Series 24 - Financial Responsibility And Net Capit
Series 24 - Financial Responsibility and Net Capit
Exam (elaborations)
Series 24 - Financial Responsibility and Net Capital || with 100% Verified Solutions.
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Series 24 - Financial Responsibility and Net Capit
Institution
Series 24 - Financial Responsibility And Net Capit
What are the two requirements for a subordinated loan? correct answers It must:
- Be in writing for a specified amount of cash or securities
- Have at least a one year duration; no prepayment for first year
What are the three requirements for a temporary subordinated loan? correct answers - Al...
Series 24 - Financial Responsibility and Net Capital || with
100% Verified Solutions.
What are the two requirements for a subordinated loan? correct answers It must:
- Be in writing for a specified amount of cash or securities
- Have at least a one year duration; no prepayment for first year
What are the three requirements for a temporary subordinated loan? correct answers - Allowed
for a maximum duration of 45 days
- No more than three such loans in a 12-month period
- Firm's ratio of AI/NC does not exceed 10:1 or its net capital is not below 120% of the minimum
When must temporary and regular subordinated loan agreements be filed? correct answers For
SEC, 10 days prior to the effective date. For FINRA, temporary loan agreements 10 days prior to
the effective date; and regular subordinated loan agreements 30 days prior to the effective date.
What is total capital, tentative net capital, and net capital? correct answers Equity + Debt = Total
Capital.
Total Capital - Non-Allowable Assets = Tentative Net Capital.
Tentative Net Capital - Haircuts on security positions = Net Capital.
What is the minimum net capital requirement for a prime broker? correct answers $1,500,000
What is the minimum net capital requirement for a qualified block positioner? correct answers
$1,000,000
What is the minimum net capital requirement for a carrying broker? correct answers $250,000
What is the minimum net capital requirement for underwriters and market makers? correct
answers $100,000
What is the minimum net capital requirement for non-carrying brokers? correct answers $50,000.
They receive, but do not hold, customer funds.
What is the minimum net capital requirement for other broker-dealers? correct answers $5,000.
They neither receive nor hold customer funds.
What are net capital requirements for a market maker? correct answers $100,000 minimum and
$1,000,000 maximum.
$1,000 per stock at $5 or less.
$2,500 per stock above $5.
Does aggregate indebtedness (AI) include subordinated loans? correct answers No. AI does not
include subordinated or collateralized loans (that are not collaterlized by customer funds).
, What is the haircut on common stock with a ready market? correct answers 15%
What is the haircut on limited market stock (e.g. OTCBB) (i.e. fewer than 3 market makers)?
correct answers 40%
What is the haircut on assets not readily convertible into cash, or on restricted stock (private
placements)? correct answers 100%
What is the haircut on undue concentrations? correct answers An extra 15% on any one non-
exempt security position that exceeds 10% of Tentative Net Capital, calculated on the
"concentrated" amount above the 10% limit.
A broker-dealer has computed Tentative Net Capital of $100,000. The firm holds a $30,000
position in ABC common stock in its inventory. What is the TOTAL haircut to be taken on the
ABC position? correct answers $7,500. The the regular 15% haircut ($4,500), plus an additional
15% ($3,000) on the amount that exceeds the 10% concentration limit ($20,000).
How often and when must carrying BDs file FOCUS Part I and Part II reports? correct answers
Part I monthly within 10 business days of month end, Part II quarterly within 17 business days of
the end of the month and quarter, Part II audited annual within 60 days (90 days if extension
granted by SEC).
How often and when must introducing (non-carrying) BDs file FOCUS Part I and Part IIA
reports? correct answers Part I not required, Part II quarterly within 17 business days of the end
of the quarter, Part II audited annual within 60 days (90 days if extension granted by SEC).
What problems constitute a net capital violation? correct answers -N.C. is below minimum dollar
amount
-A.I. to N.C. ratio is greater than 15:1, New firm 8:1
-Outstanding subordinated debt exceeds 70% of debt-equity total for a period exceeding 90 days
What problems require an early warning report? correct answers -N.C. is below 120% of
minimum dollar amount
-A.I. to N.C. ratio is greater than 12:1
At what net capital amount or ratio will FINRA require a broker-dealer to reduce its level of
business? correct answers FINRA will force a firm to reduce its level of business if its ratio of
AI/NC exceeds 12:1 or its Net Capital falls below 125% of the minimum requirement for 15
consecutive days.
When must net capital violation reports be submitted? correct answers On the day the deficiency
occurs
When must early warning reports be submitted? correct answers Within 24 hours
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