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Question 1 of 10
1. Question
Which of the following is the reason for the bona fide arbitraged’s existence?
I. To avoid fraudulent actions and unnecessary transactions made by the broker-dealer
II. To reduce the risks by making a risk-assessment matrix by the management
III. To recognize the risk reduction and market liquidity of short-selling transactions
IV. To capture the short sales and purchases from current differential in pricingCorrect
A bona fide arbitrage was established to recognize the risk reduction and market liquidity of transactions in short sales. It is also made to capture the differential in pricing for short sales and purchases. Bonafide arbitrage my be claimed if there is an offsetting transaction that occurs at the same time as practicable.
Incorrect
A bona fide arbitrage was established to recognize the risk reduction and market liquidity of transactions in short sales. It is also made to capture the differential in pricing for short sales and purchases. Bonafide arbitrage my be claimed if there is an offsetting transaction that occurs at the same time as practicable.
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Question 2 of 10
2. Question
How many haircuts must be taken for errors of a broker-dealer in the business of acting as a floor broker under the SEA Rule 15c3-1?
Correct
No haircuts shall be taken on the error transactions provided by floor brokers or another broker if it is immediately liquidated a day after an error occurred. If an error occurs on a Friday, it must be liquidated before the closing day of Monday excluding the weekends in between.
Incorrect
No haircuts shall be taken on the error transactions provided by floor brokers or another broker if it is immediately liquidated a day after an error occurred. If an error occurs on a Friday, it must be liquidated before the closing day of Monday excluding the weekends in between.
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Question 3 of 10
3. Question
How can a broker-dealer be considered as primarily in the business of acting as a floor broker?
Correct
A broker-dealer shall have a floor brokerage commission of 75% to be considered as primarily in the business of acting as a floor broker. A floor broker may be interpreted as either the owner of the seat or the lessee of the seat. The other term for a floor broker is “pit broker” which is an independent member who executes trades on the exchange floor.
Incorrect
A broker-dealer shall have a floor brokerage commission of 75% to be considered as primarily in the business of acting as a floor broker. A floor broker may be interpreted as either the owner of the seat or the lessee of the seat. The other term for a floor broker is “pit broker” which is an independent member who executes trades on the exchange floor.
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Question 4 of 10
4. Question
Who is not required in taking an open contractual commitment charge from the underwriting commitment in entering a written agreement with another syndicate member?
Correct
In underwriting backstop agreement, a member of an underwriting syndicate in a firm commitment underwriting is not required in taking an open contractual commitment charge from the underwriting commitment with another syndicate member. This underwriting syndicate member is called a “backstop recipient” while another syndicate member is called a “backstop provider.”
Incorrect
In underwriting backstop agreement, a member of an underwriting syndicate in a firm commitment underwriting is not required in taking an open contractual commitment charge from the underwriting commitment with another syndicate member. This underwriting syndicate member is called a “backstop recipient” while another syndicate member is called a “backstop provider.”
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Question 5 of 10
5. Question
What are the conditions in underwriting the backstop agreement between the backstop recipient and the backstop provider?
I. The written agreement is executed before the time the backstop recipient becomes obligated to the underwriting commitment.
II. The backstop provider deducts in its net capital computation the open contractual commitment charge.
III. The backstop provider includes in its net capital computation the open contractual commitment charge.
IV. The backstop provider equivocally purchased any unsold securities allocated to the backstop recipient.Correct
The conditions in underwriting backstop agreement between the backstop recipient and backstop provider are the first and second statements. The backstop provider is required “unequivocally” to purchase any unsold securities allocated to the backstop recipient. The transaction must not be doubtful for the commitment to be effective in both parties.
Incorrect
The conditions in underwriting backstop agreement between the backstop recipient and backstop provider are the first and second statements. The backstop provider is required “unequivocally” to purchase any unsold securities allocated to the backstop recipient. The transaction must not be doubtful for the commitment to be effective in both parties.
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Question 6 of 10
6. Question
How does an open contractual commitment be considered closed or completed?
I. If the open contractual commitment arises from a transaction in which a customer of the other broker or dealer had an interest
II. If the other dealer was not a market maker in the securities involved
III. If the other broker was acting as the customer’s agent
IV. If the open contractual commitment had a trade date within three business daysCorrect
All of the statements above would consider an open contractual commitment closed or completed. The open contractual commitment must also have a settlement date on or within thirty days prior to the filing date. The obligations of both parties must also be remained outstanding on the filing or settlement date in three business days.
Incorrect
All of the statements above would consider an open contractual commitment closed or completed. The open contractual commitment must also have a settlement date on or within thirty days prior to the filing date. The obligations of both parties must also be remained outstanding on the filing or settlement date in three business days.
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Question 7 of 10
7. Question
On which category shall the records of the special and limited partners’ non-capital and non-subordinated accounts be shown on the books?
Correct
As stated in SEA Rule 15c3-3, the records of the special and limited partners’ non-capital and non-subordinated accounts must be shown under the customer accounts category. For the non-capital and non-subordinated accounts of a general partner, it must be reported under the non-customer accounts.
Incorrect
As stated in SEA Rule 15c3-3, the records of the special and limited partners’ non-capital and non-subordinated accounts must be shown under the customer accounts category. For the non-capital and non-subordinated accounts of a general partner, it must be reported under the non-customer accounts.
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Question 8 of 10
8. Question
Which conditions must be satisfied in using a segregation management allocation system to eliminate a possession or control deficits?
I. If the securities do not have any doubtful transactions from the previous transactions
II. If the re-selection of securities cannot create a deficit in another security
III. If a verifiable and detailed audit trail is maintained
IV. If the broker or dealer identifies the risks in creating deficits within three business daysCorrect
The re-selection of securities must not create a deficit in another security in order to use a segregation allocation management system. A verifiable and detailed audit trail must also be maintained in computing and reporting the prior day’s stock record to identify any excess or deficit after the segregation substitution.
Incorrect
The re-selection of securities must not create a deficit in another security in order to use a segregation allocation management system. A verifiable and detailed audit trail must also be maintained in computing and reporting the prior day’s stock record to identify any excess or deficit after the segregation substitution.
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Question 9 of 10
9. Question
Which transactions are not available for same-day turnaround rule under the physical possession or control of securities?
I. For securities received is in the satisfaction that has reached a settlement on the day of its receipt
II. For returns of securities borrowed
III. For securities loans or recalls from bank
IV. For securities loans or recall from stock loansCorrect
The same-day turnaround rule is not available for securities returned, recalled from a bank, or recalled from stock loans. If the securities received are in the satisfaction that has reached a settlement on the day of its receipt, it must be available for turnarounds. This is a requirement under the physical possession or control of securities of SEA Rule 15c3-3.
Incorrect
The same-day turnaround rule is not available for securities returned, recalled from a bank, or recalled from stock loans. If the securities received are in the satisfaction that has reached a settlement on the day of its receipt, it must be available for turnarounds. This is a requirement under the physical possession or control of securities of SEA Rule 15c3-3.
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Question 10 of 10
10. Question
What are the requirements in Automated Customer Account Transfer System deliveries?
I. It must be paid partially for the first quarter of the year.
II. It must be a fully paid cash account.
III. It shall not create or increase a deficit.
IV. An increase in deficit may be included in the account with proper disclosures.Correct
Under SEA Rule 15c3-3, the ACATS or Automated Customer Account Transfer System must be a fully paid cash account and must not create any deficits with respect to its deliveries. The segregation requirements and control locations must also be reduced by an equal quantity.
Incorrect
Under SEA Rule 15c3-3, the ACATS or Automated Customer Account Transfer System must be a fully paid cash account and must not create any deficits with respect to its deliveries. The segregation requirements and control locations must also be reduced by an equal quantity.