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Collateral Risk occurs when repo collateral (e.g., securities) declines in value, requiring additional margin or replacement collateral. This risk is distinct from operational or suitability risks. Thus, B is correct.

The Public Company Accounting Oversight Board (PCAOB) oversees accounting firms that audit broker-dealers. It establishes auditing standards and inspects audit quality. FASB sets accounting rules (GAAP), SEC enforces securities laws, and FINRA regulates broker-dealers but not auditors. Thus, B is correct.

Trade blotters, which record daily purchases, sales, receipts, and disbursements, must be preserved for 6 years under Rule 17a-4, with the first 2 years easily accessible. This allows regulators to reconstruct activity if necessary. Thus, C is correct.

An Unqualified Opinion (also called a “clean opinion”) from an independent auditor confirms that the financial statements present fairly, in all material respects, the financial condition of the broker-dealer in accordance with GAAP. A Qualified Opinion notes exceptions, Adverse indicates material misstatements, and Disclaimer means the auditor could not express an opinion. Regulators expect unqualified opinions for healthy firms. Thus, C is correct.

Prepaid expenses are non-allowable since they cannot be liquidated quickly to meet obligations. Treasuries, cash, and marketable securities are allowable assets. Therefore, B is correct.