Unit 18: Type of Clients

Limited Partnership (LP)

-A partnership with one or more general partners and one or more limited partners. -Unlimited liability is assigned to the general partners - limited partners are passive investors with limited liability -Suitability is similar to general partnership except that the limited partners do not have the full liability of the general partners.

Transfer on Death (TOD)

A client has an account where, upon her death, she desires that her only son receive 50% of account value and her 4 daughters will receive 12.5% each. The easiest way to accomplish this would be to title the account A) Transfer On Death (TOD) B) JWTROS C) tenants in common D) in trust for the children

Tenants in Common (TIC)

A form of joint ownership of an account whereby a deceased tenant's fractional interest in the account is retained by his estate.

Joint tenants with right of survivorship (JTWROS)

A form of joint ownership of an account whereby a deceased tenant's fractional interest in the account passes to the surviving tenant(s). It is used almost exclusively by husbands and wives. Related item(s): tenants in common.

True

An individual account can be for a natural person, a trust, or a deceased person through an estate account. In an individual account there is one beneficial owner.

Options Disclosure Document (ODD)

Characteristics and Risks of Standardized Options - Delivery: - to customer, at or before a/c is approved - revised version no later than next confirm - Must accompany or precede an option worksheet

Tenants by the Entirety (TBE)

Co-ownership form that can only be used by married couples. Created by express wording. Surviving spouse has right of survivorship. Neither spouse may sell, gift, devise, or otherwise transfer property without permission of other spouse.

a foundation

For which of the following types of clients would the suitability requirements be somewhat more relaxed? A) a guardian for an orphan B) a charity C) a foundation D) an executor

the 2 survivors continue as contenants with the decedent's estate.

If 3 individuals have a tenants in common 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 contenants with the decedent's estate C) probate is avoided on the estate of the deceased contenant. D) the account is converted to joint with rights of survivorship

Sam Jones is the trustee

Sam Jones has been a successful businessman and is concerned that his youngest daughter will not be able to live within her means. To protect this from happening, Jones places a large sum of money in a trust for the benefit of her daughter. Because Jones knows he won't live forever, he arranges for the Fourth Fidelity Bank and Trust Company to have control over the assets. Which of the following is NOT true? A) Same Jones is the granter B) Sam Jones is the trustee C) Fidelity Band and Trust Company is the trustee D) Sam Jone's daughter is the beneficiary

Individual Account

Securities account registered in the name of one person (individual, business, gov't entity) as opposed to a joint account, which has more than one owner.

All of the investors

Several investors open an account in joint tenancy. For suitability purposes, financial information is required on which of the following investors? A) the majority of the investors B) the largest investor only C) only the one authorized to trade the account D) All of the investors

C Corporation Disadvantages

costly to set up and maintain, double taxation, legal and regulatory requirements, control of organization can be lost to larger shareholders

General Partnership

Accounts for Business Entities - An unincorporated association consisting of two or more individuals - The partners manage and are responsible for the operation and debts of the partnership. - The partnership allow the business profits (losses) to flow directly through to the investors for tax purposes, thus avoiding double taxation.

Sole Proprietorship

Accounts for Business Entities - Simplest form of business organization - Treated like an individual account - Same suitability that applies to individual accounts apply to this type of business entitiy - All income (loss) is that of the individual - All liability for debts of the business are that of the individual

TIC

The following best describes what type of joint account (TIC/JTWROS) - Ownership doesn't have to be equal - A tenant can buy/sell at any time without the other tenant's agreement/involvement - Is created by a deed where a previous owner transfers their interest to the new tenant(s)

Customer Identification Program (CIP)

The policies and procedures of an institution that aim to identify and verify the identity of its customers. In general, the program must be in writing, have senior board approval and include procedures for customer notification. It is used to help the government fight funding of terrorism and money laundering.

S corporation

Three friends plan to start a new business. It is anticipated it will be several years before the business turns a profit. Which of the following types of business organization would be best if they wish to limit their liability while, at the same time, being able to receive favorable tax treatment for the expected loss? A) C corporation B) S corporation C) General partnership D) Sole proprietorship

II, I, IV, and III

When an agent with a broker-dealer opens a new options account for a client, in which order much the following actions take place? I. Obtain approval from a qualified supervisor II. Obtain essential facts from the customer III. Obtain a signed options agreement IV. Enter the initial order A) I, II, II, and IV B) I, II, IV, and III C) II, I, IV, and III D) II, I, III, and IV

C Corporation

Which of the following business structures is most appropriate for retaining money in the business? A) C corporation B) sole proprietorship C) LLC D) S corporation

parent and a minor child

Which of the following individuals may not open a joint account? A) Two spouses B) Three sisters C) Two friends D) Parent and a minor child

express the author's end-of-life wishes

A living will is used to: A) avoid the cost and time of probate B) eliminate, or at least reduce, estate taxes C) ensure that the author's assets are properly distributed D) express the author's end-of-life wishes

checks can be drawn in the name of either party

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 permission of the other party 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.

acting with high ethics and morality

A socially responsible mutual fund would probably invest in companies A) generating higher returns B) acting with high ethics and morality C) located in a single geographic area D) with major presence on social media