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Question 1 of 10
1. Question
Under the SEC Rule 17h-1T, which of the following information is/are required to be maintained and preserved by the associated persons of brokers and dealers, regarding the written policies, procedures, or systems in identifying operational and financial risks?
I. Procedures in monitoring and controlling risks with regards to financing and operating activities, which are caused by uncertain actions of any of its associated persons, other than a natural person.
II. Information on sources of funding with a narrative discussion on liquidation of material assets, the structure of debt capital, and sources of alternative funding.
III. Notes to financial statements that explain the consolidated balance sheets, as of the quarter-end for the broker or dealer and its ultimate holding company.
IV. Risks on reporting responsibilities for trading activities, limitation and restriction policies on trading securities and financial instruments, and description of reviews conducted in monitoring the existing positions.Correct
The consolidated balance sheets are not under the written policies, procedures, or systems concerning the broker or dealer. However, its information is still needed to be maintained and preserved.
Incorrect
The consolidated balance sheets are not under the written policies, procedures, or systems concerning the broker or dealer. However, its information is still needed to be maintained and preserved.
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Question 2 of 10
2. Question
Which of the following is not a technical requirement of an independent public accountant’s reports under SEC Rule 17a-5(i)?
Correct
As a requirement for an independent public accountant’s report, it must be duly dated and signed manually. The report must also contain the exact location where it was issued and have detailed information on the items covered. Complete information indicated in the reports would have fewer complications in making annual financial statements.
Incorrect
As a requirement for an independent public accountant’s report, it must be duly dated and signed manually. The report must also contain the exact location where it was issued and have detailed information on the items covered. Complete information indicated in the reports would have fewer complications in making annual financial statements.
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Question 3 of 10
3. Question
Under the SEC Rule 15c3-1(c), which of the following is not included in deducting fixed assets not readily convertible into cash?
Correct
Mutual fund receivables are not readily converted into cash if it is outstanding for a period longer than thirty (30) days. On the other hand, prepaid items, deficits in secured notes, goodwill, and organization expenses are deducted on fixed assets not readily convertible to cash.
Incorrect
Mutual fund receivables are not readily converted into cash if it is outstanding for a period longer than thirty (30) days. On the other hand, prepaid items, deficits in secured notes, goodwill, and organization expenses are deducted on fixed assets not readily convertible to cash.
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Question 4 of 10
4. Question
Trial balances indicated the proof of money balances of all ledger accounts, and a computation of net capital or tangible net worth. How often must a trial balance be prepared?
Correct
Trial balances and computations must be prepared currently for at least once a month. This would avoid any misstatements in the future in recording the annual trial balances.
Incorrect
Trial balances and computations must be prepared currently for at least once a month. This would avoid any misstatements in the future in recording the annual trial balances.
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Question 5 of 10
5. Question
Under the SEC Rule 17a-5, which of the following is included in the credit risk information on derivatives exposures within seventeen (17) days after the end of the month?
I. Ten largest commitments listed by the counterparty.
II. The broker’s or dealer’s aggregate maximum potential exposure.
III. A complete and detailed report on broker’s or dealer’s exposure for each of the top ten countries where they were exposed.
IV. A complete and detailed report regarding the broker’s or dealer’s exposure by credit rating category.Correct
Instead of providing a complete and detailed report, only a summary of the broker’s or dealer’s exposure must be reported within seventeen (17) days after the end of the month. A complete and detailed report is not required as it takes time for it to analyze, unlike reporting a summary where only important details are emphasized.
Incorrect
Instead of providing a complete and detailed report, only a summary of the broker’s or dealer’s exposure must be reported within seventeen (17) days after the end of the month. A complete and detailed report is not required as it takes time for it to analyze, unlike reporting a summary where only important details are emphasized.
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Question 6 of 10
6. Question
There are certain provisions with respect to Material Associated Persons subject to the supervision of certain domestic regulators under SEC Rule 17h-2T. In which of the following requirements must a broker or dealer comply?
I. The Material Associated Person would comply with the examination and reporting requirements of the Federal banking agency.
II. The Material Associated Person would be supervised by an insurance commissioner.
III. The Material Associated Person is a member of a holding company.
IV. The Material Associated Person would be supervised by an official agency of the state.Correct
It is not a requirement for Material Associated Person to be a member of a holding company in relation to the supervision of certain domestic regulators. Otherwise, the Material Associated Person must be able to comply with the reporting requirements and be supervised by an insurance commissioner and an official agency of the state.
Incorrect
It is not a requirement for Material Associated Person to be a member of a holding company in relation to the supervision of certain domestic regulators. Otherwise, the Material Associated Person must be able to comply with the reporting requirements and be supervised by an insurance commissioner and an official agency of the state.
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Question 7 of 10
7. Question
Which of the following applies to the net capital of a broker or dealer without deducting the securities haircuts, charges on inventory, and charges for market and credit risk?
Correct
The term is called “tentative net capital” as defined in SEC Rule 15c3-1. Tentative net capital is simply called the capital before security haircuts.
Incorrect
The term is called “tentative net capital” as defined in SEC Rule 15c3-1. Tentative net capital is simply called the capital before security haircuts.
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Question 8 of 10
8. Question
When must unaudited statements dated six (6) months after the date of audited statements be furnished?
I. Within sixty-five (65) days after the date of the unaudited statements.
II. 70 days after the expiration of the time limit if the broker or dealer sends it with the next mailing of their quarterly customer statements of account.
III. Before the issuance of the financial statements.
IV. At the end of the quarter after the date of audited statements.Correct
Statements I and II are the required period for unaudited statements to be furnished stated in the SEC Rule 17a-5(c). Longer days allotted in furnishing unaudited statements would allow more extra days for revisions before it becomes furnished.
Incorrect
Statements I and II are the required period for unaudited statements to be furnished stated in the SEC Rule 17a-5(c). Longer days allotted in furnishing unaudited statements would allow more extra days for revisions before it becomes furnished.
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Question 9 of 10
9. Question
In a contract of warrants, which of the following is not required to be stated in the deliveries affected more than 30 days after the expiration of rights or other securities?
Correct
All of the choices above are required under FINRA Rule 11840 except for the letter of authorization. A letter of authorization is outside the scope of the contract of warrants and is not a requirement in the delivery of expired rights and securities.
Incorrect
All of the choices above are required under FINRA Rule 11840 except for the letter of authorization. A letter of authorization is outside the scope of the contract of warrants and is not a requirement in the delivery of expired rights and securities.
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Question 10 of 10
10. Question
Under FINRA Rule 13201, claims regarding discrimination in a workplace, sexual harassment, or violation of a statute is not required to be arbitrated under the Code. Which of the following statements is correct?
Correct
Arbitration would happen only if the parties agreed on it, either before or after the argument or certain misbehavior arose. If an agreement does not exist, any forms of claims regarding discrimination, sexual harassment, or violation of a statute would not require arbitration.
Incorrect
Arbitration would happen only if the parties agreed on it, either before or after the argument or certain misbehavior arose. If an agreement does not exist, any forms of claims regarding discrimination, sexual harassment, or violation of a statute would not require arbitration.