Investment Company and. Variable Contracts Products Principals (Series 26) Practice Exam

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Prepare for the Investment Company and Variable Contracts Products Principals Exam with our interactive quiz. Master key concepts with multiple choice questions designed to enhance your understanding and boost your confidence for the Series 26.

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For how many consecutive business days must the aggregate indebtedness to net capital ratio exceed 12 to 1 before a member firm must reduce its business?

10 consecutive business days
15 consecutive business days
20 consecutive business days
30 consecutive business days

The correct answer is: 15 consecutive business days

The correct answer is 15 consecutive business days because the rules governing broker-dealers under the Securities and Exchange Commission (SEC) require firms to monitor their aggregate indebtedness to net capital ratio closely. When the ratio exceeds 12 to 1 for 15 consecutive business days, it indicates a significant imbalance between a firm's debt and its capital, which can lead to financial instability. As a protective measure, the firm must then take action to reduce its business activity to lower the risk associated with such a high ratio. This requirement ensures that firms maintain a proper level of financial health and stability, safeguarding their operations and protecting investors.