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Question 1 of 10
1. Question
Which of the following would not be a part of the shareholders’ equity of a company on the financial statement?
Correct
FINRA rule no 4210. Margin Requirements
The term “equity” means the customer’s ownership interest in the account, computed by adding the current market value of all securities “long” and the amount of any credit balance and subtracting the current market value of all securities “short” and the amount of any debit balance. Any variation settlement received or paid on a security futures contract shall be considered a credit or debit to the account for purposes of equityIncorrect
FINRA rule no 4210. Margin Requirements
The term “equity” means the customer’s ownership interest in the account, computed by adding the current market value of all securities “long” and the amount of any credit balance and subtracting the current market value of all securities “short” and the amount of any debit balance. Any variation settlement received or paid on a security futures contract shall be considered a credit or debit to the account for purposes of equity -
Question 2 of 10
2. Question
What does the term maintenance margin mean?
Correct
FINRA rule no 4210. Margin Requirements
The term “maintenance margin” means margin equal to 2 percent of the contract value of the net “long” or net “short” position, by CUSIP, with the counterparty.Incorrect
FINRA rule no 4210. Margin Requirements
The term “maintenance margin” means margin equal to 2 percent of the contract value of the net “long” or net “short” position, by CUSIP, with the counterparty. -
Question 3 of 10
3. Question
Which of the following must be included in requirements for Borrowing of Customers’ Fully Paid or Excess Margin Securities?
I. Providing the customer in writing
II. According to the rules of Exchange Act
III. Having reasonable explanation
IV. Notifying FINRA at least 5 days prior engaging in such activityCorrect
FINRA rule no 4330. Customer Protection — Permissible Use of Customers’ Securities
A member that borrows fully paid or excess margin securities carried for the account of any customer shall:
(A) comply with the requirements of SEA Rule 15c3-3;
(B) comply with the requirements of Section 15(e) of the Exchange Act; and
(C) notify FINRA, in such manner and format as FINRA may require, at least 30 days prior to first engaging in such securities borrows.
(2) Prior to first entering into securities borrows with a customer pursuant to paragraph (b)(1) of this Rule, a member shall:
(A) have reasonable grounds for believing that the customer’s loan(s) of securities are appropriate for the customer. In making this determination, the member shall exercise reasonable diligence to ascertain the essential facts relative to the customer, including, but not limited to, the customer’s financial situation and needs, tax status, investment objectives, investment time horizon, liquidity needs, risk tolerance and any other information the customer may disclose to the member or associated person in connection with entering such securities loans.Incorrect
FINRA rule no 4330. Customer Protection — Permissible Use of Customers’ Securities
A member that borrows fully paid or excess margin securities carried for the account of any customer shall:
(A) comply with the requirements of SEA Rule 15c3-3;
(B) comply with the requirements of Section 15(e) of the Exchange Act; and
(C) notify FINRA, in such manner and format as FINRA may require, at least 30 days prior to first engaging in such securities borrows.
(2) Prior to first entering into securities borrows with a customer pursuant to paragraph (b)(1) of this Rule, a member shall:
(A) have reasonable grounds for believing that the customer’s loan(s) of securities are appropriate for the customer. In making this determination, the member shall exercise reasonable diligence to ascertain the essential facts relative to the customer, including, but not limited to, the customer’s financial situation and needs, tax status, investment objectives, investment time horizon, liquidity needs, risk tolerance and any other information the customer may disclose to the member or associated person in connection with entering such securities loans. -
Question 4 of 10
4. Question
Which of the following statement is not true about authorization records?
Correct
FINRA rule no 4514. Authorization Records for Negotiable Instruments Drawn From a Customer’s Account
No member or person associated with a member shall obtain from a customer or submit for payment a check, draft or other form of negotiable paper drawn on a customer’s checking, savings, share or similar account, without that person’s express written authorization, which may include the customer’s signature on the negotiable instrument. Where the written authorization is separate from the negotiable instrument, the member shall preserve the authorization for a period of three years following the date the authorization expires. This provision shall not, however, require members to preserve copies of negotiable instruments signed by customers.Incorrect
FINRA rule no 4514. Authorization Records for Negotiable Instruments Drawn From a Customer’s Account
No member or person associated with a member shall obtain from a customer or submit for payment a check, draft or other form of negotiable paper drawn on a customer’s checking, savings, share or similar account, without that person’s express written authorization, which may include the customer’s signature on the negotiable instrument. Where the written authorization is separate from the negotiable instrument, the member shall preserve the authorization for a period of three years following the date the authorization expires. This provision shall not, however, require members to preserve copies of negotiable instruments signed by customers. -
Question 5 of 10
5. Question
Which of the following statements is/are true about discretionary accounts?
I. the client must sign a discretionary disclosure with the broker as documentation of the client’s consent
II. an investment account that allows an authorized broker to buy and sell securities without the client’s consent for each trade
III. Discretionary accounts are less expensive than non discretionary accounts
IV. Fund managers and advisers are bound by fiduciary rules that make it necessary for them to act in their client’s best interests.Correct
FINRA rule no 4512. Customer Account Information
For discretionary accounts maintained by a member, in addition to compliance with subparagraph (1) and, to the extent applicable, subparagraph (2) above, and Rule 3260, the member shall maintain a record of the dated, signature of each named, associated person of the member authorized to exercise discretion in the account. This recordkeeping requirement shall not apply to investment discretion granted by a customer as to the price at which or the time to execute an order given by a customer for the purchase or sale of a definite dollar amount or quantity of a specified security. Nothing in this Rule shall be construed as allowing members to maintain discretionary accounts or exercise discretion in such accounts except to the extent permitted under the federal securities laws.Incorrect
FINRA rule no 4512. Customer Account Information
For discretionary accounts maintained by a member, in addition to compliance with subparagraph (1) and, to the extent applicable, subparagraph (2) above, and Rule 3260, the member shall maintain a record of the dated, signature of each named, associated person of the member authorized to exercise discretion in the account. This recordkeeping requirement shall not apply to investment discretion granted by a customer as to the price at which or the time to execute an order given by a customer for the purchase or sale of a definite dollar amount or quantity of a specified security. Nothing in this Rule shall be construed as allowing members to maintain discretionary accounts or exercise discretion in such accounts except to the extent permitted under the federal securities laws. -
Question 6 of 10
6. Question
For how many years records must kept or updated regarding customer’s account information?
Correct
FINRA rule no 4512. Customer Account Information
Customer Account Information Retention Periods. For purposes of this Rule, members shall preserve a record of any customer account information that subsequently is updated for at least six years after the date that such information is updated. Members shall preserve a record of the last update to any customer account information, or the original account information if there are no updates to the account information, for at least six years after the date the account is closed.Incorrect
FINRA rule no 4512. Customer Account Information
Customer Account Information Retention Periods. For purposes of this Rule, members shall preserve a record of any customer account information that subsequently is updated for at least six years after the date that such information is updated. Members shall preserve a record of the last update to any customer account information, or the original account information if there are no updates to the account information, for at least six years after the date the account is closed. -
Question 7 of 10
7. Question
Which of the following statement is FALSE about registration statement?
I. it includes prospectus which is the legal offering contract
II. registration statement must be filed with SEC
III. Disclosure of company’s financial condition, risks and result of operations must be highlightedCorrect
FINRA rule no 2310. Direct Participation Programs
Registration statement — a registration statement as defined by Section 2(8) of the Securities Act, as amended, a notification on Form 1-A filed with the SEC pursuant to the provisions of Securities Act Rule 255 and, in the case of an intrastate offering, any document initiating a registration or similar process for an issue of securities which is required to be filed by the laws or regulations of any state.Incorrect
FINRA rule no 2310. Direct Participation Programs
Registration statement — a registration statement as defined by Section 2(8) of the Securities Act, as amended, a notification on Form 1-A filed with the SEC pursuant to the provisions of Securities Act Rule 255 and, in the case of an intrastate offering, any document initiating a registration or similar process for an issue of securities which is required to be filed by the laws or regulations of any state. -
Question 8 of 10
8. Question
The term for the costs associated with financial trade is?
Correct
FINRA rule no 2310. Direct Participation Programs
Transaction costs — costs incurred in connection with a limited partnership rollup transaction, including printing and mailing the proxy, prospectus or other documents; legal fees not related to the solicitation of votes or tenders; financial advisory fees; investment banking fees; appraisal fees; accounting fees; independent committee expenses; travel expenses; and all other fees related to the preparatory work of the transaction, but not including costs that would have otherwise been incurred by the subject limited partnerships in the ordinary course of business or solicitation expenses.Incorrect
FINRA rule no 2310. Direct Participation Programs
Transaction costs — costs incurred in connection with a limited partnership rollup transaction, including printing and mailing the proxy, prospectus or other documents; legal fees not related to the solicitation of votes or tenders; financial advisory fees; investment banking fees; appraisal fees; accounting fees; independent committee expenses; travel expenses; and all other fees related to the preparatory work of the transaction, but not including costs that would have otherwise been incurred by the subject limited partnerships in the ordinary course of business or solicitation expenses. -
Question 9 of 10
9. Question
Which of the following statement is/are TRUE about limited partnership roll up transaction?
I. limited partnership roll up transaction providing debt instruments provide an interest rate of at least 120%
II. limited partnership roll up transaction providing unsecured debt instruments must limit total leverage to 70% of the appraised value of the assets
III. a transaction that involves only a limited partnership or partnerships having an operating policy or practice of retaining cash available for distribution and reinvesting proceeds from the saleCorrect
FINRA rule no 2310. Direct Participation Programs
limited partnership rollup transactions which utilize debt instruments as compensation must provide for a trustee and an indenture to protect the rights of the debt holders and provide a rate of interest equal to at least 120% of the applicable federal rate as determined in accordance with Section 1274 of the Internal Revenue Code of 1986;
2. limited partnership rollup transactions which utilize unsecured debt instruments as compensation, in addition to the requirements of subparagraph 1., must limit total leverage to 70% of the appraised value of the assets;
3. all debt securities must have a term no greater than 8 years and provide for prepayment with 80% of the net proceeds of any sale or refinancing of the assets previously owned by the partnership entitles subject to the limited partnership rollup transaction or any part thereofIncorrect
FINRA rule no 2310. Direct Participation Programs
limited partnership rollup transactions which utilize debt instruments as compensation must provide for a trustee and an indenture to protect the rights of the debt holders and provide a rate of interest equal to at least 120% of the applicable federal rate as determined in accordance with Section 1274 of the Internal Revenue Code of 1986;
2. limited partnership rollup transactions which utilize unsecured debt instruments as compensation, in addition to the requirements of subparagraph 1., must limit total leverage to 70% of the appraised value of the assets;
3. all debt securities must have a term no greater than 8 years and provide for prepayment with 80% of the net proceeds of any sale or refinancing of the assets previously owned by the partnership entitles subject to the limited partnership rollup transaction or any part thereof -
Question 10 of 10
10. Question
An accurate valuation or assessment of worth of an asset is called?
Correct
FINRA rule no 2310. Direct Participation Programs
Fair market value (FMV) is the price that property would sell for on the open market. A term commonly used in tax and real estate, fair market value has come to represent the price of an asset under the following usual set of conditions: Prospective buyers and sellers are reasonably knowledgeable about the asset, behaving in their own best interests, free of undue pressure to trade and given a reasonable time period for completing the transaction. Given these conditions, an asset’s fair market value should represent an accurate valuation or assessment of its worth.Incorrect
FINRA rule no 2310. Direct Participation Programs
Fair market value (FMV) is the price that property would sell for on the open market. A term commonly used in tax and real estate, fair market value has come to represent the price of an asset under the following usual set of conditions: Prospective buyers and sellers are reasonably knowledgeable about the asset, behaving in their own best interests, free of undue pressure to trade and given a reasonable time period for completing the transaction. Given these conditions, an asset’s fair market value should represent an accurate valuation or assessment of its worth.