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Series 63 practice questionmediumBroker-Dealer Registration — Financial Requirements

On a timed state-securities quiz, the scenario below appears. Assume the administrator is testing the cleanest state-law answer. The Administrator may require a broker-dealer to maintain a minimum net capital. This requirement is designed to:

  1. AEnsure the broker-dealer can pay dividends to shareholders
  2. BLimit the number of transactions the broker-dealer can process
  3. CProtect customers by ensuring the firm has sufficient financial resources to meet its obligations✓ Correct answer
  4. DPrevent the broker-dealer from expanding to other states
Explanation

Why C — Protect customers by ensuring the firm has sufficient financial resources to meet its obligations

Under USA Section 202(d), the Administrator may set minimum financial requirements, including net capital requirements, for broker-dealers. The purpose is investor protection, ensuring the firm has adequate financial resources to meet obligations to customers and to operate in a financially sound manner. The governing USA principle is unchanged even though the framing is different.

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