Chapter 2- Customer Accounts
An 75-year old individual has contributed $40,000 to a qualified plan that currently has a value of $100,000. If she decides to take a lump-sum distribution of the total value, she is taxed on:
$100,000
Premature withdrawals from a traditional IRA are subject to a penalty of:
10%
An individual may roll over a lump-sum distribution from a corporate pension plan to an IRA without tax consequences if it is done within:
60 days
Which of the following choices is considered a qualified retirement plan? A 401(k) plan An IRA A 529 plan A Roth IRA
A 401(k) plan
A corporation wishes to open a cash account. Which of the following documents is required?
A corporate resolution
Community Property Account
A joint account between a married couple
If one of the customers of a registered representative (RR) wants to borrow funds from her 401(k) plan, what advice should the RR provide?
A loan is permitted, but the amount is based on the customer's vested interest.
Revocable Trust
A person can make changes to the trust at anytime
Signatures of which tenants must be obtained when opening a joint account?
All tenants, and all have authority to trade in the account.
full trading authorization
Allows another person to execute trades and withdraw cash and securities from an account
After opening an account with a firm a customer must receive an updated privacy notice:
Annually.
ERISA stipulates that employers with qualified plans are not permitted to exclude employees who have worked for the employer at least one year and:
Are age 21 or older and have worked a minimum of 1,000 hours during the year
Delivery vs. Payment (DVP)
B/D delivers securities to a client's bank and is paid by the bank
All of the following information should be obtained by a registered representative when opening a new account for a customer, EXCEPT the: Street address Tax identification number Occupation Education
Education
Which of the following statements is NOT TRUE concerning a 403(b) plan? A tax-exempt employer can establish the plan. Employees of certain tax-exempt organizations are permitted to make pre-tax contributions. Employees of certain tax-exempt organizations are permitted to claim a tax credit based on the amount of their contributions. Employees of certain tax-exempt organizations are not taxed on the earnings until they withdraw funds from their accounts.
Employees of certain tax-exempt organizations are permitted to claim a tax credit based on the amount of their contributions.
Two individuals hold $100,000 in assets in a JTWROS account. Each party's ownership in the account may be described as:
Equal and undivided
A registered person of a broker-dealer has an existing account at another firm and has followed the proper procedures to open the account. The current responsibility of the registered person is to:
Follow her employing firm's guidelines when trading securities
A pattern day trader is defined as an individual who day-trades no less than:
Four or more times in a five-day period
Which of the following statements is TRUE regarding a Coverdell Education Savings Account? The maximum contribution is $6,000. If the funds are not used for educational expenses, the account may be used for tax-deferred retirement savings Contributions must be invested conservatively Grandparents may make contributions for their grandchildren until the children reach the age of 18
Grandparents may make contributions for their grandchildren until the children reach the age of 18
A new customer wants to open an account at a brokerage firm to purchase municipal securities. The Municipal Securities Principal of the branch is out of the office for the day, but the customer is adamant about the account being opened right away. What action can be taken?
Have the General Securities Principal of the branch approve the account.
A prime brokerage account would MOST likely be established for a(n):
Hedge fund
Which TWO of the following statements are TRUE concerning Section 457 plans? These plans are state-sponsored and used to fund higher education expenses These plans are used to fund retirement These plans grow tax-deferred These plans grow tax-free
II and III
According to FINRA which TWO of the following are not required when opening a cash account for a customer? I Name II Signature III Is customer of legal age IV Social Security Number
II and IV
Dennis, Al, and Dan have opened a securities account with your firm as tenants in common. All of the following are TRUE, EXCEPT: If Dennis dies, his interest in the account will pass to Al and Dan You may accept an order from either Dennis, Al, or Dan Checks issued by your firm from the account will be in the name of all three co-owners When opening the account, you should obtain Social Security numbers from all three co- owners
If Dennis dies, his interest in the account will pass to Al and Dan
An individual transferring an IRA from one trustee to another:
Is not subject to taxes or penalties
In April, one of the customers of a broker-dealer died. If the decedent's estate is settled and the account is closed by a relative in November, the firm's responsibility is to:
Maintain a record of the account for six years from the closure in November
A customer of a member firm has provided one of his relatives with power of attorney in his account. If the relative contacts the RR and requests that all confirmations on transactions in this account be sent to him, the RR:
May do so, but only if the account owner provides written approval
A client's wife calls and wants to purchase 200 shares of XYZ in her husband's personal account. The registered representative handling the account knows that a favorable earnings report is about to be issued. The registered representative:
May not accept the order because the wife does not have trading authorization to enter orders for the husband's personal account
An employee of a brokerage firm has decided to open an account with an investment company to purchase various mutual funds under the company's complex of funds. The employee:
May open the account without notifying either firm
A broker-dealer's privacy notice must include all the following information, EXCEPT the: Type of personal information that the firm collects Names of any other financial institutions with which the firm is affiliated Fact that clients may opt out of having their information shared with non-affiliates Types of third parties to which the firm may disclose information
Names of any other financial institutions with which the firm is affiliated
Unfunded retirement plans that generally promise to pay are considered
Non-Qualified Deferred Compensation Plans
Before accepting a delivery versus payment (DVP) order from a customer, a broker-dealer must:
Obtain the name of the customer's agent from the customer
The spouse of a brokerage firm employee wants to open a brokerage account in order to invest in bonds. If this account is opened at a firm that does not employ her spouse, the employee of the firm is required to:
Obtain the prior written consent of the employing firm in order to open the account
A customer would like to open an account designated by number. The registered representative should:
Open the account if the customer signs a written statement acknowledging the account is the customer's
An individual has made before- and after-tax contributions to her traditional IRA. When she begins taking distributions after age 59 1/2, they would be taxed as:
Part ordinary income and part return of capital
Under industry rules, the final approval to open a new account is given by a(n):
Partner or principal
The major provisions of ERISA provide protection for:
Private sector employees against improper investments by their employer
All of the following must be addressed in the written supervisory procedures (WSP), EXCEPT: Approval of new accounts Procedures designed to ensure taxes are paid in ERISA qualified accounts Communication between research and investment banking An identity theft prevention program
Procedures designed to ensure taxes are paid in ERISA qualified accounts
The written supervisory procedures (WSP) manual of a broker-dealer would NOT include the:
Procedures that must be followed in the event of a catastrophic business disruption
A client would like to open a numbered account. An RR may open the account:
Provided the broker-dealer has a written statement on file signed by the client
Which of the following terms is associated with the process of a customer instructing his bank to deliver securities against payment by the clearing firm? Receipt versus Payment (RVP) Cash on Delivery (COD) Delivery versus Payment (DVP) Power of Attorney (POA)
Receipt versus Payment (RVP)
Lyle, Molly, and Seena have a joint account registered as Tenants in Common. In the event that Seena dies, which of the following statements is TRUE?
Seena's estate has a claim on her portion of the account's assets
An insider is not permitted to:
Sell short his corporation's stock
A broker-dealer must maintain customer account records for how long after an account is closed?
Six years
A customer has recently closed her account. How long is her broker-dealer required to keep records related to her account?
Six years
For how long must an account record be maintained after a joint owner's death and the account is moved to the survivor?
Six years after the move
A registered representative discovers that one of her customers is on the Office of Foreign Assets Control (OFAC) list. The RR or another person at her firm must notify:
The Treasury Department
A registered representative (RR) wants to open a new account for a client who is a resident of Mexico. Which of the following statements is TRUE? Customer verification of the client's personal information is not required if the customer was referred by an existing client. Customer verification of the client's personal information is required if the name is on the Office of Foreign Assets Control (OFAC) list. The client can have either a taxpayer identification number or a passport number and country of origin. The client must have a taxpayer identification number to open the account.
The client can have either a taxpayer identification number or a passport number and country of origin.
A customer would like to open an individual account and would like his confirmations sent to a P.O. Box. What other information is needed to comply with the client's request?
The client's primary residential address
Which of the following statements is TRUE concerning Regulation SP and a customer choosing to opt out of information sharing?
The customer is required to positively affirm that he wants to opt out of information sharing
Which of the following situations should be escalated to the firm's compliance department?
The customer's mail is sent only to the registered representative's primary address.
A customer wants to open a cash account. What information is NOT required on the new account form?
The customer's signature
If a registered representative opens an account for an investor, the registered representative would need to know all of the following information, EXCEPT: The investor's tax identification number If the investor is a U.S. citizen The investor's investment objectives The investor's educational background
The investor's educational background
A person has had a brokerage account with an online securities trading firm, but is subsequently hired by a broker-dealer. Which of the following statements is TRUE?
The person is permitted to maintain the account if his employer provides written consent within 30 days of being hired.
On May 25, the president of MaxCo bought 3,000 shares of MaxCo stock in the open market at $33. Two months later, the stock has increased to $40. If the president now wants to sell the shares:
The profit from the trade must be forfeited according to the short-swing profit rule
An elderly client would like to give discretionary authority to a third party. Which of the following statements is TRUE concerning the person who is granted discretion?
The signature of the person granted discretion must be obtained Under FINRA firm must Obtain the signature of each person authorized to exercise discretion in the account Record the date such discretion is granted Record the age or approximate age of the customer in connection with exempted securities other than municipals
A Form 3 must be filed:
Within 10 days of becoming a director
Insider
an individual holding more than a 10% voting interest in a corporation
ERISA (Employee Retirement Income Security Act)
determines eligibility and vesting schedules for qualified retirement plans
OFAC List
maintained to identify the names of terrorists an /or criminals
In order to change an account registration after marriage or divorce requires a ________ or ________
marriage certificate or divorce decree
An employee of a B/D opening an account at another B/D must ______ and provide ____
obtain their employers prior written consent and provide prior written notification to the other B/D
Pattern Day Trader
one who executes four or more day trades in a five business day period
A privacy notice must be provided to a client when_______ and _____
opening the account and annually thereafter
