FC Chapter 15 Flashcards
Jim has a $10,000 debit balance in his margin account. The BD may rehypothecate stock of $_______ and borrow $_______.
Jim has a $10,000 debit balance in his margin account. The BD may rehypothecate stock of $14,000 and borrow $10,000.
If a BD extends credit to a client, what must it disclose to the client?
The annual interest rate to be charged and the method of determining the debit balance on which interest is charged
If a client’s margin account has an equity balance greater than the Reg. T requirement, the account has ____.
If a client’s margin account has an equity balance greater than the Reg. T requirement, the account has SMA.
For clients to whom credit has been extended, what two disclosures must be made regarding the loan?
(1) The annual interest rate that may be charged, and (2) the method by which the debit balance is determined
Regulation T regulates the extension of credit by _____ for the purchase of securities.
Regulation T regulates the extension of credit by BDs for the purchase of securities.
The maintenance requirement on a short leveraged ETF position is computed by multiplying the leverage factor by ____%.
The maintenance requirement on a short leveraged ETF position is computed by multiplying the leverage factor by 30%.
Define Regulation T.
The percentage a customer must deposit when purchasing securities or selling short
True or False: Portfolio margin may be used for only one type of security.
False. Portfolio margin may be used for most securities.
The ______________ agreement must be signed before a firm may lend stock belonging to a client.
The loan consent agreement must be signed before a firm may lend stock belonging to a client.
When must a margin disclosure document be provided to a client?
At the time the account is opened
A client’s account has an LMV of $40,000, Debit of $25,000, and Equity of $15,000. Must the account’s equity be fixed?
No. The equity percentage is currently 37.5% (15 ÷ 40). Provided the equity is 25% or greater, no fix is required.
In order to utilize portfolio margin, a client must be approved for ___________ option writing.
In order to utilize portfolio margin, a client must be approved for uncovered option writing.
True or False: BDs are NOT required to provide advance notice if they change their in-house maintenance requirements.
True
Under Regulation T, does the payment date requirement apply to cash or margin accounts?
Payment is required within four business days for both (100% in a cash account, but 50% in a margin account).
Reg X regulates the ___________ who obtain credit for the purchase of securities.
Reg X regulates the borrowers who obtain credit for the purchase of securities.
Jim makes a $1 million purchase of a 3x long Gold Index ETF. What is his maintenance requirement?
His requirement is based on the leverage factor times the SRO maintenance requirement (3 x 25% = 75% or $750,000).
When may a member firm lend the stock that belongs to a client?
When the client signs the loan consent agreement
What must be obtained for a firm to commingle the securities of two or more customers?
Written permission from each customer
A margin account has Market Value of $20,000, Debit of $8,000, Equity of $12,000. What may the BD borrow from a bank?
$8,000, which is 100% of the debit balance.
True or False: Firms may establish their own in-house rules relating to payment dates and minimum requirements.
True. However, the requirements must be at least as stringent as those established by the regulators.
True or False: ETFs are marginable and may be sold short.
True
True or False: Restricted accounts must be remedied immediately by depositing the appropriate dollar amount.
False. Restricted accounts do not require immediate response.
For a client to use portfolio margin, when must he receive, and acknowledge receipt in writing, a disclosure document?
Prior to the initial transaction
A restricted account has equity below ____%, but above the minimum maintenance requirement of ____%.
A restricted account has equity below 50%, but above the minimum maintenance requirement of 25%.
Customers are given ____ business days after settlement date to pay for their portion of the trade.
Customers are given two business days after settlement date to pay for their portion of the trade. (S+2 or T+4)
Reg U regulates the extension of credit by ________ for the purchase of securities.
Reg U regulates the extension of credit by non-BDs for the purchase of securities.
True or False: National futures exchange members may use portfolio margin-eligible securities to hedge index futures.
True
How is SMA created?
Appreciation in the value of securities, cash or dividend deposits, or sales of securities from the account
The buying power of a day trading account is _____ times the maintenance requirement excess.
The buying power of a day trading account is four times the maintenance requirement excess.
Define a day trade.
The purchase and sale of the same security on the same day in a margin account
On a stock loan between two BDs, when may the lender call the stock back?
At any time
`Along with listed common stock, name some of the other securities that are deemed marginable by the FRB.
Closed-end funds, warrants, convertible bonds, REITs, and leveraged ETFs
Sue makes a $1 million purchase of a 2x short Gold Index ETF. What is her maintenance requirement?
Her requirement is based on the leverage factor times the SRO maintenance requirement (2 x 30% = 60% or $600,000).
If owned for ____ days, open-end investment company (mutual fund) shares may be used as collateral in a margin account.
If owned for 30 days, open-end investment company (mutual fund) shares may be used as collateral in a margin account.
