Series 24 Ch 2
SEC Uniform Net Capital Rule - correct answer ✔-division of market
regulation (DMR) requires actual expenses reduce firm's capital as though
there were no expense-sharing agreement.
-firm must maintain sufficient net capital every day in which it conducts
business and throughout entire trading day. If unable, deemed insolvent, and
must cease all security operations.
Introducing Firm - correct answer ✔-may operate with more than one
clearing firm.
Carrying Firm - correct answer ✔-carry customer accounts and accepts
funds and securities from customers.
-sometimes self clearing.
-minimum net capital requirement = $250k or 6 2/3% of aggregate
indebtedness (AI), whichever greater. Including firms that do a commission
recapture business.
-6 2/3% AI = 15:1 AI to NC.
Introducing Firms (fully disclosed) - correct answer ✔-introduces customers
to a clearing firm.
-clearing firm is back office.
-minimum net capital requirement is either $5k or $50k depending on how
they conduct business.
-major difference is that $50k firm can receive (not hold) customer securities
in house for prompt forwarding to clearing firm. $50k firm can participate in a
firm commitment underwriting as a selling group member.
-participates in best efforts underwriting = $5k or $50k firm.
-neither receive checks made out to intro firm.
, Firms engaged solely in m&a work or in the sale of limited partnerships have a
capital requirement of... - correct answer ✔-$5k.
For net capital purposes, the concept of a dealer is any member that: - correct
answer ✔-endorses (writes) OTC (non-listed, non-standardized) options, or
-effects > 10 transactions per year in its investment account.
-minimum net capital requirement for a dealer is $100k. Only affects firms
whose requirement is below $100k (i.e. intro firms).
Members that deal solely in sale of mutual funds or other investment company
products, have a minimum net capital requirement of... - correct answer ✔-
either $5k or $25k.
-accept wire orders from customers = $25k
-firms that sell on a subscription basis only = $5k
-firms that do both of the above = $25k
-MF BD subject to $25k net capital requirement is permitted to sell stock for
an investor as long as proceeds are immediately reinvested in redeemable
investment company securities.
Market Makers - correct answer ✔-minimum net capital requirement is a
function of the number of markets made, subject to a minimum $100k and a
maximum of $1 million.
-for each stock in which the firm makes a market, requirements are:
*bid </= $5 : $1k net capital per security
*bid > $5 : $2,500 net capital per security
Firms that buy/sell large quantities of equity securities using its own capital... -
correct answer ✔-must be registered BD and minimum net capital of $1
million to be deemed a qualified block positioner.
SEC Uniform Net Capital Rule - correct answer ✔-division of market
regulation (DMR) requires actual expenses reduce firm's capital as though
there were no expense-sharing agreement.
-firm must maintain sufficient net capital every day in which it conducts
business and throughout entire trading day. If unable, deemed insolvent, and
must cease all security operations.
Introducing Firm - correct answer ✔-may operate with more than one
clearing firm.
Carrying Firm - correct answer ✔-carry customer accounts and accepts
funds and securities from customers.
-sometimes self clearing.
-minimum net capital requirement = $250k or 6 2/3% of aggregate
indebtedness (AI), whichever greater. Including firms that do a commission
recapture business.
-6 2/3% AI = 15:1 AI to NC.
Introducing Firms (fully disclosed) - correct answer ✔-introduces customers
to a clearing firm.
-clearing firm is back office.
-minimum net capital requirement is either $5k or $50k depending on how
they conduct business.
-major difference is that $50k firm can receive (not hold) customer securities
in house for prompt forwarding to clearing firm. $50k firm can participate in a
firm commitment underwriting as a selling group member.
-participates in best efforts underwriting = $5k or $50k firm.
-neither receive checks made out to intro firm.
, Firms engaged solely in m&a work or in the sale of limited partnerships have a
capital requirement of... - correct answer ✔-$5k.
For net capital purposes, the concept of a dealer is any member that: - correct
answer ✔-endorses (writes) OTC (non-listed, non-standardized) options, or
-effects > 10 transactions per year in its investment account.
-minimum net capital requirement for a dealer is $100k. Only affects firms
whose requirement is below $100k (i.e. intro firms).
Members that deal solely in sale of mutual funds or other investment company
products, have a minimum net capital requirement of... - correct answer ✔-
either $5k or $25k.
-accept wire orders from customers = $25k
-firms that sell on a subscription basis only = $5k
-firms that do both of the above = $25k
-MF BD subject to $25k net capital requirement is permitted to sell stock for
an investor as long as proceeds are immediately reinvested in redeemable
investment company securities.
Market Makers - correct answer ✔-minimum net capital requirement is a
function of the number of markets made, subject to a minimum $100k and a
maximum of $1 million.
-for each stock in which the firm makes a market, requirements are:
*bid </= $5 : $1k net capital per security
*bid > $5 : $2,500 net capital per security
Firms that buy/sell large quantities of equity securities using its own capital... -
correct answer ✔-must be registered BD and minimum net capital of $1
million to be deemed a qualified block positioner.
