Series 65 Unit 5 Test Review - Customer Accounts (6 questions)

CMV long - Debit balance = long equity Credit balance - CMV short = short equity

CMV long - Debit balance = ? Credit balance - CMV short = ?

C. checks can be drawn in the name of either party

1. A new account is opened for joint tenants with rights of survivorship. All of the following statements are true EXCEPT: A. orders may be given by either party B. mail can be sent to either party with the other party's permission C. checks can be drawn in the name of either party D. in the event of death, the decedent's interest in the account goes to the other party

B. 1 and 3 - minors CANNOT designate a beneficiary so UTMA cant be the answer

10. Which of the following accounts could be opened with a TOD designation? 1. individual 2. joint TIC 3. JTWROS 4. UTMA A. 1 and 2 B. 1 and 3 C. 1, 3, and 4 D. 2 and 4

B. a maintenance margin call

11. You have a client with a margin account at your broker/dealer. If the market price of the securities in the account should fall to a point where you have to ask the client for additional funds, it is: A. a Regulation T call B. a maintenance margin call C. a margin call D. a market call

C. long and short positions

12. An IAR is reviewing the investments of a potential advisory client. The rep notices that the investor has a mixed margin account at a large, well known broker/dealer. It would be expected that this account would contain: A. stocks and bonds B. stocks and options C. long and short positions D. cash and securities

B. the 2 survivors continue as co-tenants with the decedent's estate

2. If 3 individuals have a TIC account with a firm and one individual dies, then: A. the account must be liquidated and the proceeds split evenly among the 2 survivors and the decedent's estate B. the 2 survivors continue as co-tenants with the decedent's estate C. trading is discontinued until the executor names a replacement for the deceased D. the account is converted to JTWROS

D. 4 only - think about it... if you can use discretion an account it would make sense that you could trade on margin...you have the discretion to trade however you want (within the fiduciary guidelines)

3. Which of the following accounts is (are) prohibited from using margin? 1. joint account for a husband and wife 2. discretionary account 3. corporation account 4. custodian account under the UGMA A. 1 and 2 B. 1, 2, and 3 C. 2 and 4 D. 4 only

C. educational background

4. All of the following must be obtained from new customers EXCEPT: A. employer name and address B. tax ID number C. educational background D. date of birth

B. account in which the IAR chooses portfolio securities on behalf of the client - an order is discretionary when it is placed by the member firm or its reps for a customer's account without the customer's express authorization for that order.

5. Over which of the following would the investment adviser rep (IAR) have discretionary authority? A. order that specifies the size of the trade and name of the security but leaves the choice of price and time up to the IAR B. account in which the IAR chooses portfolio securities on behalf of the client C. account in which a customer has power of attorney over another individual's account D. account in which a trustee has power of attorney over another individual's account

D. 1, 2, 3, and 4

6. Which of the following are fiduciaries? Which of the following would be considered fiduciaries? 1. executor of an estate 2. administrator of a trust 3. custodian of an UGMA/UTMA account 4. IAR granted with discretionary authority over the account A. 1 and 2 B. 1, 2, and 3 C. 3 and 4 D. 1, 2, 3, and 4

C. the max amount of money an adult can give to a minor in any one year is $14,000 - any adult can gift to a minor in a custodial account. There is NO LIMITATION on the size of the gift. Although any gift in excess of $14,000 will possibly subject the donor to a gift tax liability.

7. Under the UGMA, which of the following statements is NOT true? A. an UGMA account may have only one custodian for only one minor B. only an adult can make a gift to a minor C. the max amount of money an adult can give to a minor in any one year is $14,000 D. once a gift is given to a minor, it cannot be reclaimed

C. margin account

8. A client of a brokerage firm purchases 100 shares of ABC CS at a price of $50 per share. On the settlement date, the firm journals $2,500 from the client's money market account to pay for the trade. No further call for money is made. This trade must have taken place in a: A. cash account B. depository account C. margin account D. wrap free account

A. acquisition cost - remember the 3 A's

9. A trade order must be marked discretionary if the agent or IAR has the ability to determine any one of the following EXCEPT: A. acquisition cost B. action to be taken C. amount to acquire D. asset to trade

B. obtain a copy of a guardianship doc - court docs appointing a guardian must be in file before an account can be opened for a declared legally incompetent person

An individual who has been legally declared incompetent wants to open an account. Which of the following actions must the firm take? A. obtain power of attorney B. obtain a copy of a guardianship doc C. open the account as a cash account D. request to talk to a relative

A. an individual account opened by the individual's spouse

An investment adviser rep (IAR) is permitted to open all of the following EXCEPT: A. an individual account opened by the individual's spouse B. minor's account opened by a custodian C. corporate account opened by the designated officer D. partnership account opened by the designated partner

B. 3 separate accounts and deposit cash and securities - UGMA/UTMA rules require that any of these accounts may only have ONE beneficial owner and ONE custodian. - ONLY cash and securities may be donated into a UGMA/UTMA account

An investor wants to provide for his 3 nephews after his brother dies. Under the UGMA, the investor may open: A. 1 account for all 3 nephews B. 3 separate accounts and deposit cash and securities C. 3 separate accounts and deposit insurance policies D. 3 separate accounts and deposit fixed annuities

B. open the account and name himself custodian - the donor CAN name himself the custodian of an UGMA/UTMA account

If a customer would like to open a custodial UGMA or UTMA account for his nephew, a minor, the uncle can: A. open the account provided the proper trust arrangements are filed first B. open the account and name himself custodian C. open the account, but he needs approval from his nephew's parents first D. be custodian for the account only if he is also the minor's legal guardian

1. A 2. D 3. B 4. C

Match each of the following: A. hypothecation agreement B. tenants in common (TIC) C. limited power of attorney D. discretionary authorization 1. specifies conditions for pledging securities to a broker/dealer as collateral for the margin loan 2. enables the IAR to make investment decisions in a client's account 3. a deceased's fractional interest in an account is retained by his estate 4. legal documentation that authorizes someone other than the customer to have trading priveleges in an account

1. C. TIC 2. D. JTWROS 3. B. TOD 4. A. Partnership account

Match each type of account with the appropriate description below: A. Partnership account B. TOD C. TIC D. JTWROS 1. Each party specifies a percentage interest in the account. If one party dies, her interest in the account passes to her estate 2. Parties share an undivided interest in the account. If one part dies, his interest passes to the other owner(s) of the account 3. The assets in the account become the property of the beneficiary on the death of the account owner passing through probate 4. An unincorporated interest of two or more individuals. An annual agreement specifies which individuals can trade the account

1. B 2. A

Match the following Transfer On Death (TOD) accounts (also called Payable On Death accounts or PODs) with the correct statement: A. Interest between parties can be unequal in the account B. all parties must have equal interests in the account 1. JTWROS 2. Tenants-In-Commom (TIC)

A - Activity A- Amount A- Asset

To identify a discretionary order; an order is discretionary if au of the 3 A's is missing. The 3 A's are: A-? A-? A-?

1. F 2. F - the tickets must be reviewed by a principal promptly AFTER execution of the trade 3. F

True or false? 1. a diacretionary trade is one in which the member chooses either the action, the security, or the price. 2. a principal must approve all discretionary order tickets before execution 3. the custodian in an UGMA account must be an immediate family member of the minor

D. margin trading in a fiduciary account does not require any special consideration

Which of the following is NOT true regarding customer accounts? A. stock held in a custodial account may not be held in a street name B. in some cases, a TOD account is referred to as a POD account C. stock held under a JTWROs goes to the survivor(s) in the event of death of one of the tenants D. margin trading in a fiduciary account does not require any special consideration

D. parent and a minor - a minor CANNOT legally exercise control over an account

Which of the following people may NOT open a joint account? A. 2 spouses B. 3 sisters C. 2 strangers D. parent and a minor

D. 1, 2, 3, and 4

Which of the following would be considered fiduciaries? 1. executor of an estate 2. administrator of a trust 3. custodian of an UGMA/UTMA account 4. conservator for a legally incompetent person A. 1 and 2 B. 1, 2, and 3 C. 3 and 4 D. 1, 2, 3, and 4