Series 99 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

T+1 settlement cycle

Standard settlement for U.S. securities transactions: cash and securities must be exchanged on the first business day after trade date. The SEC moved the industry from T+2 to T+1 effective May 28, 2024.

Rule 15c3-3

The Customer Protection Rule. It requires a broker-dealer to segregate customer fully paid and excess margin securities and to deposit customer cash in a special reserve bank account under the reserve formula.

Minimum net capital

Under SEC Rule 15c3-1, a broker-dealer that carries customer accounts or holds customer funds or securities must maintain at least $250,000 of net capital; a firm doing neither may operate with $5,000.

TRACE reporting deadline

Executions in TRACE-eligible corporate bonds must be reported to FINRA within 15 minutes of the time of execution, including price, size, and a buy/sell indicator, unless a specific exemption applies.

Equity trade reporting timing

Trades in exchange-listed and OTC equity securities must be reported to a FINRA trade reporting facility as soon as practicable: within 10 seconds for electronic executions and 60 seconds for manual executions.

Reg SHO locate

Rule 203(b)(1) prohibits executing a short sale unless the firm has borrowed the security, arranged to borrow it, or has reasonable grounds to believe it can be borrowed and delivered by settlement date.

Threshold security close-out

A fail to deliver in a threshold security that persists for 13 consecutive settlement days must be closed out by the settlement day following the 13th day, and further short sales are barred until closed.

Pattern day trader

A margin account customer executing four or more day trades within five business days, where day trades exceed 6% of total trades. Requires $25,000 minimum equity and permits 4x day-trading buying power.

Regulation T initial margin

A customer buying marginable securities must deposit at least 50% of the purchase price in the margin account; the payment must be received within the Regulation T payment period or the transaction is frozen.

Maintenance margin percentages

FINRA Rule 4210 requires maintenance margin of 25% of long market value and 30% of short market value, with higher house or minimum requirements often applied to concentrated or volatile positions.

Rule 17a-4 retention

Books and records must be preserved for six years, with the first two years in an easily accessible place, and electronic records must be stored in a non-rewritable, non-erasable (WORM) format.

ACATS transfer timeline

In the Automated Customer Account Transfer Service, the receiving firm validates the transfer instruction and the delivering firm must complete the transfer of assets within three business days after validation.

SIPC coverage limits

SIPC protects each customer account up to $500,000 total, of which no more than $250,000 may be cash. It does not cover market losses or investments outside its definition of a security.

SAR filing

A suspicious activity report must be filed with FinCEN within 30 calendar days after initial detection of activity involving at least $5,000 where the firm knows, suspects, or has reason to suspect a crime.

Currency transaction report

A Currency Transaction Report is required for cash transactions exceeding $10,000 conducted by or on behalf of one person in a single business day, filed with FinCEN.

Limit order display

SEC Rule 604 and FINRA Rule 6460 require a market to execute a customer limit order at an improved price or display that order when it improves the market's best bid or offer.

Affirmation deadline

To support T+1 settlement, institutional broker-to-broker trade affirmations through CTM must be completed by 9:00 p.m. Eastern time on trade date rather than the next day.

FINRA Rule 2010

Requires members and associated persons to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their investment banking and securities business.

Reg BI obligations

Regulation Best Interest imposes four obligations on broker-dealers recommending to retail customers: Disclosure, Care, Conflict of Interest, and Compliance. It raises the standard above mere suitability for retail recommendations.

Suitability Rule 2111

Requires a reasonable basis to believe a recommendation is suitable using reasonable-basis, customer-specific, and quantitative suitability. The quantitative prong applies only when the member controls the account.

Gift limit Rule 3220

No member or associated person may give anything of value exceeding $100 per year to any person in relation to that person's employer's business, unless the member approves it in writing and keeps records.

Outside business activity notice

FINRA Rule 3270 requires an associated person to give written notice to the member before accepting employment or compensation from any outside business; the firm may impose conditions or prohibit the activity.

Selling away

FINRA Rule 3280 requires written notice to and approval from the member before an associated person participates in any private securities transaction, with disclosure of compensation and any conflicts of interest.

Personal account notification

FINRA Rule 3210 requires an associated person who opens or maintains a securities account at another firm to notify the employing member in writing and arrange duplicate confirmations and statements.

Trusted contact Rule 4512

Members must make reasonable efforts to obtain the name and contact information of a trusted contact person for each customer account, with limited exceptions for certain institutional accounts.

Temporary hold Rule 2165

Where financial exploitation of a specified adult is reasonably suspected, a firm may place a temporary hold on disbursement of funds or securities for 15 business days, extendable by 10 more.

Rule 4530 reporting

Members must report specified events to FINRA, including customer complaints alleging theft, misappropriation of funds or securities, or forgery, within 30 calendar days of learning of the event.

Rule 2210 principal approval

Retail communications and correspondence must be reviewed and approved by a registered principal before use, and a new member's first-year communications generally must be filed with FINRA before use.

Disclose-or-abstain

Core insider trading doctrine: a person possessing material nonpublic information must either disclose it before trading or refrain from trading and from passing the information to others who might trade.

SAR confidentiality

A firm and its personnel may not disclose to any person involved in the transaction that a suspicious activity report was filed; disclosure is permitted only to appropriate law enforcement and regulators.

Branch inspection cycle

FINRA Rule 3110 requires on-site inspection of the main office and each office of supervisory jurisdiction at least annually, and of other branch offices on a cycle of at least every three years.

Customer borrowing restriction

FINRA Rule 3240 prohibits associated persons from borrowing from or lending to customers unless the firm's written procedures permit it, the customer is a financial institution, or a pre-approved business-terms arrangement exists.