Chapter 2 Practice Questions
- 1. An introducing firm enters into a carrying agreement with a carrying firm. A customer of the introducing firm buys a security from a market maker. Which firm(s) will be responsible for safeguarding the customer’s securities?
- A. The introducing firm
- B. The carrying firm
- C. Both the introducing firm and the carrying firm
- D. The market maker
- 2. The customer protection rule is designed to ensure that broker-dealers comply with all of the following except:
- A. Maintain control of fully paid and excess margin securities at approved locations free of charge
- B. Keep a detailed description of the procedures they use to ensure the possession and control of customer securities.
- C. Keep their customers’ cash and securities separate from their own proprietary trading activities
- D. Notify customers in their quarterly account statements that they intend to use their free credit balances for business operations
- 3. Broker-dealers must periodically compute the amount of funds in their customers’ accounts deposited by the customer (credits) and compare them to the amount they have lent to customers for customer transactions (debits). The broker-dealer is required to keep the difference on deposit in a customer reserve bank account:
- A. When debits exceed credits
- B. When credits exceed debits
- C. When debits and credits exceed PAB reserves
- D. When the broker-dealer wishes to hypothecate its customers’ securities
- 4. Acceptable deposits into the customer reserve bank account do not include:
- A. Municipal bonds
- B. Treasury securities
- C. Agency bonds
- D. Cash
- 5. The computation to determine how much funds are needed in a customer reserve bank account must occur:
- A. Daily
- B. Weekly
- C. Monthly
- D. Quarterly
- 6. A broker-dealer may withdraw money or s