Series 24 - Financial Responsibility and Net Capital
Questions with Correct Answers
What are the two requirements for a subordinated loan? Correct Answer-
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 Answer-- 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 Answer-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
Answer-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 Answer-$1,500,000
, What is the minimum net capital requirement for a qualified block
positioner? Correct Answer-$1,000,000
What is the minimum net capital requirement for a carrying broker?
Correct Answer-$250,000
What is the minimum net capital requirement for underwriters and
market makers? Correct Answer-$100,000
What is the minimum net capital requirement for non-carrying brokers?
Correct Answer-$50,000. They receive, but do not hold, customer funds.
What is the minimum net capital requirement for other broker-dealers?
Correct Answer-$5,000. They neither receive nor hold customer funds.
What are net capital requirements for a market maker? Correct Answer-
$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
Answer-No. AI does not include subordinated or collateralized loans
(that are not collaterlized by customer funds).
Questions with Correct Answers
What are the two requirements for a subordinated loan? Correct Answer-
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 Answer-- 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 Answer-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
Answer-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 Answer-$1,500,000
, What is the minimum net capital requirement for a qualified block
positioner? Correct Answer-$1,000,000
What is the minimum net capital requirement for a carrying broker?
Correct Answer-$250,000
What is the minimum net capital requirement for underwriters and
market makers? Correct Answer-$100,000
What is the minimum net capital requirement for non-carrying brokers?
Correct Answer-$50,000. They receive, but do not hold, customer funds.
What is the minimum net capital requirement for other broker-dealers?
Correct Answer-$5,000. They neither receive nor hold customer funds.
What are net capital requirements for a market maker? Correct Answer-
$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
Answer-No. AI does not include subordinated or collateralized loans
(that are not collaterlized by customer funds).
