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Series 27 – Practice Test 1

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Question 1 of 10

1. Question

A large FINRA member firm showed net credits as of its latest 15c3-3 rule computation. If the firm fails to make the required deposit in a timely way,

It constitutes a criminal offense
Correct Incorrect Correct answer

The firm may continue conducting business on a limited basis until the deposit is made
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The firm will be prohibited from participating in any firm commitment underwritings until the deposit is made
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All of the above
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Question 2 of 10

2. Question

A clearing carrying broker-dealer engaged in making 200 markets in stocks below $5/share and 400 markets in stocks trading above $5 per share must have net capital of no less than which of the following?

$ 250,000
Correct Incorrect Correct answer

$ 1,000,000
Correct Incorrect Correct answer

$ 1,200,000
Correct Incorrect Correct answer

$ 600,000
Correct Incorrect Correct answer

Correct

Incorrect
Question 3 of 10

3. Question
SEC Rule 17a-11, known in industry jargon as the early warning rule, states which of the following?
1. When the firm discovers its books and records are not being kept current, immediate notification to the SEC is required.
2. When the firm has been notified by its independent auditor that its overall accounting system has material inadequacies, immediate notification to SEC is required
3. When the firm’s net capital ratio has gone above 1200 per centum, it has 24 hours in which to notify the SEC
4. When the firm’s net capital has fallen below its required minimum, it has 24 hours in which to remedy the insufficiency or else cease doing business.
I and III
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II and IV
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II and III
Correct Incorrect Correct answer

I and IV
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Correct

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Question 4 of 10

4. Question

When a B/D has received securities, there are circumstances in which it is required to validate the legitimacy of those securities. Which of the following entities will the firm have validate the securities?

The SIC
Correct Incorrect Correct answer

The SEC Regional office in which the firm’s principal office is located
Correct Incorrect Correct answer

FINRA or another relevant SRO
Correct Incorrect Correct answer

The firm’s Compliance Department
Correct Incorrect Correct answer

Correct

Incorrect
Question 5 of 10

5. Question

The Financial Principals license (Test Series 27) requires the candidate have as a pre-requisite which of the following licenses?

Series 7
Correct Incorrect Correct answer

Series 24
Correct Incorrect Correct answer

Series 9 and 10
Correct Incorrect Correct answer

Series 27 has no pre-requisite
Correct Incorrect Correct answer

Correct

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Question 6 of 10

6. Question

Customer complaints are required to be preserved in a complaint file for a period of time set forth by the SROs. Which of these statements is correct?

FINRA requires complaint files to be retained for a period of 4 years
Correct Incorrect Correct answer

MSRB requires complaint files to be retained for a period of 6 years
Correct Incorrect Correct answer

FINRA and the MSRB require complaint files to be retained for 4 years
Correct Incorrect Correct answer

Both A. And B. are correct
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Correct

Incorrect
Question 7 of 10

7. Question

An additional haircut is required when a firm has one stock position considered to represent undue concentration. Undue concentration haircuts are computed:

By taking an additional 15% of the current market value of a stock position which exceeds 10% of the firm’s tentative net capital
Correct Incorrect Correct answer

By taking an additional 15% of the current market value of a stock position which exceeds 10% of the firm’s net capital
Correct Incorrect Correct answer

By taking an additional 50% of the current market value of a stock position which exceeds 10% of the firm’s tentative net capital
Correct Incorrect Correct answer

By taking an additional haircut equal to 50% of the normal haircut on a stock position which exceeds 10% of the firm’s tentative net capital
Correct Incorrect Correct answer

Correct

Incorrect
Question 8 of 10

8. Question

A part of the net capital rule that does not directly relate to the liquidity of the assets on the Broker-dealer’s balance sheet is the debt-equity rule. This rule specifies that no firm may have subordinated indebtedness in excess of 70% of the firm’s overall debt & equity capital combined for a period of more than 90 days. Not all subordinated indebtedness is treated as debt for the purposes of this rule. Which of the statements below are not true?

Subordinated loans which come from an owner of the firm may qualify as equity rather than debt for the purposes of the debt-equity computation
Correct Incorrect Correct answer

Subordinated loans which have an initial maturity of at least 3 years may qualify as equity rather than debt for the purposes of the debt-equity computation
Correct Incorrect Correct answer

Subordinated loan with an initial maturity of at least 3 years with at least 12 months remaining may qualify as equity for the purposes of the debt-equity computation
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Secured demand notes which come from an owner, a director, and/or senior officers of the firm may qualify as equity for the purposes of the debt-equity computation
Correct Incorrect Correct answer

Correct

Incorrect
Question 9 of 10

9. Question

The books and records of a brokerage firm are required to be kept and preserved for minimum periods of time, including in most cases ready accessibility for at least 2 years after the making of the record.

The member firm shall identify a designated executive officer to be in charge of assuring compliance with all SRO and federal requirements regarding making and preservation of books and records
Correct Incorrect Correct answer

The member firm shall identify its chief financial officer to be in charge of assuring compliance with all SRO and federal requirements regarding the making and preservation of books and records
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The member firm shall identify a designated specialist to be in charge of assuring compliance with all SRO and federal requirements regarding the making and preservation of books and records
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FINRA or other relevant SROs are required to provide at least 24 hours advance notice to member firms that a physical visitation is forthcoming to enable firms to gather the required records for inspection
Correct Incorrect Correct answer

Correct

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Question 10 of 10

10. Question

The haircut on common stock under Rule 15c3-1 is computed based on which of these formulas?

15% of the greater of the long and short positions, plus 15% of the lesser position
Correct Incorrect Correct answer

15% of the long position, plus 15% of the excess of the short position above 25% of the long position
Correct Incorrect Correct answer

15% of the greater of the long or short positions, plus 15% of the excess of the lesser position above 25% of the greater position
Correct Incorrect Correct answer

15% of the net long or short positions
Correct Incorrect Correct answer

Correct

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1. Question

A large FINRA member firm showed net credits as of its latest 15c3-3 rule computation. If the firm fails to make the required deposit in a timely way,

2. Question

A clearing carrying broker-dealer engaged in making 200 markets in stocks below $5/share and 400 markets in stocks trading above $5 per share must have net capital of no less than which of the following?

3. Question

SEC Rule 17a-11, known in industry jargon as the early warning rule, states which of the following?

4. Question

When a B/D has received securities, there are circumstances in which it is required to validate the legitimacy of those securities. Which of the following entities will the firm have validate the securities?

5. Question

The Financial Principals license (Test Series 27) requires the candidate have as a pre-requisite which of the following licenses?

6. Question

Customer complaints are required to be preserved in a complaint file for a period of time set forth by the SROs. Which of these statements is correct?

7. Question

An additional haircut is required when a firm has one stock position considered to represent undue concentration. Undue concentration haircuts are computed:

8. Question

9. Question

The books and records of a brokerage firm are required to be kept and preserved for minimum periods of time, including in most cases ready accessibility for at least 2 years after the making of the record.

10. Question

The haircut on common stock under Rule 15c3-1 is computed based on which of these formulas?