Progress Exam 1 Flashcards
The Central Registration Depository (CRD) is a pool of information concerning the employment and disciplinary histories of registered persons. The CRD is __________ for the states, as well as for processing applications for agent and broker-dealer registration withdrawals. If any information on an individual’s Form U4 changes, ________________.
used to process applications for agent registrations
an amendment must be filed promptly
This system is used to report trades for Nasdaq and 3rd Market securities
TRF
A trade executed after hours and reported through TRF at 8:30am will use this modifier
.U
A trade executed during market hours, but not reported within 10 seconds, will use this modifier
.Z
Other than the exchange, this is a system on which a Nasdaq security may be quoted
ADF
A broker-dealer has a tentative net capital of $2.5 million. In its inventory, the firm is long 8,125 shares of a company’s common stock at $40. When computing its net capital, the broker-dealer’s obligation is to:
Make an undue concentration deduction
The standard haircut for common stock that’s held in a broker-dealer’s inventory is 15%. However, if the inventory contains one security that accounts for a significant percentage of the market value of its total inventory, this puts the firm at extra risk if that security suddenly declines in value. Therefore, Rule 15c3-1 assesses an extra net capital charge, which is termed an undue concentration deduction, if any long or short position is more than 10% of the broker-dealer’s tentative net capital. The undue concentration rule requires an additional deduction on the amount in excess of the 10% threshold. In this question, the broker-dealer has a tentative net capital of $2.5 million and 8,125 shares of a company’s common stock at $40 per share (a $325,000 value). The value of the common stock position is greater than 10% of the firm’s tentative net capital.
After receiving the information required to complete an application, a registered person who recommends a deferred variable annuity must:
Send the application to an office of supervisory jurisdiction promptly
The function of the Nasdaq Market Center Execution System that allows part of a market maker’s interest to remain non-displayed is called:
Reserve size
Reserve size allows a Nasdaq Global Market securities market maker to display part of its trading interest while the remainder is non-displayed. (99036)
If a broker-dealer does NOT carry customer funds or securities, but receives a customer check that’s made out to a third party, it should be forwarded to the third party:
By noon on the following business day
Promptly is defined as no later than noon of the following business day
Which of the following will permit an insider to trade during a blackout period?
Rule 10b5-1 plan
Rule 10b5-1 prohibits a person from buying or selling a security based on material, non-public information. Many corporate executives may want to purchase or sell securities in which they’re considered a corporate insider or considered to be privy to material, non-public information. A 10b5-1 plan allows a person to have an affirmative defense against insider trading if certain conditions are met.
A representative’s client gives him an order to sell 1,000 shares at $20. The trade is executed, and the client requests a check. The RR’s operations department sends the client a check for $20,000. Five days later, the RR’s reorganization department notifies him that, prior to the sale, the stock was subject to a 1-for-10 reverse split and the client is short 900 shares. For the RR’s principal, what action should be taken?
Explain the error to the client and request that the check be returned
The first step in reclaiming the proceeds is to request the return of the check so that a new one for the proper amount can be issued. There’s no need to place the trade in the error account because the mistake was made by the client, not the firm. The contra-broker is under no obligation to adjust the trade.
Under the TRF reporting rules, an order-entry firm:
Must either enter its version of the trade or respond to the market maker’s trade details within 20 minutes
Under the TRF rules, the order-entry side of the transaction must do one of the following:
Enter a version of the trade within 20 minutes of execution using the OE function on Nasdaq Workstation II
Accept market-maker trade entries on the TRF through ACT Trade Scan within 20 minutes of the execution
Decline incorrect market-maker trade entries on the TRF through ACT Trade Scan or cancel trade entries, when necessary
The Special Reserve Bank Account is used:
To satisfy customer protection concerns
Rule 15c3-3 is the Customer Protection Rule and requires the broker-dealer to establish a Reserve Bank Account for the protection of customers. Essentially, the Reserve Bank Account consists of customer-related items found on the credit side of a broker-dealer’s trial balance, such as customer credit balances, fails to receive for the accounts of customers, securities loaned for the accounts of customers, and money borrowed using customer stock as collateral. The broker-dealer is required to segregate cash in an amount equal to the value of these items and is allowed to subtract from the amount required to be on deposit cash equal to the value of certain debit items found on the trial balance. Among these items are securities borrowed for the accounts of customers and customer-secured debit balances
A broker-dealer purchases stock from a customer at a net price of 19.00. At the time of the purchase, the broker-dealers market for the stock is 19.35 - 19.85, and the inside market is 19.60 - 19.85. The percentage markdown is:
The markdown is 60 cents. This is determined by subtracting the price received by the customer (19.00) from the inside bid of 19.60, yielding .60, which is divided by 19.60, for a markdown of 3.06%.
