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Question 1 of 10
1. Question
How must the security haircuts be computed in terms of its application?
Correct
In computing for the combined amount of haircuts to be applied, the total contractual and actual value must be added together. If common stocks have two categories, long and short, it must be added together in getting either the total contractual or total actual of the haircut.
Incorrect
In computing for the combined amount of haircuts to be applied, the total contractual and actual value must be added together. If common stocks have two categories, long and short, it must be added together in getting either the total contractual or total actual of the haircut.
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Question 2 of 10
2. Question
What action must be done to the debt instruments in the case where the parent or affiliated entity becomes insolvent?
Correct
For the complete satisfaction of the liability or financing loan, ownership of the debt instruments must be “transferable” for the possibility where a parent or affiliated entity becomes insolvent. No penalty fee would be charged in transferring the ownership of the debt instruments.
Incorrect
For the complete satisfaction of the liability or financing loan, ownership of the debt instruments must be “transferable” for the possibility where a parent or affiliated entity becomes insolvent. No penalty fee would be charged in transferring the ownership of the debt instruments.
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Question 3 of 10
3. Question
No net capital value shall be received by a broker-dealer who holds proprietary positions in Certificates of Deposit, Bankers, Acceptances, Commercial Paper, Corporate Non-Convertible Bands, Trust Preferred Securities or similar instruments unless which of the following conditions must be met?
I. If the agreement states that the liability will not be paid prior to the earlier of debt instrument’s early redemption, or debt instrument’s sale by affiliated broker-dealer.
II. If the ownership of debt instruments is transferable by an insolvent person.
III. If the parent orally agrees that the liability will be forgiven by making equity contributions.
IV. If a broker-dealer maintains a liability to the parent on its books equal to the market value of debt instruments.Correct
The conditions mentioned above must be met by a broker-dealer in order to receive a net capital value for such positions, except for which a parent orally agrees that the liability will be forgiven by making equity contributions. A “written or formal” agreement is needed to comply with this condition. In making equity contribution, it shall equal to the market value of unredeemed debt instruments.
Incorrect
The conditions mentioned above must be met by a broker-dealer in order to receive a net capital value for such positions, except for which a parent orally agrees that the liability will be forgiven by making equity contributions. A “written or formal” agreement is needed to comply with this condition. In making equity contribution, it shall equal to the market value of unredeemed debt instruments.
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Question 4 of 10
4. Question
Under FINRA Rule 11892, which of the following thresholds shall be met to declare a transaction as clearly erroneous?
I. In the case of multi-day events, it may be viewed as one event if all transactions were based on the same incorrect issuance which leads to severe valuation error.
II. For transactions occurring during trading halts, it shall be declared as null and void.
III. The price of the transaction is away from the reference price by an amount not smaller than the numerical guidelines provided by FINRA.
IV. The transaction must have a 5% difference from the reference price if the reference price is ranging from $25 to $50.Correct
In determining a clearly erroneous transaction, numerical thresholds must be met. Statement I and II is an exception in describing a clearly erroneous transaction reviewed by the Executive Vice President of FINRA’s Market Regulation Department. Additional factors such as system malfunctions and volatility for security are considered in determining a transaction as clearly erroneous.
Incorrect
In determining a clearly erroneous transaction, numerical thresholds must be met. Statement I and II is an exception in describing a clearly erroneous transaction reviewed by the Executive Vice President of FINRA’s Market Regulation Department. Additional factors such as system malfunctions and volatility for security are considered in determining a transaction as clearly erroneous.
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Question 5 of 10
5. Question
In confirmation of debt securities transactions, which of the following must be disclosed in a “dollar price” basis?
I. Type of yield
II. Call legend
III. Dollar price
IV. Yield to maturity based on the dollar priceCorrect
Dollar price and yield to maturity based on the dollar price shall be disclosed in a dollar price basis of debt security transactions. The type of yield is disclosed in a yield price basis. Call legend is disclosed in callable security.
Incorrect
Dollar price and yield to maturity based on the dollar price shall be disclosed in a dollar price basis of debt security transactions. The type of yield is disclosed in a yield price basis. Call legend is disclosed in callable security.
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Question 6 of 10
6. Question
Which of the following refers to a member which conducts a general securities business and is required in the net capital calculation?
Correct
A general securities member is required in the net capital calculation. It also conducts general securities business. However, he or she is not responsible for carrying customer accounts and does not hold customer funds or securities.
Incorrect
A general securities member is required in the net capital calculation. It also conducts general securities business. However, he or she is not responsible for carrying customer accounts and does not hold customer funds or securities.
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Question 7 of 10
7. Question
Which of the following best describes a “Delivery Versus Payment” account?
I. It is made to the selling customer’s agent for the payment of securities purchased.
II. It is a stipulation that the securities are only delivered once the payment has been made.
III. It is made to the buying customer’s agent for the delivery of securities sold.
IV. It is a stipulation that the payment must be made at the time of delivery, or else the goods will be returned to the seller.Correct
A DVP or Delivery-Versus-Payment is a stipulation between the seller and the buyer regarding the securities purchased or sold. It is also an agreement that the seller will deliver the securities once the payment has been made. It is different from COD or Cash-On-Delivery where payments will be made upon delivery of securities.
Incorrect
A DVP or Delivery-Versus-Payment is a stipulation between the seller and the buyer regarding the securities purchased or sold. It is also an agreement that the seller will deliver the securities once the payment has been made. It is different from COD or Cash-On-Delivery where payments will be made upon delivery of securities.
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Question 8 of 10
8. Question
Under the FINRA Rule 4513, in which period must the records of written customer complaints are preserved?
Correct
Records of written customer complaints shall be preserved for a period of at least four years. These written records may be preserved and be available at the office of supervisory jurisdiction. An action taken by the member regarding the customer complaint must also be specified in the report.
Incorrect
Records of written customer complaints shall be preserved for a period of at least four years. These written records may be preserved and be available at the office of supervisory jurisdiction. An action taken by the member regarding the customer complaint must also be specified in the report.
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Question 9 of 10
9. Question
Under the FINRA Rule 4514, who is authorized to obtain from a customer a check, draft, or other forms of negotiable paper drawn on a customer’s checking and savings account?
Correct
According to FINRA Rule 4514, any member or associated person is authorized to obtain from a customer’s account a check or other negotiable paper drawn only if it has an express written organization signed by the customer. However, members are not required to preserve copies of negotiable instruments signed by the customers.
Incorrect
According to FINRA Rule 4514, any member or associated person is authorized to obtain from a customer’s account a check or other negotiable paper drawn only if it has an express written organization signed by the customer. However, members are not required to preserve copies of negotiable instruments signed by the customers.
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Question 10 of 10
10. Question
According to FINRA Rule 4160, which assets may be transferred within a reasonable period of time?
I. Proprietary assets
II. Customer assets
III. Tangible assets
IV. Intangible assetsCorrect
In relation to asset transfers under FINRA Rule 4160, whether an asset is owned by a customer or a proprietary, it may be transferred in a reasonable period of time. The ownership of the asset may not be continued by a member to custody or retain its record if it fails to provide written verification of assets at such a financial institution.
Incorrect
In relation to asset transfers under FINRA Rule 4160, whether an asset is owned by a customer or a proprietary, it may be transferred in a reasonable period of time. The ownership of the asset may not be continued by a member to custody or retain its record if it fails to provide written verification of assets at such a financial institution.