Q&A5 Flashcards
Qualified third-market maker
Must meet following conditions:
- Be a registered BD subject to SEC’s min ___.
- Have net capital of $__.
- Have a reasonable avg ___ in such security.
- Be ready to effect tx’s for its own account at ___ w/ other BDs.
- net capital rule
- $500k
- inventory turnover
- quoted prices
Due bill
Used if a trade occurs ___ the ex-dividend date with delivery ___ the record date.
…before the ex-dividend date with delivery after the record date
If stock bought before ex-dividend date, trade should settle before record date and transfer agent would know buyer is new owner. But if seller fails to deliver stock by record date, transfer agent will still have seller listed as owner. So dividend will go to seller. Seller will attach due bill upon delivery as evidence that dividend will be turned over to buyer when paid.
Alternative net capital requirement
Requires net capital of $___ or __% of the aggregate debit items, whichever is __
$250k or 2%, whichever is greater
Can restricted persons by convertible debt offerings?
Can they buy any debt offering?
What about secondary offerings?
Yes
Yes
Yes
Net capital requirements
- BD that carries customer accounts but promptly transmits customer cash / securities to clearing firm must maintain net capital of $__.
- BD that introduces its customer accounts on fully disclosed basis but does not hold their cash / securities must maintain $__.
- Introducing BD that doesn’t receive cash / securities must maintain $__.
- $100k
- $50k
- $5k
Form 13F
Filed by inst investment mgrs and includes any equity security that is registered pursuant to __ of the 34 Act.
Does NOT include __.
Section 12 of 34 Act
Does NOT include mutual funds
Statutory disqualification
Applies to any conviction w/in last __ yrs for any felony or misdemeanor involving funds or securities
10 yrs
Reg A+ offering
- Offering of no more than $__ over __-month period
- Max that may be sold on behalf of existing shareholders is $___
- Offering entity must be organized under laws of, and have principal place of biz in, US or __ or any territory in their possession.
- $50mm over 12-month period
- $15mm
- Canada
Form 8-K
- Filed when material event occurs that would affect firm’s ___ or ___.
- Must be filed w/in ___ unless based on leak of mnpi (then Form FD filed w/in 24 hrs)
- financial condition or share value
2. 4 biz days
Wrap account
Firm charges one fee that covers both ___ and ___.
portfolio mgmt and tx costs
Fingerprinting
Required of all employees involved in following:
- ___ securities
- Having access to keeping / handling of __ or __ or books and records related thereto
- Having ___ over those in 1 or 2 above
- Selling securities
- securities or monies
- supervisory responsibility
Fidelity bond coverage
- Firms with net capital > $12mm must have min coverage of $___.
- $5mm
- An attributable quote/order shows a market maker’s ___ while a nonattributable one does not.
- Nonattributable orders appear in Nasdaq quote montage as ___.
- Market maker must have a __-sided attributable quote and permit ___ against its position.
- MPID
- NSDQ
- two-sided attributable quote….automatic execution
Locate requirement
Exceptions to locate req for short sales:
1. by __ in connection w/ bona fide __ activities
- accepted from another __ that accepted responsibility to comply
- of restricted securities ___ in which person intends to deliver as soon as restrictions removed
- MM…MM
- BD
- 144
AML
Testing of program req’d how often for:
1. BD that holds customer accounts?
- Firm that does not execute customer trades / hold accounts (or acts as introducing broker)?
- Annually
2. Every two yrs
REITs
- At least __% of gross income must be derived from RE activities (rental income), interest on mortgages, or dividends / interest.
- Of that, __% must be derived solely from RE activities.
- 95%
2. 75%
Temp registration as principal
RR whose duties are changed by member so as to require registration as a principal is allowed __ days to pass principal’s exam.
90 days
Variable annuities:
Principal must approve or reject customer’s variable annuity application based on suitability w/in __ days and must document and ___ the approval or rejection.
Deferred variable annuities:
Firm permitted to maintain customer funds prior to approval of application if firm permitted to maintain funds under ____. Must be held in ___ account.
7 biz days…sign
SEC Net Capital Rules…special reserve bank account
SEC Rule 606
- BDs must disclose nondirected customer order-routing info through ___ reports.
- Reports required from both ___ and ___.
- Reports must disclose:
a) ___ to which certain orders were routed
b) nature of any relationship b/w ___ and ___ - Customers must be notified in writing at least ___ that disclosures available on request.
- Order-routing info must be posted on BD’s ___.
- quarterly
- MMS and order-entry firms
3a) market center
3b) market center and BD entering the order
- annually
- website
TRF and ORF
- Both open from __ to __.
- While open, trades in any equity must be reported by executing BD no later than __ after execution and by counterparty BD w/in ___ (by entering its own trade or using Browse Function to accept/decline trade based on first BD’s details).
Between midnight and 8am, trades in:
- restricted equities must be reported __.
- nonrestricted equities must be reported b/w __ and __.
- 8am to 8pm
- 10 secs…20 minutes
- anytime on the same biz day as the trade
- 8:00am and 8:15am
Limit state vs. Straddle state
- Limit state occurs and trading ALWAYS paused if for 15 secs:
a) NBB is __ or __ upper price band, or
b) NBO is __ or __ lower price band - Straddle state occurs and trading NOT NECESSARILY paused if one side of market is __ price bands and other side is __ price bands.
Ex: Reference price of security is $40 and pricing band parameter is 10%. Trading would be paused if NBB __ or NBO __.
1a) NBB on or above upper price band
1b) NBO on or below lower price band
- one side outside and other side inside
Ex: if NBB at/above $44 or NBO at/below $36
Temporary subordination agreement
- Duration cannot exceed ___ days.
- BD limited to no more than ___ such agreements in 12-month period.
- 45 days
2. three
ACATs
- Carrying BD has [how long] to protest or validate transfer request.
- If validated, transfer must take place w/in __.
- How long does receiving (carrying) firm have to resolve a discrepancy in the transfer?
- one biz day
- three biz days
- five biz days
Fail to deliver
- Generally, all fails to deliver must be closed out by morning of __ settlement day.
Short sales of restricted securities:
2. If security sold short is Rule 144 security where restrictions need removal pre-delivery, BD has __ SETTLEMENT days before close-out.
Long sales of restricted securities:
3. If restrictions not removed w/in __ CALENDAR days on Rule 144 securities sold long, BD will be req’d to close out.
- 14th settlement day
- 35 settlement days for short sales
- 35 calendar days for long sales
Margin accounts
In a NEW margin account, minimum equity must be $___ unless amt of purchase is lower, in which case customer must deposit ___.
$2k…full purchase price
Fidelity bond coverage
- BD with net capital < $250k must maintain min coverage which is GREATER of __% of member’s net capital requirement or $__.
- Does it protect against theft of securities/ funds on premises only or also in transit?
- What about against forgery, alterations, and counterfeit currency?
- greater of 120% or $100k
- both
- yes, all
Reg S
Holding period of ___ for debt securities and ___ for equity securities before they can be resold if initially sold under Reg S.
40 days for debt and 1 year for equities
Suitability- inst investors
Institutional investors are subject only to the ___ obligation and ___ obligation.
They must affirmatively state that they are exercising ___ in evaluating the recs.
reasonable-basis obligation and quantitative obligation
independent judgment
Estimated values
Cannot be based on data that is more than ___ months old.
Ex: BD must provide valuations on account statements to investors who have purchased nontraded REITs w/in ___ months post-offering.
18 months
Trust Indenture Act of 1939
Regulates issuance of debt sold interstate to non-institutional investors if value exceeds $___.
Exemptions are offers sold under Rule ___ to QIBs or outside US under Reg __.
$10mm
Rule 144A or Reg S
