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S27 Prep
S27 FINRA
| Question | Answer |
|---|---|
| Aggregate Indebtedness | Unsecured liabilities; excludes subordinated loans, secured debt, deferred taxes. |
| AI Exclusion Rule | 85% of securities loaned offset by borrowed are excluded from AI. |
| Tentative Net Capital | Total capital minus non-allowables before haircuts. |
| Early Warning Net Capital | Triggered if NC <120% minimum or AI/NC >12:1. |
| Net Capital Violation | NC below minimum or AI/NC >15:1; report same day. |
| Market Making Requirement | $1,000 per stock ≤$5; $2,500 per stock >$5; max $1M. |
| Reverse Repo Add-On | 10% of excess market value over 105% (Treasuries). |
| Open Contract Haircut | 15% of firm commitment; 30% for non-listed follow-on. |
| Selling Concession Effect | Reduces open contractual haircut. |
| Commercial Paper Haircut | 0% <30 days; 0.5% up to 1 year if minimal credit risk. |
| Corp Bond Haircut | 2% <1 yr; up to 9% at 25+ yrs. |
| Common Stock Haircut | 15% of greater long/short. |
| Additional Long/Short Rule | If lesser >25% of greater, extra 15% on excess. |
| Undue Concentration | Extra 15% haircut on excess over 10% of TNC. |
| Subordinated Loan Equity | Test 30% debt-equity rule to avoid violation. |
| SDN Haircut | Common stock collateral reduced by 30%. |
| Aged Short Differences | 7–13 days 25%; 14–20 50%; 21–27 75%; 28+ 100%. |
| Non-Allowable Assets | Restricted stock, furniture, unsecured receivables deducted 100%. |
| Long Margin Equity Formula | Equity = LMV − Debit. |
| SMA Creation | Excess equity above 50% LMV creates SMA. |
| Long Maintenance Call | Occurs when equity <25% LMV. |
| Short Maintenance Call | Occurs when equity <30% SMV. |
| Excess Margin Securities | LMV − 140% of debit = segregated amount. |
| Reserve Formula | If credits > debits, deposit difference in reserve account. |
| Alt Method Haircut | 3% of aggregate debit items. |
| AI to NC Calculation | Divide AI by Net Capital; must not exceed limits. |
| Market Making Cap | Max capital requirement is $1,000,000. |
| Reverse Repo Example | Excess over 105% ×10% = extra net capital required. |
| Common Stock Extra Haircut | Lesser − 25% threshold ×15%. |
| Undue Example | (Position − 10% TNC − $10k) ×15%. |
| SIPC Cash Limit | Max $250k cash per customer. |
| CTR Threshold | Over $10,000 in one day triggers filing. |
| SAR Threshold | $5,000 suspicious transaction triggers filing. |
| Free Riding | Proceeds cannot pay for same security in cash account. |
| Pattern Day Trader | 4 trades in 5 days; watch 7 trades in 2 days trap. |
| Reg T Deadline | Payment due 2 business days after settlement. |
| Short Marking | Long only if customer has title or unconditional contract. |
| Threshold Security | 10k shares AND 0.5% outstanding for 5 days. |
| Reg SHO Closeout | 13 settlement days open = mandatory buy-in. |
| FOCUS Filing | Carrying firms file Part I monthly, Part II quarterly. |
| Books Retention Trap | Blotters 6 yrs; order tickets 3 yrs; corp docs lifetime. |
| AI Exclusion Trap | Subordinated loans NOT included in AI. |
| Customer Definition Trap | Subordinated lenders are NOT customers. |
| Debt-Equity Trap | Violation after 90 days below 30%. |
| Fidelity Bond | Max deductible 25% of coverage. |
| Capital Withdrawal Rule | FINRA approval if >10% excess NC in 35 days. |
| Reserve Deposit Timing | Must deposit by 2nd business day after calc. |
| SMA Trap | Using SMA increases debit balance. |
| Convertible Bond Haircut | Premium → treat as stock; discount → as bond. |
| Concentration Rule | If one security >15% of collateral, reduce debit balance. |
| Concentration Calc | Excess over 15% ÷1.4 = debit exclusion. |
| Reserve Credits | Include free credits and customer short proceeds. |
| Reserve Debits | Include margin debits and securities borrowed. |
| Repo Deficit | Market > contract; deduct excess over threshold. |
| Reverse Repo Deficit | Contract > market; full deficit deducted. |
| Treasury Repo Threshold | 5% of contract price. |
| Agency Repo Threshold | 10% of contract price. |
| Other Securities Repo | 20% threshold before deduction. |
| Reverse Repo Add-On | 10% over 105% Treasuries. |
| Agency Reverse Add-On | 10% over 110% contract. |
| Other Reverse Add-On | 10% over 120% contract. |
| Short Difference 7-13 Days | 25% capital charge. |
| Short Difference 14-20 Days | 50% capital charge. |
| Short Difference 21-27 Days | 75% capital charge. |
| Short Difference 28+ Days | 100% capital deduction. |
| Box Count Timing | Every 2–4 months. |
| Box Count Purpose | Verify ownership equals location. |
| Fail to Deliver | Long side entry. |
| Fail to Receive | Location entry. |
| Stock Record Balance | Long minus FTR equals box. |
| U4 Disclosure | Felonies and 10-year employment. |
| Restricted Person | Includes in-laws and children. |
| Not Restricted | First cousin. |
| IPO Freeze | 90-day freeze for unpaid trade. |
| Reg T Extension | Requested through FINRA. |
| Margin IPO Loan Value | No loan value 30 days. |
| LEAPS Loan Value | Have loan value. |
| Municipal Broker Broker | No proprietary positions. |
| Municipal Net Capital | $150,000 minimum. |
| OTC Derivatives Dealer | $20 million minimum NC. |
| Wire Order Mutual Funds | $25,000 net capital required. |
| Subscription Way Funds | $5,000 net capital required. |
| Alt Method Requirement | Greater of $250k or 2% ADI. |
| Early Warning Alt | Below 5% ADI triggers filing. |
| FINRA 150% Rule | Notify if below 150% minimum. |
| Capital Withdrawal Notice | Notice if >20% excess NC. |
| Capital Withdrawal Approval | Approval if >10% excess in 35 days. |
| Equity Withdrawal 1 Year | Cannot withdraw without FINRA ok. |
| Fidelity Bond Deductible | Max 25% of coverage. |
| Deductible >10% | Excess deducted from net worth. |
| SIPC Claim Value | Date trustee appointed. |
| Fingerprint Retention | 3 years after termination. |
| Electronic Delivery | Customer consent required. |
| Payment for Order Flow | Quarterly disclosure required. |
| Expense Sharing Notify DEA | If expenses not recorded. |
| Reasonable Allocation | Based on use or benefit derived. |
| PCAOB Registration | Required for BD auditor. |
| Carrying Agreement Reports | Annual list to introducing firm. |
| Carrying Notice | Date by July 1 annually. |
| Fair Value Level 1 | Unadjusted active market prices. |
| Fair Value Level 2 | Observable inputs adjusted. |
| Fair Value Level 3 | Unobservable model inputs. |
| Observable Inputs | Derived from current market data. |
| Unobservable Inputs | Based on assumptions. |
| Moment to Moment Capital | Must comply at all times. |
| Market Maker Requirement | $1k ≤$5 stock; $2.5k >$5. |
| AI Definition | Unsecured liabilities only. |
| Subordinated Loan | Adds to net capital. |
| Satisfactory Subordination | Not deducted from net worth. |
| Non-Allowable Asset | Prepaid rent. |
| Free Credit Balance | Quarterly notice required. |
| CMIR Filing | Physical >$10k transport. |
| Dividend Short Sale | Short seller owes dividend. |
| Settlement Regular Way | T+1. |
| Seller's Option | Settlement beyond T+1. |
| Proxy Reimbursement | Paid by issuer. |
| Reserve Withdrawal | Excess over required may withdraw. |
| Reverse Repo Equity | Additional 10% excess over limit. |
| Treasury Haircut Reduction | 25% reduction if Fed reporting. |
| Aggregate Debit Items | Customer debits and fails. |
| Alt Method Reduction | 3% reduction to debit items. |
| Debt-Equity Rule | Equity ≥30% total. |
| Expansion Restriction | No new proprietary trades. |
| SIPC Coverage | $500k total; $250k cash. |
Created by:
sjameve
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