Series 24 – General Securities Principal Exam Financial & Capital Requirements 2 — Questions and Answers
Question 1: Under SEC Rule 17a-5, broker-dealers must file annual audited financial statements with their DEA within how many days after the fiscal year end?
- 30 days
- 60 days
- 90 days (Correct answer)
- 120 days
Correct answer: 90 days
SEC Rule 17a-5 requires broker-dealers to file annual audited financial statements with their DEA within 60 days after the firm's fiscal year end.
Question 2: What is the primary purpose of the SIPC (Securities Investor Protection Corporation)?
- To guarantee investment returns
- To restore securities and cash to customers if a broker-dealer fails (Correct answer)
- To regulate broker-dealer capital requirements
- To insure brokerage accounts against market losses
Correct answer: To restore securities and cash to customers if a broker-dealer fails
SIPC protects customers by restoring missing securities and cash up to $500,000 (including $250,000 for cash) if a member broker-dealer fails.
Question 3: Under the alternative net capital method (Rule 15c3-1), a broker-dealer must maintain net capital of at least what percentage of aggregate debit items?
- 1%
- 2%
- 5% (Correct answer)
- 10%
Correct answer: 5%
Under the alternative method of Rule 15c3-1, broker-dealers must maintain net capital of at least 2% of aggregate debit items computed under the Customer Protection Rule.
Question 4: A broker-dealer receives an early warning notice when its net capital drops to what level relative to minimum required capital?
- Below 100% of minimum required
- Below 120% of minimum required
- Below 150% of minimum required (Correct answer)
- Below 200% of minimum required
Correct answer: Below 150% of minimum required
FINRA issues an early warning when a firm's net capital falls below 120% of its minimum required net capital, prompting corrective action before a deficiency occurs.
Question 5: Which financial report must a broker-dealer file monthly with FINRA to report its financial and operational condition?
- Form ADV
- FOCUS Report (Form X-17A-5) (Correct answer)
- Form BD
- Form 10-K
Correct answer: FOCUS Report (Form X-17A-5)
Broker-dealers file the FOCUS Report (Form X-17A-5) monthly with their DEA to report their financial condition and operational data.
Question 6: When computing net capital, which of the following liabilities must be subtracted from net worth?
- Subordinated loans approved under FINRA rules
- Unsecured bank loans
- Customer credit balances
- All of the above except subordinated loans (Correct answer)
Correct answer: All of the above except subordinated loans
Unsecured bank loans and customer credit balances are liabilities subtracted from net worth; approved subordinated loans are excluded from net capital deductions.
Series 24 – General Securities Principal Exam Financial & Capital Requirements 2
Under SEC Rule 17a-5, broker-dealers must file annual audited financial statements with their DEA within how many days after the fiscal year end?