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Question 1 of 10
1. Question
What is the minimum net capital requirement of a specialist on a nationals securities exchange?
Correct
Under SEA Rule 15c3-1, the minimum net capital requirement does not apply for securities for specialist broker-dealer registered on a national securities exchange. This is specifically applied for the market makers under 15c3-1(a)(4). Warrant and underlying common stock must be treated as separate securities subject to a specific net capital requirement.
Incorrect
Under SEA Rule 15c3-1, the minimum net capital requirement does not apply for securities for specialist broker-dealer registered on a national securities exchange. This is specifically applied for the market makers under 15c3-1(a)(4). Warrant and underlying common stock must be treated as separate securities subject to a specific net capital requirement.
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Question 2 of 10
2. Question
Under FINRA Rule 2251, which of the following must be processed and forwarded for “equity securities” to the beneficial owner?
I. Notices on monetary or technical defaults
II. Notices on material events and financial reports
III. All annual reports sent to stockholders by the issuer
IV. All proxy materials sent to stockholders by the issuerCorrect
For equity securities, all annual reports and all proxy materials sent to stockholders that are furnished to the member by the issuer of the securities must be processed and forwarded. This includes all other issue-related materials. On the other hand, notices on material events, financial reports, and monetary or technical defaults are under the debt securities.
Incorrect
For equity securities, all annual reports and all proxy materials sent to stockholders that are furnished to the member by the issuer of the securities must be processed and forwarded. This includes all other issue-related materials. On the other hand, notices on material events, financial reports, and monetary or technical defaults are under the debt securities.
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Question 3 of 10
3. Question
Under FINRA Rule 11740, in which of the following situations must a refund of deposit be made?
Correct
A refund on deposit shall be made on-demand if the market value of the subject changes as to the total or partial refund of any deposits previously made. Any party who is partially unsecured by the reason for changes in market value may demand a deposit equal to the difference in the contract price and the market price. Demands for the refunds must be made in writing.
Incorrect
A refund on deposit shall be made on-demand if the market value of the subject changes as to the total or partial refund of any deposits previously made. Any party who is partially unsecured by the reason for changes in market value may demand a deposit equal to the difference in the contract price and the market price. Demands for the refunds must be made in writing.
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Question 4 of 10
4. Question
Which of the following are exemptions in filing the initial annual audit report?
I. If the broker-dealer’s registration with the Commission became effective within six months at the end of the audit period
II. If the broker-dealer carries customer accounts that need an annual audit report
III. If the broker-dealer’s annual audit report covers the entire period from the registration date
IV. If the broker-dealer does not clear transactions or carry customer accounts in financial transactionsCorrect
A broker-dealer is not required to apply to Securities and Exchange Commission in filing the annual audit report if the broker-dealer’s annual audit report covers the entire period from the registration date and if he or she is not carrying customer accounts or clearing transactions. If the following conditions are met, the broker-dealer must send notice to the Commission before its audited annual report.
Incorrect
A broker-dealer is not required to apply to Securities and Exchange Commission in filing the annual audit report if the broker-dealer’s annual audit report covers the entire period from the registration date and if he or she is not carrying customer accounts or clearing transactions. If the following conditions are met, the broker-dealer must send notice to the Commission before its audited annual report.
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Question 5 of 10
5. Question
What are the requirements in requesting an extension in filing an annual audit report?
I. The amount of time of an extension
II. The fact that an unqualified opinion is expected to not be issued
III. The specific reason for the extension
IV. The fact that there are no material weaknesses existCorrect
It is stated in the SEA Rule 17a-5 that in requesting extensions and exemptions in filing an annual audit report, a broker-dealer must specify the amount of time and specific reason for the extension. He must also submit a letter indicating that there are no material weaknesses or any problems in books and records.
Incorrect
It is stated in the SEA Rule 17a-5 that in requesting extensions and exemptions in filing an annual audit report, a broker-dealer must specify the amount of time and specific reason for the extension. He must also submit a letter indicating that there are no material weaknesses or any problems in books and records.
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Question 6 of 10
6. Question
In the reports of independent public accountants, which opinions must be expressed and stated clearly?
I. Opinion as to the consistency of the application of accounting principles
II. Opinions as to the material changes in accounting principles
III. Opinions as to the practices reflected in the report
IV. Opinions as to the changes in accounting estimates and errors occurred after the reporting periodCorrect
As a requirement under the SEA Rule 17a-5, an independent accountant must clearly express their opinion on the consistency of accounting principles, its material changes, if any, and the practices reflected in the report. Also, a conclusion in the exemption must be stated clearly. An independent public accountant must specify how the reports comply with the generally accepted accounting principles.
Incorrect
As a requirement under the SEA Rule 17a-5, an independent accountant must clearly express their opinion on the consistency of accounting principles, its material changes, if any, and the practices reflected in the report. Also, a conclusion in the exemption must be stated clearly. An independent public accountant must specify how the reports comply with the generally accepted accounting principles.
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Question 7 of 10
7. Question
Which of the following conditions must be met in order for the broker or dealer to not be required to send the statements to a customer?
I. If the broker or dealer regularly sends the statements to the customers twice a year.
II. If the broker or dealer semi-annually sends the statements to the customers.
III. If the broker or dealer published the statements not later than 75 days after the date of the audited statements.
IV. If the broker or dealer published the statements not later than 90 days after the date of the audited statements.Correct
In sending certain financial information to customers, statements may not be required to be sent if the broker or dealer regularly sends it to the customers semi-annually or twice a year. A broker or dealer must also have published the statements not later than 75 days after the unaudited statements and 90 days for audited statements. Statements must be accessed through a valid Internet Uniform Resource Locator.
Incorrect
In sending certain financial information to customers, statements may not be required to be sent if the broker or dealer regularly sends it to the customers semi-annually or twice a year. A broker or dealer must also have published the statements not later than 75 days after the unaudited statements and 90 days for audited statements. Statements must be accessed through a valid Internet Uniform Resource Locator.
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Question 8 of 10
8. Question
Under the SEA Rule 17a-5, in which of the following mediums must the statements for certain information be posted by the broker or dealer for the customers?
Correct
The required statements of certain information to be sent to the customers must be accessed through the broker or dealer’s website home page. On each page of the website, a customer must log in before accessing the statements. For two or more brokers, each statement is accessed by each home page of the broker or dealer’s website.
Incorrect
The required statements of certain information to be sent to the customers must be accessed through the broker or dealer’s website home page. On each page of the website, a customer must log in before accessing the statements. For two or more brokers, each statement is accessed by each home page of the broker or dealer’s website.
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Question 9 of 10
9. Question
According to the FINRA Rule 2261, who must disclose the statement of financial conditions in the balance sheet in accordance with the federal securities laws?
I. Any member who has experiences on the independent public accountant’s role
II. Any member who is a party to an open transaction
III. Any member who has cash deposits of another member
IV. Any member who has securities deposits of another memberCorrect
Under the FINRA Rule 2261, financial conditions must be disclosed in the most recent balance sheet by members who are party to an open transaction and who has cash or securities deposits of another member. This financial condition report must be disclosed together with the written request whether in paper or electronic form.
Incorrect
Under the FINRA Rule 2261, financial conditions must be disclosed in the most recent balance sheet by members who are party to an open transaction and who has cash or securities deposits of another member. This financial condition report must be disclosed together with the written request whether in paper or electronic form.
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Question 10 of 10
10. Question
Which of the following are the roles of an independent public accountant?
I. To bring sellers and buyers together as a third person
II. To seek for clients in buying or selling securities
III. To protect shareholders and potential investors from fraud
IV. To use methods in avoiding conflicts of interest to ensure integrity of performing an auditCorrect
An independent public accountant must protect the shareholders and potential investors from fraudulent transactions. They must also avoid conflicts of interest from different entities. They must ensure that the principle of integrity must be applied in performing an audit. On the other hand, bringing sellers and buyers together and seeking for clients are the roles of a broker or dealer.
Incorrect
An independent public accountant must protect the shareholders and potential investors from fraudulent transactions. They must also avoid conflicts of interest from different entities. They must ensure that the principle of integrity must be applied in performing an audit. On the other hand, bringing sellers and buyers together and seeking for clients are the roles of a broker or dealer.