Chapter 6 Practice Questions
1. A broker-dealer must inform its customers how its business continuity plan addresses potential business disruptions and how it will respond to various events. This disclosure must be made:
A. In writing when a customer opens an account
B. In writing on an annual basis
C. Either verbally or in writing within ten days of when a client opens his account
D. In writing, but only when the firm fails to meet its net capital requirements in a given month
2. Which of the following records must be kept for a firm’s lifetime?
A. Memos of brokerage orders
B. Minutes of partners’ meetings
C. General ledgers
D. Fingerprints of associated persons
3. The ratio of aggregate indebtedness to net capital of an established firm cannot be greater than:
A. 1:1
B. 10:1
C. 12:1
D. 15:1
4. Under the SEC’s net capital rule, what is the haircut for a member firm’s inventory of 500 shares of ABC Corporation stock if the stock is trading at $50 per share? ABC stock trades on the NYSE.
A. $25,000
B. $3,750
C. $10,000
D. $2,500
5. With respect to FOCUS Reports, all firms must file _____.
A. Part I quarterly
B. Part I annually
C. Part II or Part IIA quarterly
D. Part II or Part IIA annually
6. If an independent public account determines that a firm’s controls contain a material weakness, it must notify which of the following?
A. The firm’s chief financial officer
B. FINRA
C. The SEC
D. The Public Company Accounting Oversight Board (PCAOB)
7. Net capital is best described as:
A. The excess of a firm’s liabilities over its liquid assets
B. The excess of a firm’s current liabilities over its net worth
C. The excess of a firm’s liquid assets over its non-liquid assets
D. The excess of a firm’s liquid assets over its liabilities
8. What are the limits of SIPC protection per “separate customer” with member f