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Question 1 of 10
1. Question
Which of the following is true in achieving the goal of financial stability according to FINRA Rule 4110?
Correct
In order to achieve the goal of financial stability, the withdrawal of equity capital must be prohibited, unless there is written permission provided by FINRA. It is stated in the rule that early withdrawals of equity capital may be permitted on a limited basis only.
Incorrect
In order to achieve the goal of financial stability, the withdrawal of equity capital must be prohibited, unless there is written permission provided by FINRA. It is stated in the rule that early withdrawals of equity capital may be permitted on a limited basis only.
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Question 2 of 10
2. Question
Which of the following situations require a suspension of business operations under the proposed FINRA Rule 4110(b)(1)?
Correct
Under the proposed FINRA Rule 4110(b)(1), all business operations which is not in compliance with SEA Rule 15c3-1 must be suspended by a member firm. A member is also expressly permitted to effect liquidating transactions and proprietary transactions upon customer direction which are expected to increase the member’s net capital.
Incorrect
Under the proposed FINRA Rule 4110(b)(1), all business operations which is not in compliance with SEA Rule 15c3-1 must be suspended by a member firm. A member is also expressly permitted to effect liquidating transactions and proprietary transactions upon customer direction which are expected to increase the member’s net capital.
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Question 3 of 10
3. Question
Which of the following accounts shall be classified as “non-customer” as shown on the books of the broker-dealer?
I. A non-broker-dealer affiliate or subsidiary of the reporting broker-dealer
II. Non-proprietary accounts of a foreign broker-dealer
III. Special and limited partners’ non-capital and non-subordinated accounts
IV. Proprietary accounts of a foreign broker-dealerCorrect
Proprietary accounts of a foreign broker-dealer are classified as “non-customer” as shown on the books of the broker-dealer. On the other hand, non-proprietary accounts of a foreign broker-dealer are classified as “customer”. Customer and non-customer classification is based on the rules set by SEA Rule 15c3-3.
Incorrect
Proprietary accounts of a foreign broker-dealer are classified as “non-customer” as shown on the books of the broker-dealer. On the other hand, non-proprietary accounts of a foreign broker-dealer are classified as “customer”. Customer and non-customer classification is based on the rules set by SEA Rule 15c3-3.
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Question 4 of 10
4. Question
How should the general partners’ accounts be classified on the books of the broker-dealers?
Correct
General partners’ accounts are classified as “non-customer”. On the other hand, limited partners’ accounts are classified as “customer” accounts. Customer classification is necessary under the SEA Rule 15c3-3 for customer protection.
Incorrect
General partners’ accounts are classified as “non-customer”. On the other hand, limited partners’ accounts are classified as “customer” accounts. Customer classification is necessary under the SEA Rule 15c3-3 for customer protection.
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Question 5 of 10
5. Question
Which of the following responsibilities are allocated by each party to a carrying agreement?
I. Receipt and delivery of funds and securities
II. Maintenance of books and records
III. Monitoring of accounts
IV. Order executionCorrect
All of the above-mentioned statements are the responsibilities of each party subject to approval by FINRA in pursuant to FINRA Rule 4311. Other responsibilities to be allocated by each party are opening and approving accounts, acceptance of orders, and transmission of orders for execution.
Incorrect
All of the above-mentioned statements are the responsibilities of each party subject to approval by FINRA in pursuant to FINRA Rule 4311. Other responsibilities to be allocated by each party are opening and approving accounts, acceptance of orders, and transmission of orders for execution.
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Question 6 of 10
6. Question
What is the purpose of a creditor in establishing separate margin accounts for the same person?
I. To provide one or more accounts over which a third party investment adviser has investment discretion
II. To avoid double-entry transactions of the creditors
III. To clear transactions through other creditors in which transactions are cleared by separate creditors
IV. To easily detect errors on the creditors’ transaction recordCorrect
According to Federal Reserve Board Rule 220.4, transactions that are not authorized for inclusion in another account are recorded in the margin account. Separate margin accounts are established in a same person in order to clear transactions that are cleared by separate creditors and to provide one or more accounts over which a creditor has investment discretion.
Incorrect
According to Federal Reserve Board Rule 220.4, transactions that are not authorized for inclusion in another account are recorded in the margin account. Separate margin accounts are established in a same person in order to clear transactions that are cleared by separate creditors and to provide one or more accounts over which a creditor has investment discretion.
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Question 7 of 10
7. Question
In which account must all transactions be made available with cash or long positions?
Correct
The investor must deposit cash in trading or selling an existing position when buying securities in a cash account. All transactions must be made available with cash or a long position in a cash account. Cash accounts are fairly straightforward which means proceeds may be used in buying securities.
Incorrect
The investor must deposit cash in trading or selling an existing position when buying securities in a cash account. All transactions must be made available with cash or a long position in a cash account. Cash accounts are fairly straightforward which means proceeds may be used in buying securities.
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Question 8 of 10
8. Question
Which of the following best describes a “margin account”?
Correct
In a margin account, traders will be allowed to borrow funds from a broker without the need of putting up the entire value of a trade. A trader may be allowed to trade other financial products such as futures, options, and stocks.
Incorrect
In a margin account, traders will be allowed to borrow funds from a broker without the need of putting up the entire value of a trade. A trader may be allowed to trade other financial products such as futures, options, and stocks.
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Question 9 of 10
9. Question
Which of the following is not within the definition of a “customer” as described in FINRA Rule 4210?
Correct
As described in FINRA Rule 4210, a customer does not include an “exempted borrower”. Customers are any person whom securities are sold to. Members may be able to extend, arrange, and maintain any credit to any customers.
Incorrect
As described in FINRA Rule 4210, a customer does not include an “exempted borrower”. Customers are any person whom securities are sold to. Members may be able to extend, arrange, and maintain any credit to any customers.
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Question 10 of 10
10. Question
Which term describes the amount of equity to be maintained on a security position held in an account?
Correct
A margin is the amount of equity maintained in an account. In every type of option, the initial margin and the minimum margin are required. For a stock option, minimum margin required must be 10% of the equivalent number of shares at current market prices.
Incorrect
A margin is the amount of equity maintained in an account. In every type of option, the initial margin and the minimum margin are required. For a stock option, minimum margin required must be 10% of the equivalent number of shares at current market prices.