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Question 1 of 10
1. Question
In determining the initial margin and minimum margin required in an “interest rate contract”, which of the following is the underlying component value?
Correct
Under the FINRA Rule 4210, if the option is an interest rate contract, initial margin required is 10% of the product of the current interest rate measure and the applicable multiplier. In every type of option, there are different underlying component values.
Incorrect
Under the FINRA Rule 4210, if the option is an interest rate contract, initial margin required is 10% of the product of the current interest rate measure and the applicable multiplier. In every type of option, there are different underlying component values.
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Question 2 of 10
2. Question
Which of the following accounts shown on the books of the broker-dealer must be classified as “customers”?
I. Special and limited partners’ non-capital and non-subordinated accounts
II. Joint account participation in a hedge fund between a customer and a non-customer
III. Proprietary accounts of a foreign bank
IV. Non-proprietary accounts of a foreign bankCorrect
All of the accounts stated above must be classified as “customer”, except for the proprietary accounts of a foreign bank which must be classified as a non-customer account. Proprietary accounts of a foreign broker or dealer are not included in the PAIB calculation.
Incorrect
All of the accounts stated above must be classified as “customer”, except for the proprietary accounts of a foreign bank which must be classified as a non-customer account. Proprietary accounts of a foreign broker or dealer are not included in the PAIB calculation.
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Question 3 of 10
3. Question
Which of the conditions below must be met in order for the accounts entered by a non-broker-dealer affiliated entity to be considered as a customer pursuant to Non-Confirming Subordination Agreements?
I. There must be a written non-conforming subordination agreement.
II. A written representation must be submitted stating that the subordinated assets are not those of the U.S. customers.
III. A written acknowledgment must be submitted stating that the balances of funds are not subject to foreign customer protection.
IV. An opinion must be formed by the counsel that the affiliated entity is legally authorized to make the subordinated loan of the funds or securities.Correct
Pursuant to Non-Conforming Subordination Agreements with Non-Broker-Dealer Affiliated Entities, all of the conditions stated above must be met to be considered a customer. Once a non-conforming subordination agreement has been approved by the SEC, it may be subject to provisions if the subordination covers assets for a foreign or domestic customer.
Incorrect
Pursuant to Non-Conforming Subordination Agreements with Non-Broker-Dealer Affiliated Entities, all of the conditions stated above must be met to be considered a customer. Once a non-conforming subordination agreement has been approved by the SEC, it may be subject to provisions if the subordination covers assets for a foreign or domestic customer.
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Question 4 of 10
4. Question
As required in FINRA Rule 4311, when shall the carrying firm notify the introducing firm’s chief executive officer of written reports offered to, requested by, and supplied to the introducing firm?
Correct
According to FINRA Rule 4311, written reports must be notified to the introducing firm to assist them with the responsibilities allocated pursuant to the carrying agreement. Annual reports must be notified no later than July 1 of each year. This report must be provided to the designated examining authority.
Incorrect
According to FINRA Rule 4311, written reports must be notified to the introducing firm to assist them with the responsibilities allocated pursuant to the carrying agreement. Annual reports must be notified no later than July 1 of each year. This report must be provided to the designated examining authority.
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Question 5 of 10
5. Question
Which of the following statements best describe a “short sale”?
I. It is a sale of a stock that is not generally owned.
II. A sale of stock that would be borrowed for delivery.
III. It is a process where an owner is unable to make mortgage loan payments for a significant period of time.
IV. It happens when an owner owes more on the mortgage balance than the market value or sale price at the time of sale.Correct
If an owner is unable to make mortgage loan payments for a significant period of time, a legal process called “foreclosure” will be applied, rather than a “short sale”. A short sale happens if the price of the stock drops, a lower price would be offered by the short sellers in order to make a profit.
Incorrect
If an owner is unable to make mortgage loan payments for a significant period of time, a legal process called “foreclosure” will be applied, rather than a “short sale”. A short sale happens if the price of the stock drops, a lower price would be offered by the short sellers in order to make a profit.
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Question 6 of 10
6. Question
What action must be done if an entity experiences a short sale?
Correct
Short selling works when a brokerage firm lends you a stock coming from their own inventory, the margin account of other brokerage firm clients, or another lender. However, interests would be charged to the entity for the loan and is subject to margin rules. If dividends have been paid by the firm making the loan, an entity must also pay back a dividend to them.
Incorrect
Short selling works when a brokerage firm lends you a stock coming from their own inventory, the margin account of other brokerage firm clients, or another lender. However, interests would be charged to the entity for the loan and is subject to margin rules. If dividends have been paid by the firm making the loan, an entity must also pay back a dividend to them.
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Question 7 of 10
7. Question
According to the margin requirements stated in FINRA Rule 4210, which of the following securities are qualified as a “listed non-equity securities”?
I. Non-equity securities that are listed on a national securities exchange
II. Non-equity securities that have unlisted trading privileges on a national securities exchange
III. Any securities that are not traded on the national securities exchange
IV. Any securities that have a principal amount of not less than $25 million of the issue was outstandingCorrect
If non-equity securities are listed on a national securities exchange and have unlisted trading privileges, it is called a “listed non-equity securities”. If securities are not traded on the national securities exchange, it is under the “other marginable non-equity securities”.
Incorrect
If non-equity securities are listed on a national securities exchange and have unlisted trading privileges, it is called a “listed non-equity securities”. If securities are not traded on the national securities exchange, it is under the “other marginable non-equity securities”.
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Question 8 of 10
8. Question
Which of the following amounts are required to be deposited by a customer either in cash or by securities for the purpose of effecting new securities transactions and commitments?
I. At an amount that are at least the greater of the amount specified in FINRA Rule 4210 with certain exceptions.
II. At an amount that are at least greater of the equity of $2,000 excluding the excess cash on the cost of securities purchased
III. At an amount that are at least greater of the amount specified in “Regulation T” with certain exceptions.
IV. At an amount that would not exceed $25 million from the cost of securities plus other fees.Correct
A customer is required to deposit margin in cash or by securities in an amount specified by FINRA Rule 4210 and by Regulation T. An equity shall also have at least $2,000 excluding the excess cash on the cost of the security purchased. However, a minimum of $25,000 is required for a “pattern day trader”.
Incorrect
A customer is required to deposit margin in cash or by securities in an amount specified by FINRA Rule 4210 and by Regulation T. An equity shall also have at least $2,000 excluding the excess cash on the cost of the security purchased. However, a minimum of $25,000 is required for a “pattern day trader”.
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Question 9 of 10
9. Question
What balances of the margin must be maintained under the margin requirements of FINRA Rule 4210?
I. The higher between 5 percent of the principal amount or 30 percent of the current market value for each short bonds.
II. The higher between $2.50 per share or 30 percent of the current market value for each $5.00 short stock.
III. The higher between $5.00 per share or 100 percent of the current market value for each $5.00 short stock.
IV. 25 percent of the current market value of all margin securities excluding the “long” security futures contracts.Correct
Under FINRA Rule 4210, Statements I and IV are the amounts to be maintained in all customers’ accounts, plus the amounts higher between $2.50 per share or 100 percent of the current market value, and the higher between $5.00 per share or 3 percent of the current market value for every $5.00 short stock. In addition to this is the 100 percent of the current market value for securities held “long” in the account under non-margin eligible equity securities.
Incorrect
Under FINRA Rule 4210, Statements I and IV are the amounts to be maintained in all customers’ accounts, plus the amounts higher between $2.50 per share or 100 percent of the current market value, and the higher between $5.00 per share or 3 percent of the current market value for every $5.00 short stock. In addition to this is the 100 percent of the current market value for securities held “long” in the account under non-margin eligible equity securities.
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Question 10 of 10
10. Question
Who of the following is not included in the required arbitration under FINRA Rule 13200?
Correct
In business activities, if a dispute arises between either/both the members and/or associated persons, the dispute must be arbitrated as required in FINRA Rule 13200. If a dispute arises out of the insurance business activities, arbitration would not be required by this Code.
Incorrect
In business activities, if a dispute arises between either/both the members and/or associated persons, the dispute must be arbitrated as required in FINRA Rule 13200. If a dispute arises out of the insurance business activities, arbitration would not be required by this Code.