sie chapter 11 - customer accounts
A broker-dealer may provide a custody service to its clients. The party who administers these services is the A) custodian B) trustee C) gatekeeper D) guardian
A
A customer emails his broker-dealer requesting a return email with financial information about the firm. The broker-dealer may, in accordance with FINRA rules, A) send a copy of its most recent balance sheet by email. B) send a paper copy of its annual statement by mail since financial requests cannot be answered electronically. C) send a paper copy of its most recent balance sheet by mail since financial requests cannot be answered electronically. D) send a copy of its annual statement by email.
A
A customer's request to a brokerage firm to hold her mail must be A) in writing, in all cases. B) in writing only if the customer is incapacitated. C) in writing, if the mail is to be held for more than one month. D) in writing, if the mail is to be held for up to two months.
A
A well- known individual would like to open a securities account at Broker-dealer A. Is there a way for this person to open this account but remain anonymous on the firm's records to protect their privacy? A) Yes, she may open a "numbered" account and sign a statement evidencing her legal ownership of the account. B) No, as SEC insider trading rules require that all eligible adults provide their legal identities along with acceptable documentation of this information. C) No, as all accounts must prominently carry the account holder's name and address and other required information. D) Yes, but she would need to provide an IRS tax waiver to the firm in order for her identity to remain anonymous on the firm's records.
A
All of the following types of information are required to be included on an account statement EXCEPT A) Portfolio analysis showing diversification of assets among sectors or styles B) Securities positions C) Purchases, sales, transfers and distributions in the account D) Cash balances
A
Broker-dealer Z has become insolvent, and SIPC has been notified. Customer claims for SIPC coverage will be based on the market value of eligible securities held with the firm as of the date A) of the bankruptcy court filing date. B) the independent auditor for the firm first indicated that a problem existed on the firm's books. C) the broker-dealer first encountered financial difficulty. D) that the next round of audited financial statements are required to be filed with the SEC.
A
Concerning an account opened under the UGMA/UTMA designation, A) there is one custodian and one minor, who is the owner of the assets in the account. B) there may be only one account owner but multiple custodians are permitted. C) there may be multiple custodians and minors in the account. D) there may be multiple account owners but only one custodian.
A
In a brokerage account opened by a limited partnership, who has trading authority? A) The general partner B) One or more limited partners C) The board of directors D) The trustee
A
Instructions have been received from the trusted contact to wire $100,000 from a 72-year-old client's account at a broker-dealer to a designated bank account. To determine that this is a legitimate action not intended to exploit the interests of the client, the broker-dealer A) may impose a 15- business day hold on the wire request. B) must place a 10 - business day hold on the request until confirming the request is legitimate. C) must promptly notify FINRA of its suspicion that financial exploitation may be occurring at the firm. D) must alert its chief compliance officer that such a request was received.
A
The Federal Reserve Board's Regulation T requirement applies to which of the following? A) Margin requirements for securities transactions B) Registration of municipal dealers C) Customer specific suitability requirements D) Reserve requirements for Federal Reserve member banks
A
The regulator charged with determining Reg T requirements for margin accounts is A) the Federal Reserve Board. B) SIPC. C) FINRA. D) the SEC.
A
The standard amount of FDIC coverage is how much per depositor, per insured bank, per ownership category? A) $250,000 B) $100,000 C) $400,000 D) $150,000
A
To avoid frozen account status or a possible sell out, Reg T requires that a customer make payment for a purchase A) four business days after the trade. B) on the trade date. C) the business day after the trade date. D) three business days after the trade date.
A
When customers sign and return an options agreement they confirm that they A) have read and understand the options disclosure document. B) will not complain against the broker-dealer if they lose money in their account. C) will participate in arbitration as a means of settling monetary disputes with the broker-dealer. D) can afford the risk of loss in an options account.
A
When must the brokerage firm deliver a customer confirmation to the customer? A) At or before completion of each transaction B) Within three days of trade date C) Upon the customer's request D) When an order is placed
A
Which of the following terms describes a registered representative's practice of consistently generating excessive trades in customer accounts? A) Churning B) Front-running C) Washing D) Burning
A
An investor wishes to purchase 2 XYZ Jan 50 calls trading at 3 that are purchased in August. What is the initial margin requirement for these calls? A) $600 B) $300 C) $150 D) $1,200
A A call or put contract with 9 months or less to expiration must be purchased in full. The initial margin requirement in this example is 2 contracts x $300 per contract or $600.
Last year a client opened a new account, giving discretion to his son for all trades. Last month the client was declared legally incompetent in court. What is the status of the power of attorney the client originally signed when the account was first opened? A) The power of attorney remains in force if it was a durable power of attorney. B) The power of attorney is no longer in effect. C) The power of attorney must be renewed by an officer of the court. D) The power of attorney remains in force until the client passes away.
A A durable power of attorney will remain in force if a client is declared legally incompetent in a court; otherwise it will be cancelled. All powers of attorney will be terminated upon the death of the customer.
An investor has $200,000 of cash in a brokerage account with a broker-dealer that goes bankrupt and SIPC reimburses all of it. What is the maximum additional value of lost securities for which SIPC will reimburse the same investor in his account with the same broker-dealer? A) 300,000 B) 800,000 C) None D) 50,000
A After replacing securities, SIPC covers any remaining claims up to a maximum of $500,000, including not more than $250,000 in cash. If SIPC covers $200,000 in cash it then can cover up to $300,000 per investor in lost securities up to the $500,000 total limit.
If a customer wishes to open a short margin account and sell short 100 shares of stock at $15 per share, the customer must deposit A) 2000 B) 1000 C) 750 D) 1500
A In a short margin account, a customer must deposit $2,000 even if the full value of the transaction is less than $2,000.
If a bond trades with a dollar price, the confirmation must include which of the following types of yield? A) Yield to worst B) Taxable-equivalent yield C) Current yield D) Holding period yield
A On debt securities trades made at a dollar price, the confirmation must include the dollar price and the yield to worst, which is the lower of the yield to call or yield to maturity.
Shareholders receive information about important voting matters via a A) proxy. B) registration statement. C) 10-K. D) Regulation S-P notice.
A Proxy statements are a document provided to shareholders prior to a vote on corporate matters, such as mergers or election of board members.
In which of the following types of brokerage accounts may customers use margin, borrow funds, and run a debit balance? A) Corporate account B) Qualified Tuition Plans (529 Plans) C) Traditional IRA D) Uniform Gift to Minors Act (UGMA)
A Qualified Tuition Plans (529 Plans) and UGMA accounts may not use margin. IRAs may be set up as margin accounts, but they can't borrow funds or run a debit balance. Corporate margin accounts are permitted and, with a resolution of the Board of Directors, can run a debit balance.
A customer expects to be living abroad and requests in writing that his brokerage firm hold his mail for a period of six months. The firm must A) hold the customer's mail, but not for more than one month. B) ask the customer to verify an acceptable reason for holding mail beyond three months. C) decline the request. D) accept the request in all cases.
B
A customer would be permitted to place only unsolicited orders in an account if A) he did not indicate whether he has securities accounts at other broker-dealers. B) the client did not provide certain financial information on the new account form. C) the client's account was opened within the last ten days. D) there are insufficient funds in the account.
B
A husband and wife wish to open a brokerage account in which the husband will own 60% and the wife 40%. At either owner's death, the owner's portion will be liquidated and distributed to his/her beneficiary. What type of account should they open? A) Tenancy by the Entirety B) Tenancy in common C) Partnership D) Joint Tenancy with Rights of Survivorship
B
A municipal broker-dealer has sold bonds to a client in a secondary market transaction. Which of the following statements is TRUE regarding the customer confirmation? A) A telephoned confirmation is acceptable if agreeable to both parties to the trade B) The confirmation must be given or sent at or before the completion of the transaction C) Confirmation of the trade occurs on T+3, unless the transaction is settled in cash D) Confirmation is required no later than the business day following the trade
B
A trade is considered discretionary when the registered rep is able to decide A) The action to take and the asset to trade B) The action, asset, or quantity to trade C) The action and the quantity to trade D) The asset, quantity, and price at which to trade
B
According to industry regulation on customer privacy, a customer of a broker-dealer is permitted to opt out of sharing information with which of the following entities? A) The broker-dealer for the purpose of marketing other products to the customer B) An unaffiliated third party C) A law enforcement agency that is investigating alleged financial fraud D) A subsidiary of the broker-dealer that offers a customer record keeping service
B
Funding for the Securities Investor Protection Corp. (SIPC) comes mostly from what source? A) Earnings on special issue U.S. Treasury obligations B) Assessments against broker-dealers' gross revenues from their securities business C) A transaction tax on securities trades D) Direct U.S. Treasury appropriations
B
If a broker-dealer goes bankrupt, what is the first important action SIPC will take to protect its investors? A) Liquidate any securities that appear illiquid or likely to suffer losses B) Attempt to locate and replace any securities lost C) Prorate cash among all investors D) Seize all securities held in street name
B
In a non-discretionary brokerage account, who must approve all buy and sell trades before they are executed? A) The office of supervisory jurisdiction B) The customer C) The FINOP D) The broker-of-record
B
John has purchased 5,000 shares of Issuer X. The confirmation that John will receive will not disclose A) Date of the transaction B) The time his order was received by his firm C) Execution quantity D) Capacity of broker-dealer
B
Pursuant to Regulation S-P, a broker-dealer must provide a privacy notice to a customer A) At the time a solicitation is made to purchase a security. B) Prior to engaging in any securities business with that customer. C) When a statement of account is sent. D) When a confirmation of a trade is sent.
B
The Securities Investor Protection Corp. (SIPC) was established under federal law to protect customers of U.S. broker-dealers against A) back-office errors and omissions. B) the loss of securities due to a firm's failure. C) catastrophic market conditions. D) poor investment decisions.
B
The court appointed guardian is entrusted to A) administer the affairs of the estate of a deceased party. B) manage the assets of a minor. C) provide investment recommendations to a senior investor. D) oversee the property of an incompetent individual.
B
The mother of a ten-year-old girl is the custodian on her daughter's UGMA. The mother would be permitted to make a cash contribution as a donor to her daughter's account A) only if the custodial agreement permits the mother to contribute to her daughter. B) with no limitations. C) under no circumstances. D) up to an annual limit of $3,000.
B
What is the maximum amount of FDIC insurance coverage normally available to a corporation in one bank? A) There is no limit B) $250,000 C) $1 million D) $150,000
B
What types of over-the-counter stocks can be used as collateral for margin loans? A) Those approved by FINRA B) Those approved by the Federal Reserve Board C) Large-cap D) Highly liquid
B
When customer and firm owned securities are combined, this is a practice known as A) integration and must be approved by a principal of the firm. B) commingling and is a violation. C) commingling and is acceptable. D) Insider trading which should be avoided.
B
Which of the following types of brokerage account would be appropriate for a group of people who share investment ideas and pool their money to make common investments? A) Conservatorship B) Investment Club C) Trust D) Proprietorship
B
What is the maximum amount of stocks a customer can buy when opening a new margin account with a cash deposit of $25,000? A) 12,500 B) 50,000 C) 2,000 D) 25,000
B A customer can buy double the amount of cash deposited to open the account (with a minimum deposit of $2,000). In other words, cash must be worth at least 50% of the securities purchase price.
A customer has purchased ABC stock from a broker-dealer in a transaction that was filled from the broker-dealer's inventory. The customer's confirmation must report that the firm A) acted as principal and received a commission. B) acted as principal and received a markup. C) acted as agent and received a markup. D) acted as agent and received a commission.
B An order to purchase stock that is filled from the firm's inventory is a principal transaction, and the compensation received by the firm is a markup. This information must be included in the confirmation.
A customer dies suddenly while several limit orders are open in her individual account. Her registered representative should A) execute the orders immediately and then freeze the account. B) cancel all orders. C) convert the orders into market orders. D) ask the customer's spouse or legal representative for instructions.
B At the owner's death, individual brokerage accounts are frozen. Any open orders are immediately cancelled.
The wife of a customer who has an individual IRA account calls the broker-dealer to request that the account statements be held by the firm while the family is vacationing in Europe over the summer. In this situation the firm is permitted to A) ask the wife to put the request in writing and mail or email it to the firm as documentation for the account. B) continue to mail the statements to the customer's home unless the husband makes the request. C) hold the statements for two months. D) hold the statements for three months.
B Because this is an individual account, the firm may honor a request to hold mail from that individual only.
On trade confirmations, what is the name of the unique identification number assigned to identify each security? A) NET Framework B) CUSIP C) TASM D) ISSN
B CUSIP stands for the Committee on Uniform Security Identification Procedures, a convention created in 1964. A nine-digit code identifies all North American securities for clearing and settlement purposes.
A client with early-stage dementia who wants his sister to manage his accounts until his death would choose which of the following powers of attorney? A) Limited B) Durable C) Full D) Irrevocable
B Durable POA survives the grantor becoming mentally incapacitated. Traditional POA, whether limited or full, is invalid if the grantor becomes incapacitated. "Irrevocable" designates a type of trust; not a type of POA.
Which regulator requires broker-dealers to deliver a Margin Disclosure Statement on an individual basis, to non-institutional customers, before any margin account is opened? A) Comptroller of the Currency B) FINRA C) FDIC D) SEC
B FINRA Rule 2264 requires firms to provide a margin disclosure statement to each customer prior to or at the time of opening a margin account.
A customer does not meet the Reg T call in a cash account. The broker-dealer has sold out securities in the account, and must freeze the account for A) ten business days. B) 90 days. C) 30 days. D) five business days.
B If a sell-out occurs, the broker-dealer is required to freeze the customer's account for 90 days.
FDIC insurance covers losses in each of the following types of products offered by banks EXCEPT: A) Checking accounts B) Money market mutual funds C) Interest-bearing savings accounts D) CDs
B Money market mutual funds sold through banks are not deposits and are not FDIC insured.
Key suitability information must be obtained from a customer A) Before the settlement of a recommended transaction B) Before the execution of a recommended transaction C) At the time of account opening D) Immediately following the execution of a recommended transaction
B Suitability information must be obtained from the customer prior to the execution of any recommended transaction.
A customer calls his broker-dealer to report that he has lost his job. As a result, the broker-dealer must A) require the representative to ask the customer to make notification of this change in writing. B) send an updated account record for verification within 30 days of the receipt of the customer's notification. C) verify account information with this customer on an annual basis to ensure that the account continues to be appropriate for the customer. D) close the account if it is no longer suitable for the customer based on the change in situation.
B The broker-dealer must send an updated account record for verification within 30 days of receipt of the customer's notification of a change in account information.
In a corporate account, the document that identifies the persons who are permitted to make trades on behalf of the corporation is the A) articles of incorporation. B) corporate resolution. C) power of attorney. D) corporate charter.
B When a corporate account is opened, a copy of the corporate resolution is required to identify the person(s) authorized to trade on the corporation's behalf.
Which of the following is an example of a "not held" order? A) "sell one of the three gaming stocks that I own today" B) "buy 200 shares of ABC stock sometime today" C) "sell enough of my XYZ stock so that I can purchase as much MJK stock as you can get" D) "buy 500 shares of any food company, as my portfolio could use a boost"
B Where time and price are the only variables left to the registered reps choosing, this is an example of a "not held" order. The other choices are discretionary orders.
A married couple have a joint account containing $500,000 in securities, and each person has an IRA with $200,000 in securities. The total SIPC coverage for these accounts is A) $700,000 B) $900,000 C) $400,000 D) $500,000
B With SIPC, each customer is covered for up to $500,000, with an allowance of up to $250,000 in cash. In this case, the joint account would be covered for the full $500,00, and each IRA would be covered for the full $200,000, making for total coverage here of $900,000.
A broker-dealer offers its customers an arrangement under which the customer pays an annual fee of 1.2% of assets under management, instead of per-trade commissions. This arrangement is called A) a fiduciary account. B) a discretionary account. C) a fee-based account. D) a wholesale fee arrangement.
C
A customer calls to insist on placing an order for municipal securities that you believe is inappropriate for the investment objectives of the account. You should A) Refuse to place the order B) Place the order and mark the order ticket unsolicited C) Place the order, mark the order ticket unsolicited and obtain signed and dated documentation from the customer for their file that specifies circumstances of the trade. D) Refuse to place the order and document your reason in writing. Documentation should be dated and kept in the customer's file with your signature.
C
A customer who has an individual IRA account calls his broker-dealer to request that the account statements be held by the firm while the family is vacationing in Europe. The firm will take which two of the following actions? I. Honor the request over the phone II. Ask the customer to put request in writing III. Hold the mail for a maximum two months IV. Hold the mail for a maximum of three months A) II and III B) I and IV C) II and IV D) I and III
C
A revocable trust can be altered or cancelled A) Under no circumstances B) With the consent of the state where the trust was drawn. C) At the discretion of the trustor. D) Only with the beneficiary's written consent.
C
According to FINRA rules, the minimum maintenance requirement for a short margin account is A) 50% B) 100% C) 30% D) 25%
C
An individual has opened a new account with a broker-dealer and provided all requested information. To confirm the account information, the broker-dealer must A) do a background check and provide disclosure to the customer regarding the Fair Credit Reporting Act. B) require that the customer send written confirmation of the accuracy of the account information within 30 days of the request. C) send a copy of the account documentation within 30 days of the account opening, and request that customer return any requested changes within 30 days. D) call the customer within 24 hours to verify the accuracy of the account information.
C
An investor purchasing a Treasury bond A) may not do so on margin B) must open an account with the US Treasury department and adhere to their credit rules. C) may do so on margin through a broker-dealer D) must make full payment for the bond through a broker-dealer
C
An investor that wishes to open an account to trade options on margin must receive which of the following disclosure documents? A) An Options Disclosure Document, a Margin Disclosure Statement and a Day Trading Disclosure Statement B) An Options Prospectus and a Margin Disclosure Statement C) An Options Disclosure Document and a Margin Disclosure Statement D) An Options Disclosure Document only
C
How often must a customer who opens a margin account receive disclosure of the risks of trading in such an account? A) quarterly. B) at the opening of the account only. C) at the opening of the account and once per calendar year thereafter. D) with each account statement.
C
If a broker-dealer customer wants to open a trust account, what documentation will be required? A) A will B) A perpetual power-of-attorney C) A trust agreement D) A general liability release
C
If suspicious activity is suspected in a customer's account, A) the firm must notify the FBI promptly. B) all trading activity may be suspended for 15 days to allow for a proper investigation. C) disbursements from the account may be withheld for up to 15 days. D) the chief financial officer of the firm must notify FINRA within 24 hours.
C
SIPC is best described as a(n) A) For-profit corporation B) US government agency C) Not-for-profit corporation D) Affiliate of FINRA
C
The new account form must be signed by A) the customer and the registered representative. B) the customer and a designated principal. C) only a designated principal. D) the registered representative and a designated principal.
C
The party standing between the buyer and seller in a trade to ensure timely settlement of the trade is the A) market maker B) SEC C) clearing house D) transfer agent
C
Upon signing a loan consent agreement, a customer of a broker-dealer is A) pledging their securities as collateral for other customers' margin calls. B) allowing their securities to be sold at a time of the broker-dealer's choosing. C) providing consent for their securities to be used to facilitate short sales. D) allowing their securities to be used for collateral at a bank in order to secure a margin loan.
C
When securities are held in street name, how do shareholders receive proxy materials from company in which they are owners? A) Materials are sent by the issuer's transfer agent to the shareholders of record. B) Street name shareholders do not participate in the proxy process. C) Materials are sent by the brokerage firm to the shareholders of record. D) Materials are sent directly by corporations to the shareholders of record.
C
Which TWO of the following statements about broker-dealer requirements for sending account statements are TRUE I. Firms are required to send account statements at least once per quarter. II. Firms are required to send account statements at least once per year. III. Firms typically send account statements for active accounts on a monthly basis. IV. Firms typically send account statements for active accounts on a quarterly basis. A) I and IV B) II and III C) I and III D) II and IV
C
Who supervises the assets held in a Uniform Gift to Minors Act (UGMA) account? A) A trustee B) A mutual fund company C) A custodian D) A guardian
C
When the SIPC coverage limit is exceeded while making a claim, a customer A) may file a lawsuit against the failed broker-dealer to attempt to recover the balance of their assets. B) Is considered a secured creditor of the failed broker-dealer. C) is considered a general creditor of the failed broker-dealer. D) may make a claim to the FDIC for any assets not covered by SIPC.
C A customer will legally become a general (unsecured) creditor of the failed broker-dealer when the SIPC coverage limits are exceeded.
Paul's broker recommends that he buy 300 shares of Microsoft stock. However, he does not specify any recommended price. Paul pays the broker a commission on the trade. The customer confirmation will show that this order is A) An unsolicited trade B) A principal trade C) A solicited trade D) A trade with a markup
C A solicited trade is one in which the registered representative makes a recommendation. The recommendation need not include all essential elements of the trade - e.g., price, quantity, security. A trade that shows a commission on the confirmation is an agency trade, not a principal trade.
Churning is best defined as A) day trading by an institutional investor. B) frequent buying and selling by a mutual fund. C) excessive trading in the account of a retail customer. D) portfolio adjustments made on a quarterly basis.
C Churning is excessive trading a customer account, typically beyond what the customer is suitable for and can afford. This conduct can result in additional commissions being paid by the customer.
A customer wishes to open a margin account and purchase 300 shares of XYZ stock, which is trading at $30 per share. The customer must deposit A) 1500 B) 2000 C) 4500 D) 3000
C For the first purchase in a long margin account, the customer must pay $2,000 or meet the Reg T requirement, whichever is greater. The total purchase amount is $9,000 (300 shares at $30/share). The Reg T requirement is 50% of $9,000, or $4,500.
All of the following disclosures are likely to be found in the margin account disclosure page given to customers EXCEPT A) Loss in a margin account can exceed the amount contributed to the account. B) The broker-dealer can sell out securities in the account without notice. C) The broker-dealer can increase house maintenance requirements, but only if advance written notice is given. D) Customers are not entitled to extensions of time for a margin call.
C The margin account disclosure explains that the broker-dealer can increase house maintenance requirements without advance notice.
If a customer requests financial information about the broker-dealer, the broker-dealer is required to give the customer A) a profit and loss statement. B) its last quarterly income statement. C) its most recent balance sheet. D) its most recent annual statement.
C When a customer requests the broker-dealer's financial information, the broker-dealer is required to provide only it's most recent balance sheet.
A broker-dealer acts on behalf of a customer to purchase stock to fill the customer's order. The confirmation of the sale must report this trade as A) a principal trade and disclose the commission. B) a principal trade and disclose the markup. C) an agent trade and disclose the markup. D) an agent trade and disclose the commission.
D
A married couple has set up an account designated as JTWROS. Trading instructions for this account A) must be provided and confirmed by both parties. B) must be established at the time the account is opened. C) must be established prior to the placement of the first order in the account. D) may be provided by either party, with any disbursements payable to both parties.
D
A type of trust which can only be altered with the consent of the trust beneficiary is a A) Revocable trust B) Executor trust C) Living trust D) Irrevocable trust
D
All of the following are permitted to open accounts with broker-dealers EXCEPT A) A married couple B) A partnership C) A trust D) A minor
D
How does a corporation indicate who is authorized to trade for a corporate brokerage account? A) Through a limited power-of-attorney B) Through a designated, standing power-of-attorney C) Through an amendment to its charter D) Through a resolution of the board of directors
D
If a margin account customer has failed to meet the Reg T settlement date because of special circumstances, a broker-dealer may request an extension from A) the SEC. B) the Federal Reserve Board. C) Securities Investor Protection Corporation. D) FINRA.
D
If the FBI requests that a broker-dealer provide private customer information in support of an ongoing anti-money laundering investigation, the broker-dealer is obligated to A) protect the privacy of the customer by not providing the requested information. B) provide the information with FINRA's permission. C) provide the information with the customer's written permission. D) provide the information to support the investigation.
D
In a cash account, which TWO of the following rules of settlement apply to the purchase of corporate securities? I. Regular way settlement of T + 1 II. Regular way settlement of T + 2 III. Payment is required by T + 3 IV. Payment is required by T + 4 A) I and IV B) I and III C) II and III D) II and IV
D
The number that is assigned to an issue of securities to identify and track them is the A) series number. B) catalog number. C) certificate number. D) CUSIP number.
D
Under SIPC, each customer's account is insured for A) $250,000 in cash B) $500,000 on bonds C) $600,000 in bonds and cash D) $500,000, with cash not to exceed $250,000
D
What legal instrument will a customer execute to give a financial planner discretionary trading authority, until such time it is revoked by the customer? A) A revocable living trust B) A notarized advisory contract C) A revocable collateral assignment D) A power-of-attorney
D
When a new brokerage account is opened, customer information is captured on A) the disclosure statement. B) the account's trust agreement. C) the registration statement. D) the new account form.
D
When opening a minor's account, the social security number to be used is that of the A) custodian. B) parent. C) registered rep. D) minor.
D
Which TWO of the following statements are TRUE of a principal's approval of a new opened account? I. It must be in writing. II. It indicates that all the account information is complete and correct. III. It indicates that the account is appropriate for the person opening the account based on the information collected. IV. It must be kept in the customer account file that is maintained by the representative who opened the account. A) II and IV B) I and IV C) II and III D) I and III
D
Which of the following items is not part of a standard Margin Agreement? A) Hypothecation Agreement B) Credit Agreement C) Loan consent form D) Truth-in-lending form
D
A client and his business partner open an account together that allows them to share profits and losses in the account based on a 30/70 split, and will pass to their heirs at death. This account is a A) tenants by the entirety account B) JTWROS account C) TOD account D) JTIC account
D A Joint Tenants in Common (JTIC) account may be split into equal or unequal shares. At death, the ownership interest passes to the owner's estate, and is subject to probate.
A customer has opened a cash account and purchased 100 shares of stock. If the transaction is subject to regular way settlement, payment for the stock must be made A) on the business day after the trade date. B) on the date the trade is made. C) three business days after the trade date. D) four business days after the trade.
D According to Reg T, a stock purchase settled regular way must be paid for by T+4, or 4 business days after the trade date. Regular way settlement for stocks is T+2, and payment is required two business days after settlement, T+4.
In an UGMA account, all of the following are required EXCEPT A) One adult custodian only B) Social Security number of the minor C) One minor only D) Parental approval if the account is to be opened by another adult on behalf of the minor
D An UGMA or UTMA custodial account does not require parental approval. In UGMA or UTMA accounts there must be one adult custodian and one minor only, and the account must be registered under the Social Security number of the minor.
A registered representative located in California makes a 7:30pm cold call to a potential customer in New Jersey. This is A) permitted as long as the potential customer is not on the do-not-call-list. B) permitted because the call occurred between the hours of 8am and 9pm. C) permitted as long as the registered rep had prior verbal consent from the potential customer. D) prohibited because cold calls can only be made between 8am and 9pm in the potential customer's time zone.
D Cold calls can be made between 8am and 9pm in the customer's time zone. Although it is 7:30pm in California, it is actually 10:30pm in New Jersey because of the difference in time zones. Therefore, this call is prohibited.
A broker-dealer is attempting to convert all customers who currently receive printed statements to e-statements. Which of the following is correct? A) This is not permitted; confirmations of transactions may be sent electronically, but statements may not be. B) The firm can discontinue mailing printed statements to all customers after it has provided written notice. C) The firm may proceed with electronic statements; no customer response is needed. D) The firm must receive the customer's written or electronic approval to receive statements in electronic format before it discontinues sending printed statements.
D Customers must give either electronic or written approval to receive statements of accounts online.
When do equity trades made in a cash account usually settle? A) The day after trade date (T+1) B) The fifth day after trade date (T+5) C) The third day after trade date (T+3) D) The second day after trade date (T+2)
D Trades made in a cash account usually settle regular way T+2 (the second day after trade day). However, most brokers require customers to pay for securities purchased prior to settlement. In cash accounts, payment must be made in full.
