Ch. 14 - Customer Accounts
A 55-year-old investor has earned $55,000 in pension income and $1,500 from a part-time job this year. How much can she contribute to her IRA?
$1,500
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
A customer opens a new margin account and her initial transaction is a short sale of 100 shares of XYZ at $16. What is her minimum deposit requirement?
$2,000
A 60-year-old individual is receiving $60,000 per year from a pension and $2,500 per year from a part-time job. How much can the individual contribute to her IRA?
$2,500
Which of the following statements is TRUE concerning custodian accounts?
A donor may give gifts of cash and securities
In a Roth IRA, contributions are made with:
After-tax dollars
Reinvested dividends and capital gains distributions from the investments within an IRA are:
Allowed to accumulate on a tax-deferred basis
Which of the following is classified as a joint account?
An account shared between two brothers.
Fee-based accounts are generally suitable for:
An account that's rebalanced frequently
Which of the following statements are TRUE regarding a margin account?
An extension of time cannot be granted to meet a maintenance call.
Required minimum distributions (RMDs) from a traditional IRA account must:
Begin by April 1 of the year following the one in which the individual turns 72
All of the following statements are TRUE regarding an account that's held as tenants in common, EXCEPT:
Both owners are required to have an equal share of the assets.
A broker-dealer's stock is publicly traded. In order to purchase this stock in a customer's discretionary account, the registered representative:
Can make the purchase if the customer's written approval is received
Which of the following is a characteristic of a Roth IRA?
Contributions are made in after-tax dollars.
Which of the following statements is NOT TRUE regarding profit-sharing plans?
Contributions are required to be made each year.
The investments in a Coverdell Education Savings Account (CESA) are:
Determined by the investor
Which of the following statements is NOT TRUE of a Coverdell Education Savings Account?
Distributions can only be made for higher education expenses.
A fee-based account is most suitable for customers who:
Engage in frequent trading
The funds removed as a result of a qualified withdrawal from which of the following were tax-deferred?
IRA
Three business partners have opened a brokerage account as Joint Tenants with Right of Survivorship (JTWROS). All of the following statements are TRUE, EXCEPT:
If one partner dies, his interest in the account will pass to his estate
Regarding cash and margin accounts, which of the following statements is NOT TRUE?
In a cash account, a customer is only required to deposit 50% of a purchase
Which of the following statements is TRUE about a Joint Tenancy in Common (JTIC) account?
In this type of account, ownership may be unequal.
Which investment is NOT eligible for a 403(b) plan?
Limited partnership
When opening a margin account, a customer is NOT required to sign which of the following?
Loan consent agreement
Which type of account allows a broker-dealer to lend money?
Margin account
A husband and wife have a joint account with right of survivorship. If one of the parties places an order, the RR:
May accept the order
A customer gives his registered representative the following instructions. Buy 100 shares of General Motors whenever you think the price is right. Under current regulations, the order:
May be accepted and may be executed anytime that day
The husband of a customer calls to place an order in his spouse's account. He informs the registered representative that his wife is traveling, but she gave him the authority to place the order. The registered representative should:
Not accept the order unless specific instructions are received from the wife
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
Which of the following statements is NOT TRUE regarding discretionary accounts?
Orders must be approved verbally by the customer prior to execution
Premature withdrawals of earnings from an IRA that qualify for an exception are subject to:
Ordinary income taxes on the amount withdrawn, but not a 10% tax penalty on that same amount
The major provisions of ERISA provide protection for:
Participants in pension plans
If a customer wants to open an account to trade options, the account must be approved:
Prior to the time the initial order is accepted
What feature is shared by both Roth IRA and Roth 401(k) plans?
Qualified distributions from both are excluded from federal income tax.
A qualified plan has all of the following characteristics, EXCEPT:
Tax-free distributions
A registered representative (RR) has a customer who is a senior officer of a corporation. The customer wants to open an account in the name of the corporation. Which of the following statements is TRUE?
The RR may not open the account unless the customer provides a corporate resolution authorizing her to open the account.
Which of the following BEST describes the purpose of a hypothecation agreement in a margin account?
The agreement gives the broker-dealer permission to pledge a customer's securities to a bank as collateral for a margin loan.
For any person who's considering whether to contribute to a 529 college savings plan, each of the following statements are TRUE, EXCEPT:
The beneficiary must be a relative (by blood) of the donor.
A mother opens a UTMA account for her child. She asks her brother to be the custodian for the account and he agrees. Who's the owner of the account?
The child
To determine whether churning has occurred in a discretionary account, the primary concern is:
The frequency of trading
A husband and wife have a joint account. If the husband instructed his RR to sell securities and send a check, the check could be made payable to:
The husband and wife jointly
When Uniform Transfer to Minors Act (UTMA) accounts are opened, they use the SSN or tax ID of:
The minor
Which of the following statements is TRUE regarding trustee-to-trustee IRA transfers?
There is no limit to the number of transfers per year.
All of the following statements are TRUE of ERISA guidelines, EXCEPT:
They apply to both private and government retirement plans.
To open a margin account, a hypothecation agreement is required. What's the purpose of this agreement?
To stipulate that the client's securities will be used as collateral.
Upon the death of a trust beneficiary, where are the assets directed?
To the beneficiary's estate
A mother wants to gift money to her son. If she doesn't want the son to be able to use the money for living expenses, which of the following accounts is the most beneficial?
Trust account
The payment date for securities purchased in a cash or margin account as stated by Regulation T is:
Two business days from the settlement date
Discretionary accounts require:
Written authorization from the customer
An individual has expressed interest in having a broker-dealer maintain his account, but wants his name removed from the account. Is this permissible?
Yes, with prior approval, it may become a numbered account.
