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Question 1 of 10
1. Question
If a firm has a fiscal period ended June 30, 2020, and an engagement letter was signed the month before the reporting period, how shall the statements be re-filed?
Correct
In case an engagement letter was signed a month before the reporting period, the statements under Rule 17a-5(f)(2) are not required to be re-filed electronically. It may still be re-filed if the company wishes to do so. In case it was re-filed, proof of submission must be sent with a copy of any financial notification filed with FINRA.
Incorrect
In case an engagement letter was signed a month before the reporting period, the statements under Rule 17a-5(f)(2) are not required to be re-filed electronically. It may still be re-filed if the company wishes to do so. In case it was re-filed, proof of submission must be sent with a copy of any financial notification filed with FINRA.
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Question 2 of 10
2. Question
What must be filed in changing the fiscal year of an entity as prescribed by SEA Rule 17a-5?
Correct
Notification of change of fiscal year must be filed under the SEA Rule 17a-5. This notice must be filed with the regional office of the Commission in the principal place of the business’s region and the principal office of the designated examining authority. The notice must contain the specific reason for fiscal year changes. This notice will be approved by the designated examining authority of the broker or dealer once reviewed.
Incorrect
Notification of change of fiscal year must be filed under the SEA Rule 17a-5. This notice must be filed with the regional office of the Commission in the principal place of the business’s region and the principal office of the designated examining authority. The notice must contain the specific reason for fiscal year changes. This notice will be approved by the designated examining authority of the broker or dealer once reviewed.
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Question 3 of 10
3. Question
In terms of accounting, what is the basis of the size of haircuts?
Correct
In accounting, the basis of the size of haircuts is the risk of underlying assets. If the assets are riskier, it would result in a large haircut. If the assets are less risky, it would result in a shorter haircut. A haircut will be used as collateral for a loan because it is lower than the market value placed on an asset.
Incorrect
In accounting, the basis of the size of haircuts is the risk of underlying assets. If the assets are riskier, it would result in a large haircut. If the assets are less risky, it would result in a shorter haircut. A haircut will be used as collateral for a loan because it is lower than the market value placed on an asset.
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Question 4 of 10
4. Question
What percentage of haircuts is standard for margin accounts in assessing risks of underlying assets?
Correct
A haircut of 50 percent is the standard for margin accounts in assessing risks. It may be increased if the deposited securities present liquidity or volatility risks. If a stock poses potential price and volatility risks, it may not be used as collateral in margin accounts. An entity must always monitor its liquidity and volatility risks through the haircuts in margin accounts.
Incorrect
A haircut of 50 percent is the standard for margin accounts in assessing risks. It may be increased if the deposited securities present liquidity or volatility risks. If a stock poses potential price and volatility risks, it may not be used as collateral in margin accounts. An entity must always monitor its liquidity and volatility risks through the haircuts in margin accounts.
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Question 5 of 10
5. Question
Which of the following statements are correct if a broker-dealer chose to clear the specialist options position through another broker-dealer and clear the specialist stock positions by himself?
Correct
In the case which the stock positions are cleared himself and the options positions are cleared by another broker-dealer, the options positions are exempt from haircuts while the stock positions are not exempt. Under SEA Rule 15c3-1, if the broker-dealer treated certain dealer securities under optional standards, the other securities would be subject to regular haircuts.
Incorrect
In the case which the stock positions are cleared himself and the options positions are cleared by another broker-dealer, the options positions are exempt from haircuts while the stock positions are not exempt. Under SEA Rule 15c3-1, if the broker-dealer treated certain dealer securities under optional standards, the other securities would be subject to regular haircuts.
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Question 6 of 10
6. Question
How can an options position be closed?
I. By putting in an order to sell the contract
II. By selling to make a profit or loss
III. To purchase more stocks for future sales
IV. To increase the asset and decrease liabilityCorrect
An options position can be closed by putting in an order to sell the contract or by selling to make a profit, loss, or breakeven. This term is called the “sell to close.” This is used by traders if they no longer want to hold the options position for the long bullish or long bearish position on the underlying asset.
Incorrect
An options position can be closed by putting in an order to sell the contract or by selling to make a profit, loss, or breakeven. This term is called the “sell to close.” This is used by traders if they no longer want to hold the options position for the long bullish or long bearish position on the underlying asset.
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Question 7 of 10
7. Question
Which contracts must the traders “sell to close” if they no longer want to hold an underlying asset’s long bullish position?
Correct
A call options contracts may be sold to close by a trader if they want to eliminate the long bullish position of an underlying asset. On the other hand, if the trader wants to eliminate the long bearish position of an underlying asset, a put options contracts are sold to close.
Incorrect
A call options contracts may be sold to close by a trader if they want to eliminate the long bullish position of an underlying asset. On the other hand, if the trader wants to eliminate the long bearish position of an underlying asset, a put options contracts are sold to close.
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Question 8 of 10
8. Question
Which of the following scenarios must be treated as a non-customer account?
I. When the same broker-dealer who carries the specialist account also carries the specialist’s personal account
II. When two different broker-dealers carry the specialist account and specialist’s personal account
III. When a third person holds or carries the specialist account and the broker-dealer carries the specialist’s personal account
IV. When the person who carries the specialist’s personal account is the same with the person who carries the specialist accountCorrect
Incorrect
Under SEA Rule 15c3-1, if one broker-dealer carries both a specialist account and a specialist personal’s account, it must be treated as a non-customer account. If the trading happens in commodity futures, the options specialists will not lose the election in meeting the net capital requirements under the rule.
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Question 9 of 10
9. Question
How shall the equity on deposit with a carrying broker be treated?
Correct
The equity on deposit with a carrying broker shall not be deducted from net worth in computing net capital as required by SEA Rule 15c3-1. Any cash or securities including the contribution in subordinated liabilities or capital are required to be deposited in the account even if it is not included in the agreement.
Incorrect
The equity on deposit with a carrying broker shall not be deducted from net worth in computing net capital as required by SEA Rule 15c3-1. Any cash or securities including the contribution in subordinated liabilities or capital are required to be deposited in the account even if it is not included in the agreement.
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Question 10 of 10
10. Question
What are the roles of the broker-dealer who carries equity on deposit accounts?
I. He shall issue appropriate calls for additional equity.
II. He shall liquidate existing positions if there is a failure to meet a call for equity.
III. He shall extend further credit in the account if the account falls as prescribed in the rule.
IV. He shall mark the account to the market daily.Correct
A carrying broker-dealer of equity on deposit shall comply with the abovementioned statements, except to extend further credit on equity that falls as prescribed in SEA Rule 15c3-1. It shall not extend further credit account to comply with the rule’s requirement. The broker-dealer shall obtain a written undertaking and state the representations of the market makers, specialists, and certain other dealers.
Incorrect
A carrying broker-dealer of equity on deposit shall comply with the abovementioned statements, except to extend further credit on equity that falls as prescribed in SEA Rule 15c3-1. It shall not extend further credit account to comply with the rule’s requirement. The broker-dealer shall obtain a written undertaking and state the representations of the market makers, specialists, and certain other dealers.