Series 24 Vocabulary
B/D may publish research reports when not acting as a distribution participant
according to Rule ___ - correct answer ✔137
B/D may publish research reports when acting as a distribution participant for
anther class of security (if selling stock, it can comment on debt) according to
Rule ____ - correct answer ✔138
If an issuer is a reporting company, a B/D may publish research reports when
acting as a distribution participant for the security; only if the firm is continuing
regular coverage (it may not be initiating coverage) according to Rule ____ -
correct answer ✔139
Regulation __ is a safe harbor by the SEC to sell securities outside of the US
without publicly registering. - correct answer ✔S
Regulation S Holding requirements: - correct answer ✔Non-convertible debt
= 40 days
Security of Reporting Co.= 6 months
Security of non-reporting Co.=1 year
SEC Rule 15c3-1 - correct answer ✔-net capital rule
-prevents a B/D from becoming overleveraged by requiring a specific
aggregate indebtedness to net capital ratio (AI/NC)
Minimum net capital requirements - correct answer ✔-prime broker=
$1,500,000
-Block Positioners/Executing Firms=$1,000,000
,-Carrying Brokers=$250,000
-Underwriters/Market Makers=$100,000: $1,000 per stock priced $5 or less,
$2,500 per stock priced above $5, Max $1,000,000
-Non-Carrying (receive/forward)=$50,000
-B/D's that do not accept cash/securities=$5,000
What is net capital based on? - correct answer ✔size of the firm and the
nature of its business
Net Capital= - correct answer ✔Book Equity+Year to Date
Results+Satisfactory Subordinated Loans=Total Capital
Total Capital-Non-allowable Assets=Tentative Net Capital
Tentative Net Capital-Haircuts=Net Capital
In order to participate in a firm-commitment underwriting or to make markets
in securities, a firm needs at least _____ of net capital - correct answer
✔$100,000
What is included in Aggregate Indebtedness? - correct answer ✔-fails to
receive for the acct of customers
-fails to receive for the acct of the firm, resold
-loans collateralized by customer securities
-securities loaned for the accts of customers
-customer credit balances
-accounts payable
-taxes payable
,What is the trial balance? - correct answer ✔-listing of all accts in a firm's
general ledger, divided into two groups: debits and credits
-used to create income statement, balance sheet, net capital, etc.
-prepared monthly
AI to Net Capital Ratio requirements - correct answer ✔-AI/NC must be less
than or equal to 15/1
-8/1 for first year firms
Alternative Net Capital Requirement - correct answer ✔-for larger B/Ds
-based on aggregate debit items
-required to maintain net capital of $250,000 or 2% of the aggregate debit
items, whichever is greater
Haircut Reductions: - correct answer ✔-Cash=0%
-Common Stock=15%
-Limited Market Stock=40%
-Assets not convertible to cash=100%
-Restricted Stock=100%
Undue Concentration Deduction - correct answer ✔-when any long or short
position is more than 10% of the B/Ds net capital
Fail to deliver - haircut - correct answer ✔-good receivable, but after 3
business days have passed it requires a haircut of 15% to the current market
value of the stock
, The effective date of an IPO is determined by the ___ - correct answer
✔SEC
Involvement in bankruptcy within the past ____ will preclude an issuer from
obtaining WKSI status - correct answer ✔3 years
an issuer that loses its WKSI status after filing an ASR may continue that
offering until the next _____ is filed. - correct answer ✔10-K
Regulation A+ permits offerings of up to ______ - correct answer ✔$50
million
How long is the look-back period for a Reg A+ offering? - correct answer
✔12 months
A regulation 147 offering is restricted from out-of-state resales for _____ -
correct answer ✔6 months
A partnership may purchase a 147 offering even if some of its partners are not
state residents T/F - correct answer ✔True
Regulation D buyers sign a ________ - correct answer ✔investment letter
(agreeing to a 6-month lock-up period)
Regulation D/private placement issuers must issue _______ to their transfer
agents to ensure that no illegal sales occur - correct answer ✔stop transfer
instructions
B/D may publish research reports when not acting as a distribution participant
according to Rule ___ - correct answer ✔137
B/D may publish research reports when acting as a distribution participant for
anther class of security (if selling stock, it can comment on debt) according to
Rule ____ - correct answer ✔138
If an issuer is a reporting company, a B/D may publish research reports when
acting as a distribution participant for the security; only if the firm is continuing
regular coverage (it may not be initiating coverage) according to Rule ____ -
correct answer ✔139
Regulation __ is a safe harbor by the SEC to sell securities outside of the US
without publicly registering. - correct answer ✔S
Regulation S Holding requirements: - correct answer ✔Non-convertible debt
= 40 days
Security of Reporting Co.= 6 months
Security of non-reporting Co.=1 year
SEC Rule 15c3-1 - correct answer ✔-net capital rule
-prevents a B/D from becoming overleveraged by requiring a specific
aggregate indebtedness to net capital ratio (AI/NC)
Minimum net capital requirements - correct answer ✔-prime broker=
$1,500,000
-Block Positioners/Executing Firms=$1,000,000
,-Carrying Brokers=$250,000
-Underwriters/Market Makers=$100,000: $1,000 per stock priced $5 or less,
$2,500 per stock priced above $5, Max $1,000,000
-Non-Carrying (receive/forward)=$50,000
-B/D's that do not accept cash/securities=$5,000
What is net capital based on? - correct answer ✔size of the firm and the
nature of its business
Net Capital= - correct answer ✔Book Equity+Year to Date
Results+Satisfactory Subordinated Loans=Total Capital
Total Capital-Non-allowable Assets=Tentative Net Capital
Tentative Net Capital-Haircuts=Net Capital
In order to participate in a firm-commitment underwriting or to make markets
in securities, a firm needs at least _____ of net capital - correct answer
✔$100,000
What is included in Aggregate Indebtedness? - correct answer ✔-fails to
receive for the acct of customers
-fails to receive for the acct of the firm, resold
-loans collateralized by customer securities
-securities loaned for the accts of customers
-customer credit balances
-accounts payable
-taxes payable
,What is the trial balance? - correct answer ✔-listing of all accts in a firm's
general ledger, divided into two groups: debits and credits
-used to create income statement, balance sheet, net capital, etc.
-prepared monthly
AI to Net Capital Ratio requirements - correct answer ✔-AI/NC must be less
than or equal to 15/1
-8/1 for first year firms
Alternative Net Capital Requirement - correct answer ✔-for larger B/Ds
-based on aggregate debit items
-required to maintain net capital of $250,000 or 2% of the aggregate debit
items, whichever is greater
Haircut Reductions: - correct answer ✔-Cash=0%
-Common Stock=15%
-Limited Market Stock=40%
-Assets not convertible to cash=100%
-Restricted Stock=100%
Undue Concentration Deduction - correct answer ✔-when any long or short
position is more than 10% of the B/Ds net capital
Fail to deliver - haircut - correct answer ✔-good receivable, but after 3
business days have passed it requires a haircut of 15% to the current market
value of the stock
, The effective date of an IPO is determined by the ___ - correct answer
✔SEC
Involvement in bankruptcy within the past ____ will preclude an issuer from
obtaining WKSI status - correct answer ✔3 years
an issuer that loses its WKSI status after filing an ASR may continue that
offering until the next _____ is filed. - correct answer ✔10-K
Regulation A+ permits offerings of up to ______ - correct answer ✔$50
million
How long is the look-back period for a Reg A+ offering? - correct answer
✔12 months
A regulation 147 offering is restricted from out-of-state resales for _____ -
correct answer ✔6 months
A partnership may purchase a 147 offering even if some of its partners are not
state residents T/F - correct answer ✔True
Regulation D buyers sign a ________ - correct answer ✔investment letter
(agreeing to a 6-month lock-up period)
Regulation D/private placement issuers must issue _______ to their transfer
agents to ensure that no illegal sales occur - correct answer ✔stop transfer
instructions
