Series 28 flashcards
Series 28 · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Form 1-FR-FCM due date
- A futures commission merchant files Form 1-FR-FCM for each month no later than the 17th business day after month-end, and an audited annual report within 90 days of fiscal year-end.
- Form 1-FR-IB filing
- An introducing broker files Form 1-FR-IB once a year, within 90 days after its fiscal year-end, together with the computation of its adjusted net capital.
- Early warning notice
- Notice to the CFTC and the designated self-regulatory organization is required when an FCM's adjusted net capital falls below 120 percent of its minimum requirement.
- CCO annual report
- Under CFTC Rule 1.46, an FCM or IB files an annual chief compliance officer report within 90 days of fiscal year-end describing compliance policies and assessing their effectiveness.
- Net capital deficiency notice
- Rule 1.12 requires immediate notice to the CFTC and designated self-regulatory organization when a firm fails to maintain minimum adjusted net capital, accompanied by a current financial report.
- Segregation schedule in Form 1-FR
- Form 1-FR-FCM includes a Statement of Segregation Requirements and Funds in Segregated Accounts comparing total customer balances with funds held and disclosing any deficiency.
- Risk assessment reporting
- Rules 1.15 and 1.16 require qualifying FCMs to keep risk assessment records and file risk assessment reports with the CFTC concerning market and credit exposures.
- FCM minimum net capital
- An FCM must maintain adjusted net capital of at least $1,000,000, or 8 percent of the risk margin required for customer and noncustomer positions, whichever is greater.
- IB minimum net capital
- An introducing broker must maintain adjusted net capital of at least $45,000, unless all of its obligations are guaranteed in writing by a futures commission merchant.
- Adjusted net capital formula
- Adjusted net capital equals current assets minus total liabilities, minus required haircuts on securities and other assets, plus approved subordinated debt and equity capital.
- Net capital haircuts
- Haircuts discount the carrying value of securities by prescribed percentages; fixed assets, prepaid expenses, and unsecured receivables are excluded from net capital entirely.
- Subordinated debt qualification
- Subordinated debt may be included in net capital only when a written subordination agreement satisfies Rule 1.17(h) and the debt is junior to customer and general creditor claims.
- Equity withdrawal restriction
- Rule 1.17(e) bars dividends, equity withdrawals, and unsecured advances that would cut adjusted net capital below the minimum requirement or below 120 percent of it.
- Current asset test
- Current assets counted in net capital must be readily convertible to cash within one year; assets that fail that test are excluded from the computation.
- Customer segregated account
- Rule 1.20 requires customer money and securities to be held in separately accounted for accounts titled Customer Segregated Account at a bank, trust company, FCM, or clearing organization.
- Legally segregated requirement
- Rule 1.22 requires customer funds to be legally segregated as to beneficial ownership, so funds of one customer are never used for another customer or for the firm.
- Segregation computation standard
- At all times, funds in segregated accounts must equal or exceed the total net liquidating value of all customer accounts; the computation is made daily and retained as a record.
- Rule 1.25 permitted investments
- Permitted investments of customer funds include U.S. government and agency obligations, bank deposits and CDs, commercial paper, corporate notes, money market funds, and reverse repurchase agreements meeting rating, maturity, and concentration limits.
- Rule 30.7 accounts
- Foreign futures and options customer funds are held in separate Rule 30.7 accounts covering the secured amount and may not be commingled with domestic customer segregated funds.
- Residual interest
- Residual interest is the firm's own funds held in the segregated account above the total customer requirement; NFA Financial Requirements Section 16 sets a minimum residual interest.
- Rule 1.32 custody procedures
- Rule 1.32 requires written policies and procedures for safeguarding customer funds, a monthly report to senior management, and prompt notice to regulators of any segregation deficiency.
- Five-year retention rule
- Rule 1.31 requires books and records to be retained for five years, with the first two years readily accessible for inspection by regulators.
- Order ticket contents
- Order tickets must identify the account and the terms of the order and must record the time the order was received and the time it was executed.
- Customer account records
- Rule 1.37 requires an FCM or IB to keep records identifying each customer, including name, address, principal occupation, and whether the customer is an associated person.
- Electronic recordkeeping
- Electronic records comply with Rule 1.31 when they are complete, reproducible, and retrievable on request, with an audit trail that prevents alteration.
- Oral order documentation
- Rule 1.35 requires oral orders to be time-stamped when received and reduced to writing, with all order records retained and linked to the customer account.
- Diligent supervision rule
- CFTC Rule 166.3 requires every FCM and IB to diligently supervise all commodity interest activities of its officers, employees, and agents, including branch offices.
- NFA Rule 2-9 system
- NFA Compliance Rule 2-9 requires a written supervisory system with designated supervisors and review of the system at least annually to confirm it is current and effective.
- Confirmations and statements
- Rule 1.33 requires an FCM to send customers a confirmation of each transaction and monthly statements showing open positions and the account's net liquidating value.
- Prohibition on loss guarantees
- Rule 1.56 prohibits an FCM, IB, or associated person from guaranteeing a customer against loss in a commodity interest account, apart from limited permitted arrangements.
- NFA Rule 2-30
- NFA Compliance Rule 2-30 requires members to obtain and update essential customer information and to give customers risk disclosure before they trade.
- Wash trade prohibition
- Wash sales, fictitious transactions, and accommodation cross-trades between accounts are prohibited by Section 4c(a) of the Commodity Exchange Act.