Series 99 key terms

The holding company that owns the major U.S. post-trade utilities, including NSCC, DTC and FICC. It supplies the infrastructure that clears, settles, and holds securities for brokers, banks, and funds.

A DTCC subsidiary that receives and matches trade data from exchanges and brokers, guarantees completion of those trades, and nets members' obligations so only net positions settle each day.

A DTCC subsidiary that serves as the central securities depository for U.S. markets, holding shares in book-entry form and moving ownership by debiting and crediting participants' accounts rather than moving certificates.

NSCC's core netting process, which collapses each member's purchases and sales in a given security into a single daily net position, so the firm settles only a net long or short instead of every trade.

The sole issuer and guarantor of listed U.S. option contracts. It clears option trades, steps in as counterparty to both sides, and collects margin and clearing fund contributions from members.

A firm that compares, settles, and finances trades and keeps custody and records for accounts introduced by another broker-dealer. The clearing firm holds the assets and carries the customer accounts on its books.

A broker-dealer that opens and services customer accounts and takes orders, but contracts with a clearing firm to hold cash and securities, settle trades, and maintain the official account records.

A bundled service package sold mainly to hedge funds, typically combining clearing and custody, securities lending, margin financing, execution, and consolidated reporting from a single broker-dealer.

The temporary transfer of securities from a lender to a borrower, usually to cover a short sale or a settlement fail, secured by collateral such as cash or Treasuries marked to market daily.

A settlement breakdown in which the selling side does not hand over securities by the contractual settlement date, leaving the buyer short of shares and exposing the seller to buy-in and regulatory consequences.

A remedy in which the firm owed securities purchases them in the open market and charges the failing counterparty the cost, closing out a delivery failure that has persisted beyond the allowed period.

A Federal Reserve Board rule governing how brokers extend credit to customers for buying securities. It sets initial margin, payment deadlines, and the rules for cash and margin accounts.

An SEC rule requiring broker-dealers to keep customer securities segregated and to hold cash in a special reserve bank account based on customer credit balances, so customers are protected if the firm fails.

An SEC rule setting the minimum liquid capital a broker-dealer must maintain, computed from net worth adjusted for illiquid assets and haircuts, so the firm can wind down without harming customers.

An industry utility that moves customer accounts, including positions and account records, from one broker-dealer to another on standardized forms and deadlines, reducing assets left behind during transfers.

An entity, often a bank or trust company, hired by an issuer to keep the shareholder register, issue and cancel certificates, pay dividends, and mail proxies and corporate action notices.

The requirement that brokers report to the IRS and to customers the adjusted cost basis of covered securities and the proceeds of sales, usually on Form 1099-B, so capital gains are reported accurately.

An SEC rule listing the records broker-dealers must keep, such as blotters, ledgers, and communications, and specifying retention periods and acceptable formats including non-rewriteable, non-erasable electronic storage.

A national regulatory database that captures the full life cycle of every order in U.S. listed and over-the-counter securities, from origination through routing, execution, or cancellation, for surveillance by regulators.

FINRA's facility where members must report transactions in eligible debt securities, giving regulators and the public timely price and volume information about the corporate and agency bond markets.

A nonprofit membership corporation that protects customers of failed broker-dealers up to $500,000 per customer, including a maximum of $250,000 for cash claims, by returning assets or paying shortfalls.

An SEC rule on short selling that requires a locate of borrowable shares before a short sale, imposes close-out duties for delivery failures in threshold securities, and targets abusive naked short selling.

A broker-dealer's duty to use reasonable diligence to obtain the most favorable terms for customer orders, weighing price, speed, likelihood of execution, order size, and other relevant factors.

A required compliance program in which a broker-dealer adopts written policies, internal controls, customer due diligence, staff training, and independent testing to detect and deter money laundering and report suspicious activity.

A confidential filing made to FinCEN when a firm knows or suspects a transaction involves illegal funds or is structured to evade reporting requirements. The firm may not tell the customer about the filing.

A program required by the USA PATRIOT Act that verifies each customer's identity at account opening using name, date of birth, address, and an identification number, and screens against government watch lists.

The Treasury Department office that administers U.S. economic sanctions. Firms must screen customers and transactions and block or reject dealings with named persons, entities, and embargoed countries.

An SEC and CFTC rule requiring broker-dealers to adopt a written identity theft prevention program that identifies relevant red flags, detects them in account activity, and responds to prevent and mitigate harm.

The SEC rule requiring broker-dealers to act in the best interest of retail customers when recommending securities or strategies, supported by disclosure, care, conflict of interest, and compliance obligations.

Information a reasonable investor would consider important in making an investment decision that has not been disseminated to the marketplace; trading or tipping on it is insider trading.

A policy combined with physical or electronic separation that keeps staff holding sensitive information, such as pending merger details, from sharing it with trading, sales, or research personnel.

FINRA Rule 3270 requires an associated person to notify the firm in writing before taking outside employment or compensation, so the firm can evaluate conflicts, time demands, and reputational risk.

Often called selling away, this FINRA rule requires an associated person to give written notice before participating in securities transactions away from the firm, which must record the activity and approve or reject it.

FINRA Rule 3220 caps gifts given to employees of other firms in connection with their employer's business at $100 per person per year, while ordinary business entertainment of reasonable value is treated differently.

A written plan a broker-dealer must create, maintain, and update that explains how it will keep operating, safeguard data, and communicate with customers during disruptions such as disasters or system failures.

Written authorization, such as a limited power of attorney, that lets a representative choose the security, amount, or timing of trades in a customer account without obtaining approval for each order.

The FINRA standard, found in Rule 2020, prohibiting manipulative, deceptive, or fraudulent practices and requiring members to treat customers and the public honestly rather than exploiting informational or control advantages.