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Question 1 of 10
1. Question
What is the purpose of FINRA on prescribing greater net capital or net worth requirements for a carrying or clearing members?
Correct
Under the capital compliance of FINRA Rule 4110, a clearing or carrying member is prescribed to have a greater net capital or net worth requirements to exercise the authority in protecting the investors or the public interest. A more stringent treatment of net worth’s computation would also be applied.
Incorrect
Under the capital compliance of FINRA Rule 4110, a clearing or carrying member is prescribed to have a greater net capital or net worth requirements to exercise the authority in protecting the investors or the public interest. A more stringent treatment of net worth’s computation would also be applied.
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Question 2 of 10
2. Question
Which of the following must be provided in pro forma capital position for a written request on FOCUS extension?
I. Net worth
II. Net capital excluding its excess
III. Aggregate indebtedness
IV. Net profit or loss for the monthCorrect
In a pro forma capital position for a FOCUS extension request, the net worth, net capital, excess of net capital, aggregate indebtedness, net profit or loss for the month, and capital percentage or ratio must be included. This written request must be signed by the chief financial officer or by a senior officer in the absence of a CFO.
Incorrect
In a pro forma capital position for a FOCUS extension request, the net worth, net capital, excess of net capital, aggregate indebtedness, net profit or loss for the month, and capital percentage or ratio must be included. This written request must be signed by the chief financial officer or by a senior officer in the absence of a CFO.
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Question 3 of 10
3. Question
How shall the net capital of a “consolidated entity” be computed?
Correct
Under the SEA Rule 15c3-1, the minimum net capital of a consolidated entity is different from the net capital requirement of inactive exchange members and registered trades. Its net capital requirement is determined by adding the required net capital of a consolidated subsidiary and the minimum amount of net capital of a parent broker-dealer.
Incorrect
Under the SEA Rule 15c3-1, the minimum net capital of a consolidated entity is different from the net capital requirement of inactive exchange members and registered trades. Its net capital requirement is determined by adding the required net capital of a consolidated subsidiary and the minimum amount of net capital of a parent broker-dealer.
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Question 4 of 10
4. Question
Which of the following entities are not subject to net capital under the SEA Rule 15c3-1?
Correct
Under the SEA Rule 15c-3, an entity with inactive exchange members are not subject to a minimum net capital requirement. The reason of its exemption is because an inactive exchange member is not conducting or engaged in a securities business.
Incorrect
Under the SEA Rule 15c-3, an entity with inactive exchange members are not subject to a minimum net capital requirement. The reason of its exemption is because an inactive exchange member is not conducting or engaged in a securities business.
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Question 5 of 10
5. Question
What actions must be done by a broker or dealer to not be subject to the Aggregate Indebtedness Standard in relation to the ratio requirements under SEA Rule 15c-3?
I. He shall not permit a net capital of less than $250,000 or 2 percent of aggregate debit items, whichever is higher.
II. He shall include the market value of items of more than 7 business days old.
III. He shall add the net worth in computing the 1 percent contract value of all failed securities.
IV. Credit balances shall be excluded in the accounts payable of securities not yet received or been processed.Correct
In relation to the ratio requirements under SEA Rule 15c-3, a broker or dealer may not be subject to the Aggregate Indebtedness Standard if he would deduct the net worth in computing the 1 percent contract value of all failed securities rather than including it in the computation. Other actions include the Statements I, II, and IV mentioned above. In addition to this, the computation must be required weekly.
Incorrect
In relation to the ratio requirements under SEA Rule 15c-3, a broker or dealer may not be subject to the Aggregate Indebtedness Standard if he would deduct the net worth in computing the 1 percent contract value of all failed securities rather than including it in the computation. Other actions include the Statements I, II, and IV mentioned above. In addition to this, the computation must be required weekly.
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Question 6 of 10
6. Question
Under the SEA Rule 15c-3, what is the net capital requirement of a “non-carrying brokers”?
Correct
Non-carrying brokers hold the accounts of non-customers. Therefore, its net capital requirement would be the “minimum” amount specified under SEA Rule 15c3-1. For prime brokers, their net capital requirement shall not be less than $1,500,000.
Incorrect
Non-carrying brokers hold the accounts of non-customers. Therefore, its net capital requirement would be the “minimum” amount specified under SEA Rule 15c3-1. For prime brokers, their net capital requirement shall not be less than $1,500,000.
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Question 7 of 10
7. Question
Under FINRA Rule 3310, which of the following brokers or dealers are subject to the Bank Secrecy Act for Anti-Money Laundering Compliance Program?
I. Introducing brokers
II. Carrying brokers
III. Prime brokers
IV. Non-carrying brokersCorrect
According to FINRA, the Bank Secrecy Act for Anti-Money Laundering Compliance Program applies to all brokers without any exceptions. It must first be tailored to fit the business factors regarding its size, location, activities, types of accounts, and types of transactions.
Incorrect
According to FINRA, the Bank Secrecy Act for Anti-Money Laundering Compliance Program applies to all brokers without any exceptions. It must first be tailored to fit the business factors regarding its size, location, activities, types of accounts, and types of transactions.
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Question 8 of 10
8. Question
Which of the following associated persons are exempted from member registration?
I. Associated persons who are solely and exclusively have clerical and ministerial functions
II. Associated persons who are not in any way related to commodities
III. Associated persons who have transactions in municipal securities
IV. Associated persons who only transact securities with entities outside the U.S.Correct
Under FINRA Rule 1230, associated persons are exempt from registration if their functions are solely clerical or ministerial. In addition to this, their functions must be exclusive for transactions in commodities, municipal securities, and security futures.
Incorrect
Under FINRA Rule 1230, associated persons are exempt from registration if their functions are solely clerical or ministerial. In addition to this, their functions must be exclusive for transactions in commodities, municipal securities, and security futures.
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Question 9 of 10
9. Question
In relation to the networking arrangements between members and financial institutions, where must the broker-dealer services be conducted?
Correct
Under FINRA Rule 3160, the setting where a member shall conduct broker-dealer services on the premises of a financial institution must be an area where the member’s name is displayed clearly. This is a requirement for networking arrangements between members and financial institutions. A member shall also be identified clearly as the person providing broker-dealer services to distinguish its services from the financial institution.
Incorrect
Under FINRA Rule 3160, the setting where a member shall conduct broker-dealer services on the premises of a financial institution must be an area where the member’s name is displayed clearly. This is a requirement for networking arrangements between members and financial institutions. A member shall also be identified clearly as the person providing broker-dealer services to distinguish its services from the financial institution.
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Question 10 of 10
10. Question
Which of the following public communications company are required to have disclosures on networking arrangements between members and financial institutions under FINRA Rule 3160?
I. Automated teller machine screens which promote the service of a financial institution
II. Radio or television broadcasts promoting the service of financial institution
III. Posters and brochures with the name or service of financial institution
IV. Billboards offering legal services by the broker or dealerCorrect
All retail communications that announce the name and location of the financial institutions and the services provided by the broker or dealer must be disclosed. A billboard promoting legal services by a broker or dealer is not included if its sole purpose is to promote services that are not related to a broker or a dealer’s job. Disclosures on communications with the public must not be FIDC insured, no bank guarantee, and may lose value.
Incorrect
All retail communications that announce the name and location of the financial institutions and the services provided by the broker or dealer must be disclosed. A billboard promoting legal services by a broker or dealer is not included if its sole purpose is to promote services that are not related to a broker or a dealer’s job. Disclosures on communications with the public must not be FIDC insured, no bank guarantee, and may lose value.