Series 24 Error Log - Financial
Responsibility
A broker/dealer that carries customer accounts and makes a market in eight
stocks selling for less than $5 a share must maintain minimum net capital of:
A) $1 million.
B) $250,000.
C) $25,000.
D) $100,000. - correct answer ✔The requirement for market makers is
$1,000 for each stock selling for $5 or less; $2,500 for each stock selling at
more than $5; a minimum requirement of $100,000; and a maximum
requirement of $1 million. In this case, eight stocks × $1,000 = $8,000, which
is less than $100,000. Therefore, the minimum net capital required as a
market maker is $100,000. However, because the broker/dealer is a carrying
firm, its minimum net capital requirement is $250,000.
A member firm that deals exclusively in investment company securities on
both a subscription and wire order basis has a minimum net capital
requirement of:
A) $30,000.
B) $50,000.
C) $25,000.
D) $5,000. - correct answer ✔The minimum net capital requirement for firms
dealing exclusively in investment company securities is either $5,000
(subscription orders only) or $25,000 (wire orders). If a firm does both, its
minimum is the higher of the two.
,An introducing firm subject to a $50,000 minimum capital requirement is
permitted to:
participate in a firm commitment underwriting as a selling group member.
make an occasional trade for its own account.
participate in a firm commitment underwriting as a syndicate member.
manage a best efforts underwriting. - correct answer ✔Introducing firms
(both $5,000 and $50,000) are permitted to make occasional trades for their
own accounts and manage best efforts underwritings. Neither is permitted to
participate in a firm commitment underwriting as a syndicate member. A
$50,000 introducing firm-unlike its $5,000 counterpart-is permitted to
participate in a firm commitment underwriting as a member of the selling
group.
Under SEC Rule 15c-3-1, the minimum net capital requirement for a carrying
firm is:
A) $100,000.
B) $500,000.
C) $250,000.
D) $50,000. - correct answer ✔Under SEC rules, the minimum net capital
requirement for a carrying firm (also known as a self-clearing firm) is
$250,000.
An introducing member that executes more than ten transactions per year in
its investment account has a minimum net capital requirement of:
A) $50,000.
B) $250,000.
C) $100,000.
,D) $5,000. - correct answer ✔If an introducing member or a firm engaged
solely in the sale of investment company products executes more than ten
trades per year in its investment account, it is considered a dealer for net
capital purposes. The minimum net capital requirement for a dealer is
$100,000.
A $5,000 introducing member firm is prohibited from all of the following
EXCEPT:
A) participating in a firm commitment underwriting as a selling group member.
B) receiving customer checks in the clearing firm's name for prompt
forwarding to the clearing firm.
C) receiving customer securities for prompt forwarding to its clearing firm.
D) receiving customer checks in the member's name for prompt forwarding to
the clearing firm. - correct answer ✔Both $5,000 and $50,000 introducing
firms may accept checks made out to the clearing firm for prompt forwarding,
but neither may accept checks made out in their name. Both may make
occasional trades in their investment accounts and manage a best efforts
offering, but neither are able to be in a syndicate engaged in a firm
commitment underwriting. There are two actions that can be taken by $50,000
firms that are prohibited to $5,000 firms: $50,000 firms may accept customer
securities in-house for prompt forwarding, and may participate in a firm
commitment underwriting as a selling group member.
Under SEC rules, the minimum net capital requirement for a member firm
engaged solely in merger and acquisition work is:
A) $25,000.
B) $50,000.
C) $100,000.
, D) $5,000. - correct answer ✔Firms engaged solely in M&A work have no
customers; they are described in the rules as other. The minimum
requirement for these firms is $5,000.
An introducing firm that does NOT receive or hold customer securities has a
minimum net capital requirement of:
A) $100,000.
B) $5,000.
C) $25,000.
D) $50,000. - correct answer ✔Introducing broker/dealers are subject to a
minimum requirement of either $5,000 or $50,000. A $5,000 broker/dealer
may NOT receive customer securities in-house for prompt forwarding to its
clearing firm. A $50,000 broker/dealer may.
SEC Rule 15c3-1 deals with:
net capital requirements.
customer protection.
a special reserve bank account.
aggregate indebtedness. - correct answer ✔SEC 15c3-1 is the net capital
rule which, in addition to detailing minimum capital requirements for
broker/dealers, deals with aggregate indebtedness, haircuts, and
subordinated debt. Choices II and III deal with SEC Rule 15c3-3, the customer
protection rule.
If an introducing firm wants to become self-clearing, it must do all of the
following EXCEPT:
A) meet higher net capital requirements.
