happen after issuance of notice?

A

21 Days

93
Q

What is the minimum Equity requirement for Day Trader?

A

$25,000 - must have on deposit in the account on any day in which the trades take place.
Minimum Maintenance Margin is s25% - same for regular customers.

94
Q

How long must a FINRA member keep record of Customer Complaints?

A

4 Years

95
Q

What is the initial margin requirement for a person who shorts 1000 shares of ABC at $2?

A

$2500 is the deposit requirement.
The industry requirement to short stocks below $5 per share is 100% of market value or $2.50 per share (whichever is greater)

96
Q

For Disciplinary decisions made, what is the $$ threshold whereby FINRA will release the information to the public through BrokerCheck

A

$1500

97
Q

Open-end management companies (mutual funds) and publicly traded (closed-end) funds can they buy on margin and selling short?

A

No - they are not permitted.

98
Q

Who sets the Initial Margin Rates

A

Federal Reserve Board, under Regulation T

99
Q

Under Arbitration - where Director of Arbitration sends notice to the Respondent, how many days the the responded have to Reply?

A

45 Days to provide their response to the Director and to the Claimant

100
Q

Under COP - where BD is fined, what is the dollar value upon which notice is listed on BrokerCheck?

A

$15,000

101
Q

Can a Lawyer or Accountant who over the past 15 year has devoted 20% of their time annually to the broker dealer industry be a ‘Public’ arbitrator?

A

NO

Lawyers and Accountants who have devoted 20% of their time over the past 15 years cannot be deemed a Public Arbitrator - they would fall under the Non-Public Category.

102
Q

When are broker dealers required to provide clients with SIPC information on coverage?

A

Required to provide all new customers with information when accounts are opened,

Required to provide all existing clients with information at least once / annually.

103
Q

For an established Carrying Firm: In the event of the following, when must FINRA be notified:

  • Books and records are not current.
  • Debt/equity ratio is at 80% for 100 days.
A

Both require IMMEDIATE notification to the regulatory authorities.

Represent violations under SEC 17a-11

104
Q

What is the Diversified Investment Company requirement?

A

75-5-10
75% - total assets can’t be in the company itself (related issuers)
5% - can’t be with one Issuer
10% can’t own more than 10% of the voting shares of any 1 issuer.

105
Q

What is the Trust Indenture ACT of 1939

A

It Requires the Agreement between Trustee (for Bondholders) and the Issuer.

for issues of more than $50m

Fed and Munis are Exempt from the TIA

106
Q

Under the Investment Company Act of 1940, mutual funds must send financial statements to shareholders at least

A

semiannually

Under the Investment Company Act of 1940, mutual funds must provide semiannual and annual reports to shareholders.

107
Q

Under COP - how long does a respondent have to make an Appeal after a decision is made in the 60 days.

A

Respondent has 25 Days to Appeal

108
Q

Is Arbitration Mandatory?

A

It is if it involves:
Dealer Member vs Dealer Member
Dealer Member vs Approved Person
Approved Person vs Approved Person

109
Q

If a member’s net capital falls below 150% of its minimum and remains there for more than 15 consecutive business days, what can FINRA prohibit the member from doing?

A

expanding its business

110
Q

For a client complaint to a Broker Dealer, that can’t be resolved, when must it be reported to FINRA?

A

within 30 Days

111
Q

For Client Complaints - how long do records need to be retained?

A

4 years

112
Q

Where the claimant receives a response from the Respondent, how many days does the claimant have to make a response back?

A

10 Days to provide response

113
Q

Clearing firms are required to give they Introducing Firms Exception reports annually - by which date?

A

July 1st.

The list of available exception reports must be given tot he CCO

114
Q

What are the 2 Accounting Deficiencies that require a 24hour reporting window to FINRA?

A
  • Early Warning: 120%Net cap or 12:1 AI/NC

- Material inadequacies in accounting systems

115
Q

Members of the board of directors of open-end management companies must have minimum and maximum terms of

A

1 year, 5 years

116
Q

What amount of a fidelity bond would a Member require if their net capital is less than $250,000?

A

Firm would require a Minimum coverage of 120% of the firm’s net capital or $100,000, whichever is greater.

117
Q

What is the Min Net Capital for a dealer and 2 conditions that make it a dealer:

A

$100,000

writes OTC Options

effects more than 10 transactions per year in its investment account

118
Q

If a member firm terminates its independent accounting firm, the SEC and the SRO must be notified

A

within 15 business days of termination date

119
Q

How Long must Focus reports be retained?

A 
3 Year Records
Focus Reports
Customer communications
Trial Balances
Form U4, U5 (after registrant has left)
Customer Confirmations
Telephone recordings
120
Q

When are Subordinated Loan Agreements to be filed with FINRA

A

at least 10 days Before anticipated effective date.

FINRA renders a written opinion if they are approved.

121
Q

Are Options marginable securities?

A

NO

standard 9-month put or call options are not marginable, these are expiring securities that have no loan value

122
Q

Calculating Minimum Net Capital:

An established carrying firm has AI of $12 million. Under SEC rules, its minimum net capital requirement is

A

800,000
For an established carrying firm, the minimum net capital requirement is $250,000 or 1/15 of AI, whichever is greater. In this case, 1/15 of AI is $800,000.

123
Q

In an arbitration between a firm and one of its representatives where the amount in dispute exceeds $100,000, the arbitration panel will consist of

A

2 public arbitrators and 1 nonpublic arbitrator

AP and AP
BD and AP - always 2 Public and 1 Non for 100K

if under 100K - 1 Public

124
Q

What happens to a customer when they are NOT covered by SIPC in a broker/dealer bankruptcy…

A

They become general creditors

Any customer claims that SIPC does NOT cover will result in the customer becoming a general (unsecured) creditor of the company.

125
Q

A member firm which has implemented and documented an internal risk management system and elects to use the alternative standard has a minimum net capital requirement of at least

A

$250,000 - Alternative Standards

Under the alternative method, a member must maintain minimum net capital of $250,000, or 2% of debits (assets) in the reserve formula, whichever is greater. Early warning is 5% of debits.

126
Q

When are focus reports required to be filed with FINRA?

A

17 days after their monthly or quarterly requirement

127
Q

When do Non-Carrying Firms File Focus Reprots?

A

Quarterly - by the 17th day after the quarter.

128
Q

If a firm terminates their membership in any national securities exchanges or SRO - when must they file a FOCUS report?

A

Within 2 days of termination.

129
Q

Where SEC and FINRA have not specified the keeping of records, how long must unspecified records be kep?

A

6 years

130
Q

What is the Branch review cycle for a ‘Non-Branch’

A

Periodically

non-supervisory branches are every 3 years and OSJ’s are annually

131
Q

An AP is looking to open an account for Section 529plan college saving plan at another BD, does the AP require approval to open this account?

A

NO
Section 529 plans are exempt from requiring dealer approval.

just as Municipal securities Unit Investment Trusts and companies registered under the Investment Company Act of 1940.

132
Q

If a firms Debt to Equity ratio exceeds 70% for 90 days, what is the reporting requirement with FINRA

A

Immediate

One of the 4 Immediate conditions
If Net capital falls below Minimum
AI to NC exceeds 15:1
Books and records are not current

133
Q

Under what circumstances can a dealer provide a customer with a repurchase agreement?

A

Repurchase agreements, on the other hand, can be used only to hedge long positions in exempt securities

134
Q

Which regulation requires that margin credit obtained outside the US be in compliance with Federal Reserve rules?

A

REG X
Regulation X of the Federal Reserve requires that margin credit obtained outside the US be in compliance with Regulation T if the credit is obtained from a foreign branch of a broker/dealer.

or with Regulation U if the credit is obtained from a foreign bank

135
Q

A broker/dealer would be deemed irresponsible in its duty to maintain and demonstrate compliance with net capital rules if it did not perform a trial balance at least

A

monthly

SEC 17a-5 requires broker/dealers to prepare trial balances monthly.

136
Q

If a member’s blanket fidelity bond coverage is substantially modified, cancelled or terminated, FINRA must be advised:

A

immediately

member firms must review their coverage annually

137
Q

Your firm has reason to believe that the Ajax Fund has directed brokerage arrangements in place. Under FINRA rules, your firm

A

must discontinue selling Ajax shares,

s an amendment to the antireciprocal rule, FINRA prohibits a member from selling the shares of an investment company if the member knows or has reason to know that the investment company has directed brokerage arrangements in place.

Fund companies are not permitted to tie the selling of their funds with kick backs or directed trades to the most selling dealer. No favortism either way BD to Fun or vice versa

138
Q

What registration capacities can provide for being a supervisor at an OSJ?

A

S24 - General Principal

S10 - General Securities Sales Supervisor

139
Q

The face amount of a fidelity bond a member firm must purchase is 120% times its

A

Highest net capital requirement over the preceding 12 months

A member firm with a net capital requirement of less than $250,000 must maintain minimum fidelity bond coverage of, the greater of 120% of the member’s required net capital or $100,000

140
Q

Excess margin securities are defined as securities in excess of:

A

140% of the customer’s debit balance

141
Q

A member firm, founded in 2004, has computed net capital of $90,000. Its minimum requirement is $50,000. Under SEC rules, this firm’s AI cannot exceed

A

$1,350,000

Max AI is based on computed net capital

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