Chapter 5: Customer Accounts

Question #8 of 132Question ID: 605956 Which of the following activities can take place in a cash account? A)Short sale of stock. B)Borrowing money. C)Purchase of new issue common stock. D)Uncovered option writing.

A customer may only borrow money or securities from a broker/dealer in a margin account. Uncovered call options must occur in a margin account and uncovered put options can only occur in a cash account when certain criteria are met. Short sales must occur in a margin account. Reference: 5.1.3.1 in the License Exam

Question #7 of 132Question ID: 605983 If a customer wants to open an account in the name of her adult son and wants the account to be approved for uncovered option writing, her request should be refused because: A)it is a trade through and nothing is currently known about the son's investment experience. B)the opening of accounts for third parties is prohibited. C)discretionary authorization may not be granted with respect to writing uncovered options. D)uncovered options can only be written in margin accounts.

An adult cannot open an account and name another adult as the beneficial owner. The type of option trades and the third party's investment experience are not relevant. Reference: 5.2.1.1 in the License Exam

Question #84 of 132Question ID: 606060 Under the Uniform Transfer to Minors Act, a custodian may invest in all of the following EXCEPT: A)mutual funds. B)corporate bonds. C)blue-chip stocks. D)commodity futures.

Commodity futures may not be purchased in a custodial account. Only cash and securities may be deposited. Reference: 5.3.1.5 in the License Exam

Question #15 of 132Question ID: 605965 A registered representative is opening both cash and margin accounts for a corporation. Which of the following documents will he need? The corporation's charter, account resolution, and bylaws. A copy of the corporation's most recent balance sheet. The corporation's last 3 profit and loss statements. The name(s) of natural persons authorized to trade the account. A)I and III. B)II and III. C)II and IV. D)I and IV.

Corporate accounts are generally those established by the officers of a corporation. Such accounts require a copy of the corporate resolution naming the authorized person(s) and account trading limits (if any). If it is to be a margin account, a copy of the corporate charter and a signed margin agreement are also required. Reference: 5.1.3.3 in the License Exam

Question #93 of 132Question ID: 605969 A customer wishes to open a new account but refuses to provide suitability information. Under FINRA rules, the member A)may open the account but may not make any recommendations. B)must not open the account. C)may open the account but must limit recommendations to investment-grade securities. D)may open the account but must limit recommendations to U.S. government securities.

If a customer fails to provide suitability information, the account may be opened but the member may not make any recommendations. Reference: 5.1.1.1 in the License Exam

Question #71 of 132Question ID: 606014 A customer asks his registered representative to purchase $10,000 worth of shares in any pharmaceutical company that looks promising. Which type of an account allows the registered representative to act in accordance with this instruction? A)Margin. B)Special cash. C)Custodial. D)Discretionary.

If the registered representative may decide the specific security, the transaction requires discretionary authority and therefore must be done in a discretionary account. Determining the time or price does not require discretionary authority. Reference: 5.2.2 in the License Exam

Question #47 of 132Question ID: 606037 Which of the following are considered joint accounts? UTMA account. Guardianship account. Tenants in common. Tenants with right of survivorship. A)I and II. B)III and IV. C)I and III. D)II and III.

Tenants in common and tenancy with rights of survivorship represent ownership by more than one party. UTMA and guardian accounts are in the name of a single fiduciary. To be a joint account, all parties associated with the account must be able to enter orders. In UTMA and guardian accounts, only the custodian and guardian, respectively, possess that authority. Reference: 5.2.1.2 in the License Exam

Question #1 of 132Question ID: 605976 Which of the following allows investors to hold securities in either the name of the issuer or their transfer agent and facilitates the transfer of those securities from the issuer or their transfer agent to an investor's broker/dealer in a secure, efficient manner? A)The SEC through Form S-1 issuer registration B)The Committee on Uniform Securities Identification Procedures (CUSIP) C)The Depository Trust Company through the Direct Registration System (DRS) D)The Automated Confirmation Transaction (ACT) system

The Depository Trust Company (DTC) through the Direct Registration System (DRS) allows investors the choice of having securities registered and held in the name of the issuer or the issuer's transfer agent. It facilitates efficient and secure transfer between the issuer or transfer agent and the investor's broker/dealer. Reference: 5.1.2.1.1 in the License Exam

Question #4 of 132Question ID: 605967 The federal legislation that requires broker/dealers to verify the identity of any person opening an account is the: A)Act of 1934. B)U.S.A. PATRIOT Act. C)Insider Trading Act. D)Maloney Act.

The U.S.A. PATRIOT Act requires firms to obtain identifying information on each new customer, verify the identity of each new customer, maintain records relating to identity verification, and to determine if any new customer appears on a list of known or suspected terrorist groups compiled by the Office of Foreign Asset Control (OFAC). Reference: 5.1.1.2 in the License Exam

Question #40 of 132Question ID: 606028 When a customer wants to open a guardian account, which of the following is needed? A)Signed customer account card, credit agreement, and loan consent. B)Full power of attorney. C)Limited power of attorney. D)Copy of the court-ordered guardianship papers.

The courts appoint a guardian to act on behalf of another individual who is unable to act for himself. Full and limited powers of attorney relate to accounts over which the beneficial owners have granted some form of control to other persons. Reference: 5.2.1.4.1 in the License Exam

Question #82 of 132Question ID: 606041 Which of the following is the beneficial owner of securities in an UTMA account? A)The custodian. B)The donor. C)The guardian. D)The minor.

The minor is always the beneficial owner under an UTMA account. The custodian merely exercises his best judgment in handling investment decisions on the minor's behalf. Reference: 5.3 in the License Exam

Question #99 of 132Question ID: 606002 For a trust account not seeking appreciation, which of the following would be recommended? A)Common stock in small, highly profitable companies. B)Large-cap common and preferred stocks. C)Highly-rated, fixed-income securities. D)Common stock, preferred stock, and debentures.

The only choice that is prudent and does not have a goal of appreciation is the purchase of highly rated, fixed-income securities. Reference: 5.2.1.4 in the License Exam

Question #78 of 132Question ID: 605977 Your broker/dealer acts as a prime broker for ABC fund. In this arrangement, your broker/dealer is likely to be providing which of the following services? Execution of all transactions for the fund portfolio Clearing services Lending for trades done on margin Ensuring that all exchange-trading rules are complied by A)II and III B)I and III C)I and IV D)II and IV

The prime broker would supply clearing services, lending services for marginable transaction, as well as back office support including cash management, account statements, and transaction processing. Actual executions and abiding by all exchange rules when transactions occur is the responsibility of the executing broker/dealers. Reference: 5.1.3.5 in the License Exam

Question #55 of 132Question ID: 605995 A customer asks her registered representative to exercise discretion over her account. To do so, the representative must do each of the following EXCEPT A)have a principal initial each order promptly which may be before or after execution B)obtain written authorization from the customer C)obtain evidence of written acceptance of the account by a registered principal of the firm D)obtain approval from FINRA

The requirements for a discretionary account include a written authorization from the customer, a written acceptance by a principal of the firm, and close supervision of each transaction to ensure suitable transactions in light of the customer's objectives and financial situation. No approval from FINRA is required. Reference: 5.2.2.1 in the License Exam

Question #25 of 132Question ID: 721425 Which of the following is required to sign a new account form for a cash account? A)The registered representative B)The principal C)The customer D)The spouse of the customer

To open a cash account, only the signature of the principal accepting the account is required. For margin accounts, the signature of the customer is required on the margin agreement. The signature of the spouse is required only for a joint account. Reference: 5.1.1 in the License Exam

Question #13 of 132Question ID: 721428 A new customer is opening a cash account with your broker-dealer. The new account form must contain the signature(s) of A)the principal and the registered representative working with the customer B)the customer and the registered representative working with the customer C)the customer only D)the principal only

To open a cash account, only the signature of the principal accepting the account is required. For margin accounts, the signature of the customer would be required on the margin agreement. Reference: 5.1.3.1 in the License Exam

Question #22 of 132Question ID: 605970 If a customer gives specific instructions to his registered representative to purchase a security that is clearly unsuitable in light of the customer's investment objectives, under FINRA rules, the registered representative: A)can only enter the order with the prior approval of a principal. B)can only enter the order if the customer puts his verbal instructions into written form. C)cannot enter the order. D)can enter the order.

Under FINRA rules, the representative may execute the trade at the customer's request; the trade ticket should indicate that the order was unsolicited. Reference: 5.1.1.1 in the License Exam

Question #70 of 132Question ID: 606054 Under the Uniform Transfer to Minors Act, which of the following gifts is allowable? A)From 2 donors to more than 1 child jointly. B)From 1 donor to 1 child with both parents named as custodians. C)From 1 donor to 1 child. D)From 1 donor to more than 1 child jointly.

Under UTMA, a donor may give unlimited money or securities to one child - with one person named as custodian. Reference: 5.3 in the License Exam

Question #35 of 132Question ID: 606056 Under the provisions of an UGMA account, which of the following occurs when the minor reaches the age of majority? A)The account remains as an UGMA account. B)Any securities in the account must be converted to cash. C)The account must be turned over to the donee. D)The account must be turned over to the donor. .

Under the terms of the Uniform Gifts to Minors Act, when a minor reaches the age of majority, the proceeds must be handed over to the new adult. Reference: 5.3.1 in the License Exam

Question #5 of 132Question ID: 721431 A customer wants to open a new cash account and give her sibling trading authorization. The required documents to accommodate her request would be A)a margin agreement and a limited power of attorney B)a new account form and a loan consent agreement C)a new account form and a limited power of attorney D)a margin agreement and a loan consent form

When a customer wants to give trading authorization or discretionary privileges to a third party in a cash account, a member firm requires a new account form (as with all new accounts) and a limited power of attorney. A limited power of attorney gives the third party trading authority but prohibits that party from withdrawing assets (cash or securities) from the account. Reference: 5.2.1.5 in the License Exam

Question #66 of 132Question ID: 606003 All of the following statements regarding a transfer on death (TOD) account are correct EXCEPT: A)the owner of the account may change beneficiaries at will. B)only those assets held at the broker/dealer are transferred. C)probate is avoided. D)estate taxes are reduced.

A TOD account avoids probate, but not estate taxes. The owner of the account may change beneficiaries and their percentages as he wishes. The TOD account is an account at a specific broker/dealer and only relates to the assets in that account. Reference: 5.2.1.1.1 in the License Exam

Question #19 of 132Question ID: 606012 Which of the following individuals may NOT open a joint account? A)Parent and a minor. B)Two spouses. C)Three sisters. D)Two business partners.

A minor may not be a party in a joint account because a minor cannot legally exercise control over the account. A custodial account may be set up for the minor. Reference: 5.2.1.2 in the License Exam

Question #10 of 132Question ID: 605997 If two brothers open a joint account tenants in common, at year's end, the member firm carrying the account will send Form 1099 to: A)both of the brothers. B)the brother with the largest percentage interest in the account. C)the brother whose Social Security number is on the account. D)either of the brothers.

All accounts, joint or otherwise, have a primary Social Security number. The holder of this number receives the year-end statement (Form 1099). Reference: 5.2.1.2.1 in the License Exam

Question #29 of 132Question ID: 605974 Broker/dealers are required to maintain customer identification programs (CIPs) and to check the names of new clients against A)a list compiled by FINRA B)a list maintained by the Securities Exchange Commission (SEC) C)a list of specially designated nationals (SDNs) maintained by the Office of Foreign Assets Control D)the FBI's most wanted list

All financial institutions are required by federal law to maintain a customer identification program and to check the identifying information supplied by new clients against the specially designated nationals (SDNs) list maintained by the Office of Foreign Assets Control (OFAC). Reference: 5.1.1.2.2 in the License Exam

Question #83 of 132Question ID: 606052 You have decided to open an UTMA account for your 10-year-old son. As you are completing the application to open the account, you are asked for a Social Security number. Whose Social Security number will be used to open the account? A)The donor's. B)The parents' Social Security number. C)The beneficial minor's. D)The custodian's.

An UTMA account will be opened using the beneficial minor's Social Security number. Reference: 5.3.1.3 in the License Exam

Question #16 of 132Question ID: 606018 An agent is permitted to open all of the following customer accounts EXCEPT: A)a minor's account opened by a custodian. B)a partnership account opened by the designated partner. C)a corporate account opened by the designated officer. D)an account in the name of Mrs. Jones opened by Mr. Jones.

An agent is not permitted to open an individual account in the name of a third person. Reference: 5.2.1.2 in the License Exam

Question #63 of 132Question ID: 605940 Under SEC rules, which of the following events require a broker/dealer to furnish a copy of the account record to a customer? Change of broker/dealers address Change of customer's name or address Change of customer's investment objectives Change in registered representative assigned to the account A)II and III B)II and IV C)I and IV D)I and III

Any change in a customer's status, particularly those that may impact the suitability of recommendations, requires a broker/dealer to update the customer account record and furnish it to the customer within 30 days of receipt of the change notice. Reference: 5.1.1.3 in the License Exam

Question #48 of 132Question ID: 721432 Which of the following may NOT normally assign authorization to a third party? A)A corporation B)A joint account C)A fiduciary D)An individual

Assigning authorization to a third party is giving away the fiduciary authority that had been legally assigned to someone else. This is not permitted. In some instances, custodians of an account may delegate specific investment decision authority to a third party, but that authority must not be left unsupervised by the fiduciary. Reference: 5.3.1.2 in the License Exam

Question #60 of 132Question ID: 605960 Under MSRB rules, a municipal securities broker/dealer opening an account for an employee of another firm must: A)send duplicate confirmations to the employer after each trade. B)obtain the employer's approval before each trade. C)refuse all trades unless approved by a municipal principal. D)notify the SEC after each trade.

Before opening an account for an employee of another municipal firm, a municipal dealer must notify the employer in writing. In addition, the dealer must send duplicate confirmations of each trade to the employer. Reference: 5.1.5.2 in the License Exam

Question #59 of 132Question ID: 605946 Several years after opening a brokerage account at a FINRA member firm, an individual joins another FINRA member as a research analyst. Regarding his responsibilities, which of the following is TRUE? A)The individual must notify both members of his relationship with the other. B)The individual need notify only the member carrying the account of his association with another member. C)No notification is required, as the account was opened before his association with a member firm. D)The individual need notify only the employing member of the account.

Before opening an account with another member, an associated person must notify both the employer member and the executing member in writing of his association. If the account was opened before his association with a member, the associated person must notify both members promptly in writing. Reference: 5.1.5 in the License Exam

Question #68 of 132Question ID: 606046 Which of the following best describes the responsibility of the custodian regarding cash dividends received in an UGMA account? A)Cash dividends must be withdrawn and used for the minor's education. B)Cash dividends can remain in the account in anticipation of reinvestment. C)Cash dividends must be reinvested immediately. D)Cash dividends can be used to benefit the custodian.

Cash in the account can remain idle for only a short period of time. Leaving it totally idle for prolonged periods is not deemed prudent, because of the loss of interest earning power. Reference: 5.3.1.5 in the License Exam

Question #91 of 132Question ID: 605957 If a customer wishes to open a new account but declines to provide all of the financial information the member firm requests, which of the following statements are TRUE? The member firm may open the account and make recommendations without meeting any other criteria. The member firm may open the account if it has determined (by other means) that the customer has the financial resources to carry the account and that trading is suitable. The member firm may not recommend any transactions unless the representative is able, through the information available, to make a suitability determination. The member firm may not allow trades in the account until the requested information is received. A)II and III. B)I and III. C)I and IV. D)II and IV.

If a customer refuses to provide financial information, the member firm may use whatever information is available to decide whether to open the account. Any recommendation made to a customer must be suitable, taking into account the customer's investment objectives, financial situation, and any other relevant information. If the information is not provided, the account may be opened, but no investment recommendations may be made. Reference: 5.1.1.1 in the License Exam

Question #65 of 132Question ID: 901844 On a social media site you notice that one of your customers has lost his job due to corporate downsizing. Recognizing that updating the customer's account information is needed, your best course of action should be which of the following? A)Use the social media site to contact your customer for more details. B)Notify your principal and await instructions on how best to handle the information. C)Contact the customer using the contact information on record with your firm. D)Wait until the customer contacts you specifically regarding any changes he might want to make.

It is the registered representatives' responsibility to know their customer and reflect any changes in life situations by updating the customer's account information. To initiate the contact to discuss the change, the RRs should use only the contact information given by the customer to the BD. Reference: 5.1.1.3 in the License Exam

Question #97 of 132Question ID: 605996 An agent may open a joint account for which of the following? Lee and his 13-year-old son, Tom. Mary and Kelley, two adult college roommates. Jerry and Mark, friends and partners in business for more than 20 years. Melinda and her minor nephew, John, for whom she is guardian. A)I and III. B)II and IV. C)I and IV. D)II and III.

Joint account owners share ownership of the account and must be adults. A minor may not legally exercise control over an account and may not be an owner of record of an account. Reference: 5.2.1.2 in the License Exam

Question #61 of 132Question ID: 606007 A joint account could be opened for any of the following EXCEPT: A)a parent and minor child. B)3 business associates. C)a corporation. D)2 partners in a limited partnership.

Minor children cannot be a party to any account except an UGMA or UTMA. Reference: 5.2.1.2 in the License Exam

Question #90 of 132Question ID: 721427 A customer opens an account and payment and delivery instructions are established. Beyond the opening of the account these instructions may A)be changed at any time for all transactions going forward B)be changed for individual transactions only C)not be changed unless a new account is established D)be changed for individual transactions, or going forward, for all transactions

Once payment and delivery instructions are established at the time the account is opened they can be changed for any individual transaction or for all transactions going forward. Reference: 5.1.2.1 in the License Exam

Question #46 of 132Question ID: 606045 Which of the following can be a custodian under UGMA? A)Any legally competent adult B)A broker/dealer in street name C)The beneficial owner of another UGMA account D)An investment advisory firm

Only an individual adult can be the custodian in a minor's account. Neither a broker/dealer nor an investment advisory firm can be the custodian for an account under UGMA. The beneficial owner of an UGMA account is a minor and cannot be the custodian of their own account or any other fiduciary account. Reference: 5.3.1.2 in the License Exam

Question #32 of 132Question ID: 606047 Securities in an UGMA account are sold at a profit. Who is liable for the current year taxes on the sale? A)The donor. B)No one; they are deferred to the age of majority. C)The minor. D)The guardian.

The UGMA account is for the benefit of the minor, which is registered with the minor's Social Security number. All taxes on the account are the responsibility of the minor. Reference: 5.3.1.6 in the License Exam

Question #85 of 132Question ID: 605973 Which of the following is required to be maintained by financial institutions such as banks and broker/dealers (BDs) by the USA PATRIOT Act to prevent the financing of terrorist operations and money laundering? A)Customer identification programs (CIPs) B)Privacy notices C)Specially Designated Nationals list D)Do-not-call lists

The USA PATRIOT Act requires financial institutions to maintain customer identification programs (CIPs) to protect against financing terrorist operations or activities and potential money laundering activities. The Office of Foreign Asset Control (OFAC) publishes and maintains the "Specially Designated Nationals" list which financial institutions utilize to determine if any customers or potential customers have been identified by OFAC as posing a terroristic threat or are involved in money laundering activities. Reference: 5.1.1.2.1 in the License Exam

Question #94 of 132Question ID: 605945 If an agent is assigned to an account previously handled by an agent who has since left the firm, which of the following actions should the agent take first? A)Suggest the customer buy one of the stocks the firm is currently recommending. B)Require the customer to sign a trading authorization naming the agent as the party with authority. C)Liquidate the portfolio for immediate reinvestment in stocks the firm is currently recommending. D)Verify the account information.

The agent must verify and update client information before recommending trades. Without knowledge of the client's needs and financial profile, the agent cannot make suitable recommendations. Reference: 5.1.1.1 in the License Exam

Question #9 of 132Question ID: 606017 A customer will be leaving the country and asks his representative to watch his account. If his positions begin to decline in value, the registered representative should: A)buy protective puts to reduce losses. B)write covered calls against the position. C)close out the positions. D)talk to his manager.

The registered representative may only place an order if the account owner has granted him discretionary authority. Reference: 5.2.2.1 in the License Exam

Question #72 of 132Question ID: 605984 All of the following are fiduciary accounts EXCEPT: A)guardian accounts. B)estate accounts. C)trust accounts. D)transfer on death (TOD) accounts.

A TOD account is an individual account in which, on the death of the account owner, the assets pass to a designated beneficiary. Reference: 5.2.1.4 in the License Exam

Question #77 of 132Question ID: 606053 Which of the following persons may legally open an account to trade on margin? A)A corporation. B)A minor child with approval of a court-appointed guardian. C)An open-end investment company. D)A custodian of an UTMA account.

A corporation may open an account to trade on margin if provided for in the charter and authorized in the bylaws. Both UTMA and UGMA specifically prohibit custodians from either engaging in speculative trading or borrowing money or securities in the name of the minor through trading on margin. Mutual funds are also prohibited from trading on margin. Reference: 5.3.1.5 in the License Exam

Question #52 of 132Question ID: 605955 All of the following information must be obtained from new individual customers EXCEPT: A)date of birth. B)Social Security number. C)residence address. D)educational background.

A customer's educational background is not required to open a new account. In the case of an account opened in the name of a business, the business address and tax identification number are required. Reference: 5.1.1 in the License Exam

Question #87 of 132Question ID: 606027 Which of the statements regarding a member firm's handling of a discretionary account is TRUE? A)A principal must approve each discretionary order prior to execution. B)The registered representative may not effect transactions excessive in size or frequency in view of the customer's resources. C)Margin may not be used in a discretionary account. D)The registered representative must obtain written authorization from the customer before placing each order. .

A discretionary account allows the registered representative to place orders without consulting the customer. It does not relieve him of the obligation to execute only suitable orders. Reference: 5.2.2.2 in the License Exam

Question #21 of 132Question ID: 606031 A person wishing to grant a registered representative the right to make investment decisions for his account does so by: A)providing a limited power of attorney giving discretionary powers. B)providing a letter from an attorney. C)calling the representative each time he wants to place an order. D)providing a full power of attorney to someone other than the registered representative who will then instruct the representative as to investment decisions.

A discretionary account always requires prior written authorization from the customer in the form of a limited power of attorney (trading authorization). Reference: 5.2.2.1 in the License Exam

Question #100 of 132Question ID: 606000 Your client informs you that a signed discretionary account form is in the mail. Before receiving the form and unable to contact the client, you notice that one of his stocks is dropping sharply on adverse news. You: A)cannot enter a discretionary order. B)can enter a discretionary order with instructions that the order is not held. C)can enter a discretionary order with written documentation of the situation. D)can enter a discretionary order with written permission of a principal of the broker/dealer.

A discretionary order cannot be entered until the signed discretionary account form has been received. Reference: 5.2.2.2 in the License Exam

Question #98 of 132Question ID: 605979 A broker/dealer has set up a prime brokerage account for one of its customers. This customer is most likely A)an investment club B)2 spouses, each having individual accounts and a joint account together C)an institutional customer D)an individual retail customer

A prime brokerage account is one in which a customer, generally an institutional customer, selects one member firm (the prime broker) to provide custody and other services, while other firms, called executing brokers, handle all trades placed by the customer. Reference: 5.1.3.5 in the License Exam

Question #50 of 132Question ID: 721424 One of your customers will be traveling extensively throughout Europe and asks your broker dealer to hold his mail and not send statements to his home. Under the rules, which of the following is TRUE? A)For matters of convenience, a customer can ask a broker dealer to hold mail for any length of time. B)Normal requests can be for up to three months, but longer periods may be granted for acceptable reasons. C)No additional actions need be taken by the broker dealer once they grant the request. D)During periods of time when mail is being held, it is assumed that the broker dealer will not be able to communicate with the customer in any way.

A request must include the time period the request is being made for up to three months. Requests for longer periods may be granted for an acceptable reason such as safety or security concerns, but not merely for the sake of convenience. The member firm must inform the customer of any alternate methods that the customer can use to receive or monitor account activity, such as email or through the member firm's website, and the member must obtain a confirmation from the customer that this information regarding alternate methods of communication was received. Reference: 5.1.2.3 in the License Exam

Question #74 of 132Question ID: 606033 All of the following are characteristics associated with equity-linked notes (ELNs) EXCEPT: A)They are equity securities. B)They have final payments at maturity linked to the return of an underlying stock or basket of stocks. C)They can be exchange traded or traded OTC. D)They are considered to be nonconventional structured investments.

Despite their name, equity-linked notes (ELNs) are debt instruments, not equity instruments. They have a partial fixed return as well as a final payment linked to the performance of a single stock or equity index. Some are exchange traded while others trade OTC. FINRA who considers ELNs to be nonconventional structured investments has expressed concerns that investors might not fully understand ELNs or the risks associated with them. Reference: 5.2.2.3 in the License Exam

Question #43 of 132Question ID: 606032 An arrangement in which the broker has the authority, or power-of-attorney, to make trades from funds in the account without prior approval from the investor is known as: A)a nonapproval account. B)a stop loss account. C)a discretionary account. D)a power-of-attorney account.

Discretionary accounts are arrangements in which the registered representative has the authority, or power-of-attorney, to make trades from funds in the account without prior approval from the investor. Reference: 5.2.2.1 in the License Exam

Question #14 of 132Question ID: 606005 In a discretionary account, due diligence requires a member to receive prior written consent before purchasing nonconventional investments (NCIs). All of the following are considered NCIs EXCEPT: A)Hedge funds. B)Corporate bond funds. C)Distressed corporate debt. D)Equity linked notes.

Equity linked notes, debt issued by corporations that have filed for bankruptcy or are considering filing for bankruptcy, and hedge funds are all examples of investments that carry unique risks that an investor needs to be aware of. Therefore, before purchasing these types of investments in a discretionary account, proper due diligence by the broker/dealer requires that the customer provide prior written consent. Reference: 5.2.2.3 in the License Exam

Question #27 of 132Question ID: 735929 Under FINRA's rules governing the activities of broker/dealer firms, prior notification to the employing firm and prior written consent from the employing firm would be required in order to open a cash account for all of the following EXCEPT A)a bank officer B)an employee of another member C)an exchange employee D)a registered representative of another member

FINRA requires prior written notification be made, and prior written consent be received before associated persons can open margin or cash accounts with other members or financial institutions. By virtue of being a bank officer alone, one couldn't definitively say that this rule is applicable. Reference: 5.1.5 in the License Exam

Question #24 of 132Question ID: 605939 Your firm has determined that a person seeking to open an account is on the Office of Foreign Asset Control's (OFAC) list of individuals who are viewed as threats to the United States. Who must oversee your firm's dealings, if any, with this individual? A)The registered representative whom the person approaches. B)An officer of the firm who has been designated to monitor and check customer names against the Specially Designated Nationals (SDN) list maintained by OFAC. C)The Internal Revenue Service (IRS). D)The U.S. Treasury will have OFAC send a licensed agent to handle this account.

Financial institutions, including broker/dealer firms, must designate an officer of the firm as having responsibility for monitoring the OFAC list and OFAC regulations. The officer would additionally be responsible for the blocking of transactions or declining of business with certain customers should they appear on the OFAC list. Reference: 5.1.1.2 in the License Exam

Question #79 of 132Question ID: 605962 If a customer wants his account designated by number, not by name, the registered representative: A)can open this account without additional documentation. B)can open this account with a written statement of ownership and approval from the FINRA. C)can open the account with a written statement of ownership from the customer. D)cannot open the account in this manner.

For numbered accounts, the customer must sign a document attesting to ownership. Reference: 5.1.4.1 in the License Exam

Question #31 of 132Question ID: 606009 An individual has given full power of attorney (POA) to a third party. This means that the designee is permitted to: A)originate trades in the account, but not remove funds or securities. B)originate trades in the account and remove funds or securities. C)close the account and reopen it in the designee's name. D)remove funds or securities from the account, but not originate trades.

Full power of attorney gives the named third party, the designee, all of the power of the owner except the right to change the name on the account. Reference: 5.2.1.5.1 in the License Exam

Question #33 of 132Question ID: 606016 A power of attorney is not required for a registered representative to choose which of the following order instructions? Security to be bought or sold Number of shares to be bought or sold Time of execution Price of execution. A)II and IV. B)I and II. C)III and IV. D)I and III.

If a registered representative chooses price or timing of an order only, that order is not a discretionary order and a power of attorney is not required. The order is a not-held order. To be discretionary, the representative must choose one or more of the following: the action (buy or sell), the security, or the amount (number of shares). Reference: 5.2.1.5 in the License Exam

Question #17 of 132Question ID: 605985 Which of the following statements regarding a death in a tenants in common account are TRUE? The decedent's interest in the account goes to his estate. The decedent's interest in the account goes to the remaining tenant. The member firm must freeze both the account and acceptance of orders until the required documents are presented. The member may immediately accept orders from the remaining tenant. A)II and III. B)II and IV. C)I and IV. D)I and III.

If one party in a TIC account dies, the decedent's interest in the account goes to his estate, not to any other party to the account. The member firm must freeze the account and acceptance of all orders until the required documents are presented. Reference: 5.2.1.2.1 in the License Exam

Question #41 of 132Question ID: 605986 In an account opened by 2 individuals as joint tenants with rights of survivorship, all of the following are true EXCEPT: A)in the event of death, the other party assumes full ownership of the account. B)stock certificates may be delivered in the name of either party. C)mail may be directed to the joint owner agreed upon by both parties to the account. D)orders may be entered by either party.

In a JTWROS account, each party has an equal, undivided interest in the account. Upon the death of one party in a two-party account, the other party assumes full ownership of the account. Orders may be entered by either party, and mail may be directed to either party. However, disbursements of cash or securities must be in the name of all parties to the account. Reference: 5.2.1.2.2 in the License Exam

Question #30 of 132Question ID: 606011 A customer and his spouse own shares in the ABC Fund as joint tenants with rights of survivorship. If the customer dies, what happens to the shares in the account? A)Ownership of the shares must be determined by probate court. B)One-half of the shares would belong to the spouse, and the remaining half would be distributed to the customer's estate. C)The account would be frozen until the estate was settled. D)The spouse would own all the shares.

In a JTWROS account, securities pass to the surviving owner. The account does not have to be frozen but can continue to enter orders. Reference: 5.2.1.2.2 in the License Exam

Question #64 of 132Question ID: 605994 All of the following characteristics describe a joint tenants with right of survivorship account EXCEPT A)mail may be sent to either party with the permission of the other party B)orders may be given only by the party listed first on the account C)checks must be made out in the name of the account D)in the event of the death of one of the tenants, the surviving party assumes control of the entire account

In a JTWROS account, where the surviving party assumes control of the entire account in the event of death of one of the tenants, any party named on the account may enter orders for the account. While distributions from the account must be sent in the names of all of the owners, mail could be sent to one party only with the permission of all other parties to the account. Reference: 5.2.1.2.2 in the License Exam

Question #20 of 132Question ID: 605987 Which of the following statements regarding joint accounts/tenants in common are TRUE? Each party specifies a percentage of interest in the account. Each party has an equal interest in the account. The interest of a deceased tenant passes to the estate of the decedent. The interest of a deceased tenant passes to the co-tenant. A)I and III. B)I and IV. C)II and III. D)II and IV.

In a TIC account, each party must specify a percentage of interest in the account. If one party dies, his percentage of ownership passes to his estate, not to any other party to the account. Reference: 5.2.1.2.1 in the License Exam

Question #62 of 132Question ID: 605988 If three individuals open up a joint account with your firm, and one of the parties to the account possesses written authorization from the other parties granting him authority to make all trading decisions, the new account form must contain information on: A)the individual granted trading authority. B)the individual with the highest net worth. C)all three individuals. D)any two of the three individuals.

Information is required for all three individuals because they all have ownership in the account. Reference: 5.2.1.2 in the License Exam

Question #44 of 132Question ID: 605999 In a discretionary account where the investment objective is preservation of capital and growth, all of the following practices are unsuitable EXCEPT: A)marking the investment objective on the new account form as high risk. B)frequent and profitable short-term trading in volatile stocks. C)maintaining a fixed asset allocation mix which includes under-performing sectors. D)marking order tickets solicited or unsolicited when discretion is used.

Maintaining a fixed asset allocation mix is suitable in a discretionary account because it assumes that over time, some sectors will outperform while others underperform. Reference: 5.2.2.2 in the License Exam

Question #42 of 132Question ID: 606023 A wealthy individual has established a trust and named you as the trustee. If you wish to establish an account that permits the trust to engage in margin transactions, which of the following statements regarding margin trading is TRUE? A)It is not permitted. B)It is permitted if provided for in the underlying documentation. C)It is permitted if the fiduciary shares in the profits or losses. D)It is permitted if the fiduciary observes the prudent investor rule.

Margin trading in a trust account is permitted only if it is specifically provided for in the trust agreement. Reference: 5.2.1.4 in the License Exam

Question #80 of 132Question ID: 735927 An employee of a FINRA member firm wishes to open an account at another member firm. The employee opening the account must A)notify FINRA in writing of the intent to open the account B)obtain prior written consent from FINRA before opening the account C)receive prior written consent from their employer D)make written notification to the SEC before the account can be opened

Persons associated with one FINRA member firm may open securities accounts at other member firms as long as prior written notice was made to, and prior written consent was received from, the employing broker/dealer before the account is opened. Neither notification nor consent is required from FINRA or the SEC. Reference: 5.1.5.1 in the License Exam

Question #28 of 132Question ID: 605972 Broker/dealers who reserve the right to disclose nonpublic private information about their customers to unaffiliated third parties must provide notice to customers at the time of the account opening provide notice to customers each time a transaction occurs within the account provide reasonable means for customers to opt out of such disclosures require that customers wishing to opt out send a written request with signature witnessed by a notary A)I and II B)I and III C)II and III D)II and IV

Regulation S-P requires that if a broker/dealer reserves the right to disclose nonpublic personal information to third nonaffiliated parties, it must notify the customer at the time of the account opening and annually thereafter. Means to opt out of the disclosures must be reasonable and easy. Requiring a written request to opt out would not be considered reasonable means under the regulation. Reference: 5.1.1.4 in the License Exam

Question #51 of 132Question ID: 606050 A custodian of an UTMA account may do which of the following as a fiduciary to the account? A)Be reimbursed as a fiduciary for reasonable expenses incurred for managing the account. B)Meet a margin call. C)Withdraw securities if he substitutes his own stock of equal value. D)Use the securities in the account for his own benefit.

The custodian has a fiduciary responsibility for the account and should invest for preservation of capital and to achieve reasonable income for the beneficial owner of the account. While the custodian, as a fiduciary, can be reimbursed for reasonable expenses incurred in acting as a fiduciary to the UTMA account, they may not trade on margin, nor would they be permitted to substitute securities in the account or use securities in the account for their own benefit. Reference: 5.3.1.5 in the License Exam

Question #56 of 132Question ID: 606051 Under the Uniform Gifts to Minors Act, how may stock subscription rights or warrants be handled in a custodial account? A)The custodian may exercise or sell the rights as he deems prudent. B)The rights may be exercised or sold only if the stock certificates are held in street name. C)The rights may be exercised or sold only if the donor is also the custodian. D)The custodian may not exercise or sell rights for a custodial account.

The custodian in an UGMA account is obligated to handle that account in the best interests of the minor. In doing so, he must act as a prudent investor would. There is no requirement that the donor and custodian be the same person. Remember that UGMA and UTMA accounts may never have street name registration. Reference: 5.3.1.5 in the License Exam

Question #37 of 132Question ID: 606043 Dividends have been received into an UGMA account. The custodian may do any of the following EXCEPT A)reinvest the dividends in more stock B)withdraw the dividends as a loan from the account C)withdraw the dividends and place them in an UGMA savings account D)use the dividends to pay the taxes on the account

The custodian may make investments deemed prudent and satisfy any tax obligations with the assets in the account on behalf of the minor. The custodian could not withdraw the funds as a loan from the account. Reference: 5.3.1.5 in the License Exam

Question #23 of 132Question ID: 606057 How must stock subscription rights be handled in a custodial account for a minor? A)The rights may be exercised or sold only if the stock is held in street name. B)The rights may be exercised or sold only if the donor is also the custodian. C)The custodian cannot exercise or sell rights for the custodial account. D)The custodian can exercise or sell rights as he deems prudent.

The custodian must either buy the securities or sell the rights; he cannot let the rights expire because this would not be in the best interest of the minor. The same is also true of warrants. Reference: 5.3.1.5 in the License Exam

Question #67 of 132Question ID: 606040 John is the custodian of his niece's UGMA account. John places an order for 100 shares of a very speculative stock for the account. What should the representative do? A)Refuse to enter the order, because it is unsuitable for a UGMA account. B)Advise the custodian as to the suitability of the stock. C)Enter the order as requested, without comment. D)Consult with his principal before entering the order.

The custodian should not place unsuitable orders in a UGMA account. The representative should inform the custodian of this. Reference: 5.3.1.5 in the License Exam

Question #36 of 132Question ID: 605989 If three individuals have a tenants in common account with your firm, and one individual dies, which of the following statements is TRUE? A)Trading is discontinued until the executor names a replacement for the deceased. B)The account is converted to joint tenants with rights of survivorship (JTWROS). C)The account must be liquidated and the proceeds split evenly among the two survivors and the decedent's estate. D)Two survivors continue as co-tenants with the decedent's estate.

The decedent's estate becomes a tenant in common with the survivors. Reference: 5.2.1.2.1 in the License Exam

Question #92 of 132Question ID: 606062 If a customer wishes to open a custodial UGMA or UTMA account for his nephew (a minor), the uncle: A)can open the account and name himself custodian. B)can be custodian for the account only if he is also the minor's legal guardian. C)needs a legal document evidencing the nephew's parents' approval of the account. D)can open the account provided the proper trust arrangements are filed first.

The donor may name himself the custodian of an UGMA or UTMA account. No documentation of custodial status is required to open an UGMA or UTMA account. The custodian is not required to be the minor's legal guardian. Reference: 5.3.1.2 in the License Exam

Question #89 of 132Question ID: 735928 If a registered representative of a FINRA member firm wants to open an account with another member firm, which of the following statements are TRUE? The account may only be opened if the registered representative (RR) is also a principal of his employing BD. The account may be opened, but the registered representative may not engage in securities transactions that he could do through his own firm. The member firm opening the account must send duplicate confirmations to the employing member firm if the employing member firm has requested them to do so. The employing broker/dealer must receive prior written notice and give prior written consent in order for the account to be opened. A)III and IV B)I and III C)II and IV D)I and II

The employing broker/dealer must be notified in writing and give prior written approval for the account to be opened. It must receive duplicate confirms and account statements if it has requested them. Reference: 5.1.5.1 in the License Exam

Question #11 of 132Question ID: 721429 If a person wishes to enter orders in his spouse's account, he: A)is free to do so. B)could never be permitted to do so as there is no provision that would allow for it to occur. C)needs written permission from his spouse via a power of attorney. D)needs verbal permission from his spouse.

The only persons permitted to enter orders in an account are the account owners. For a person to enter orders in his spouse's account, the spouse whose name is on the account must sign a power of attorney. Reference: 5.2.1.5 in the License Exam

Question #76 of 132Question ID: 606022 When a customer of a broker/dealer dies, all of the following documents may be required to release the decedent's assets EXCEPT: A)an inheritance tax waiver. B)an affidavit of domicile. C)a power of attorney. D)a certified copy of the death certificate.

The power of attorney is the only document not required. If the decedent had executed a power of attorney, it would have become invalid upon death. An affidavit of domicile and an inheritance tax waiver may be required. A certified copy of the death certificate is always required. Reference: 5.2.3 in the License Exam

Question #3 of 132Question ID: 605968 According to the U.S.A PATRIOT Act, account identification and verification procedures should be applied to which of the following? New individual accounts. New business accounts. Existing individual accounts. Existing business accounts. A)I and IV. B)III and IV. C)II and IV. D)I and II.

The procedures required by the U.S.A PATRIOT Act for the verification and identification of customer accounts should be applied to all new customers-whether individuals or businesses. Reference: 5.1.1.2 in the License Exam

Question #54 of 132Question ID: 605992 A fiduciary acting under the prudent investor rule should recognize that one of the following transactions would not be acceptable or meet the standards of the rule. Which is it? A)Buying sector funds B)Purchasing shares of a tech sector mutual fund C)Writing uncovered calls D)Purchasing BBB-rated debentures

The prudent investor rule permits a fiduciary to invest in securities that a reasonably prudent investor, seeking income and preservation of capital, might invest in for his own account. Writing uncovered (naked) calls which have an unlimited loss potential would not meet the standard of the rule. Reference: 5.2.1.4.1 in the License Exam

Question #49 of 132Question ID: 606064 Which of the following activities are disallowed under FINRA rules? Opening an account for a 16-year-old individual. Accepting a sale in a joint account from one of the owners and having the check payable in the name of that individual. Accepting a sale order from the husband only in a joint account owned by both husband and wife. Requiring written discretionary authorization before accepting orders for a discretionary account. A)I and II. B)II and III. C)III and IV. D)I and IV.

The question is asking for the nonallowable practices. We cannot open an account for a minor, nor may we make a check payable to only one of the parties in a joint account. Reference: 5.3 in the License Exam

Question #45 of 132Question ID: 605954 When a customer instructs a registered representative to transfer and ship, the representative instructs the margin department to transfer ownership into the: A)customer's name and deliver the securities to the customer's bank for safekeeping. B)brokerage firm's name and deliver the securities to the brokerage firm's commercial bank for safekeeping. C)brokerage firm's name and deliver the securities to the customer. D)customer's name and deliver the securities to the customer.

The term "transfer and ship" means to transfer the securities into the name of the customer and to ship (deliver) the securities to the customer. Hold in street name would require the securities to be transferred into the name of the broker/dealer and held in safekeeping. Reference: 5.1.2.1 in the License Exam

Question #34 of 132Question ID: 606061 If a registered representative receives a call from a custodian wishing to buy shares of a new issue security, the registered representative should: A)refuse to accept an order. B)discuss and review suitability. C)talk the investor into buying another stock. D)accept the order only if it is placed in a margin account.

There are no restrictions that specifically apply to the purchase of new issues in a custodial account, provided the registered representative has discussed and reviewed the suitability of the investment. Reference: 5.3.1.5 in the License Exam

Question #26 of 132Question ID: 606048 Under the Uniform Transfer to Minors Act, there may be: A)2 custodians and 1 beneficial owner. B)1 custodian and 2 beneficial owners. C)1 custodian and 1 beneficial owner. D)There is no restriction on the number of tenants in an UTMA account.

There may be only one custodian and one minor per UGMA/UTMA account. Reference: 5.3.1.2 in the License Exam

Question #39 of 132Question ID: 606026 Which of the following statements regarding discretionary accounts is NOT true? A)The customer must grant written authorization to the broker/dealer or a designated individual to exercise discretion in the account. B)Each discretionary order must be reviewed promptly by a principal. C)The account may not be accepted unless approved in writing by a principal of the member firm. D)The customer must approve each order before or after it is executed.

To establish a discretionary account, a customer must grant trading authority in writing. Furthermore, the firm must indicate its willingness to handle the account on a discretionary basis through a signature of a principal of the firm. All orders, including those for discretionary accounts, must be reviewed and endorsed promptly, but not before execution. Reference: 5.2.2 in the License Exam

Question #53 of 132Question ID: 606063 Who is responsible for the taxes in an UTMA account? A)Parent. B)Child. C)Donor. D)Custodian.

UTMA and UGMA accounts are custodial accounts. They are for the benefit of the child and bear the child's Social Security number. Although in practice the taxes are usually paid by the parent or legal guardian, they are the responsibility of the beneficial minor (child). Reference: 5.3.1.6 in the License Exam

Question #18 of 132Question ID: 606039 Under the Uniform Gift to Minors Act (UGMA), the custodian must be: A)bonded. B)court appointed. C)an adult. D)a member of the minor's family.

Under UGMA, the custodian must be an adult. The custodian does not need to be bonded, a member of the minor's family, or appointed by a court. Reference: 5.3 in the License Exam

Question #58 of 132Question ID: 606042 Under the Uniform Gifts to Minors Act, Ralph wants to give some stock to his brother's son, Jose. His nephew's father, Bob, is the legal guardian. If Ralph wants to name himself as custodian, which of the following needs to be done? A)Ralph must receive legal permission to act as custodian. B)Ralph must have the permission of the guardian. C)Ralph must file the proper legal documents. D)Ralph must open the account and name himself as the custodian.

Under UTMA or UGMA, no special documentation is required. The account is opened in the name of the minor with the minor's Social Security number and the name of the adult listed as custodian. Reference: 5.3.1.2 in the License Exam

Question #2 of 132Question ID: 721423 A new customer has given you written authorization to transfer the holdings in his account at another broker/dealer to his new account at your broker/dealer. Under the Uniform Practice Code, using the automated customer account transfer system form (ACATS) the carrying broker/dealer would have how many days to validate the positions and how many days to complete the transfer after validation? 1 business day to validate. 2 business days to validate. 2 business days to transfer after validation. 3 business days to transfer after validation. A)II and III. B)I and IV. C)II and IV. D)I and III.

Under the Uniform Practice Code the carrying broker/dealer has 1 business day to validate positions and 3 business days to transfer to the receiving broker/dealer after validation. Reference: 5.1.4.3 in the License Exam

Question #81 of 132Question ID: 605961 If a municipal dealer maintains an account for the employee of another municipal dealer and the employing dealer has not sent any written instructions, which of the following documents must be sent to the employing dealer? A)Form RE-3. B)Written notice of a security recommended for account purchase. C)Monthly statement of all transactions in the account. D)Duplicate confirmations of all securities purchased for the account.

Unless instructed otherwise in writing, the municipal dealer must only send duplicate confirmations. Reference: 5.1.5.2 in the License Exam

Question #96 of 132Question ID: 606055 Under the Uniform Transfer to Minors Act, which of the following are allowable activities? Giving an unlimited amount of cash. Giving securities. Giving no more than $5,000 in cash. Revoking a gift. A)II and III. B)I and II. C)I and IV. D)III and IV.

Unlimited gifts may be put into an UTMA account. Gifts under UTMA are irrevocable and may consist of cash and/or securities. Reference: 5.3 in the License Exam

Question #88 of 132Question ID: 606029 Which of the following occurs in a partnership account if one partner dies? A)The surviving partners are considered joint tenants. B)The surviving partners receive the deceased partner's share. C)The surviving partners are considered joint tenants and receive the deceased partner's share. D)The account is frozen until a new or amended partnership agreement is received.

Upon a partner's death, a partnership account is automatically frozen until a new or amended partnership agreement is received. The deceased partner's share usually goes to an estate, not to the other partners. Reference: 5.2.1.3 in the License Exam

Question #75 of 132Question ID: 721430 Upon notification of the death of a client, which of the following actions would NOT be required to be taken by the registered representative assigned to the account? A)Obtaining the names of the beneficiaries of the estate for the purpose of notifying all parties B)Marking the account Deceased until all proper documentation has been received C)Canceling all GTC orders currently entered for the account D)Canceling all day orders currently entered for the account

Upon being notified of the death of a client, the registered representative assigned to the account should cancel all open orders (GTC and day) and mark the account Deceased. The firm should not permit any trades until proper documents are received from the estate representative. There is no requirement nor is it the responsibility of the firm to contact the decedent's attorney or beneficiaries. Reference: 5.2.3 in the License Exam

Question #6 of 132Question ID: 606006 A client of your member firm dies. In correct order, you should freeze the account. accept orders from the executor. obtain the death certificate and other legal documents. cancel all open orders. A)I, IV, III, II. B)IV, I, III, II. C)II, III, IV, I. D)III, IV, I, II.

Upon death of a client, all open orders must be canceled. The account is then frozen until proper legal documentation is received. Once that has occurred, the executor may begin conducting activity in the account. Reference: 5.2.3 in the License Exam

Question #73 of 132Question ID: 606019 If a registered representative is opening a brokerage account for a partnership, in which order, from first to last, would the following events ordinarily take place? Representative obtains the partnership agreement Principal gives written acceptance of the account Representative fills out a new account card First trade is executed. A)III, I, II, IV. B)I, III, IV, II. C)IV, III, II, I. D)III, II, I, IV.

When a registered representative opens a new account, the first step is to complete the new account form. In the case of a partnership account, a principal of the firm must see a copy of the partnership agreement before accepting the account. When the account has been accepted by the principal, trades may be entered. Reference: 5.2.1.3 in the License Exam

Question #95 of 132Question ID: 605944 While interviewing a person in order to fill out the new account form, a registered representative asks the potential new client a number of questions. Information regarding which of the following would NOT be required on the form? A)Investment objective B)Occupation C)Financial condition such as net worth D)Educational background

When opening a new account, the registered representative must obtain information about the customer's occupation, financial condition, and investment objectives, among other information. Information such as educational background may be inquired about and useful to know, but is not required to open the account. Reference: 5.1.1 in the License Exam

Question #69 of 132Question ID: 606024 If a customer who has granted a durable power of attorney to her son dies, which of the following statements regarding the power of attorney is TRUE? A)It is canceled on the death of either principal. B)It remains in effect until the son cancels it. C)It remains in effect only if the son is the sole heir to the estate. D)It remains in effect until the executor of the estate cancels it.

When the customer or her son dies, the power of attorney also expires. However, a durable power of attorney will survive a declaration of mental incompetence and is useful in those cases where a parent suffers from dementia. Reference: 5.2.1.5 in the License Exam

Question #38 of 132Question ID: 605975 A new client's name appears on the SDN list. After your broker/dealer notifies OFAC, the likely outcome will be A)the client's assets will be frozen and the broker/dealer will be directed to cease doing business with the client B)you will be directed by OFAC to continue doing business with the client but report all broker/dealer business dealings to OFAC C)you, the registered representative, will be directed to let the client know that the client's name has appeared on the SDN list D)OFAC will have the client arrested under federal law

When the name of an individual or group appears on the specially designated nationals (SDNs) list, the individual's/group's assets will be blocked (frozen), and US financial institutions will be prohibited from doing business with them. Reference: 5.1.1.2.2 in the License Exam

Question #86 of 132Question ID: 735926 Which of the following individuals could most likely open an account at a FINRA member firm without notifying or receiving permission form their employer? A)A bank employee selling fixed annuities only B)An agent who sells variable annuities C)A government security trader employed by a member D)A purchases and sales clerk of a member

Whenever an employee of a FINRA member wants to open a securities account with another FINRA member firm or financial institution, the employee must give prior written notice to his employer, and receive prior written consent from his employer, before the account can be opened. Someone selling fixed annuities only (not a security like variable annuities) is most likely not associated with a member. Reference: 5.1.5.1 in the License Exam

Question #12 of 132Question ID: 605990 If a new joint tenants with rights of survivorship account is opened, all of the following statements are true EXCEPT: A)in the event of death, the decedent's interest in the account goes to the other party. B)mail may be sent to either party (with the permission of each party). C)orders may be given by either party. D)checks may be drawn in the name of either party.

While either party may enter an order, any money or securities delivered out of the account must be in the names of both owners. Reference: 5.2.1.2.2 in the License Exam

Question #57 of 132Question ID: 605971 Which types of accounts are billed a single fee annually for a group of services? A)Cash account. B)Margin account. C)Wrap account. D)Option account.

Wrap accounts are accounts for which firms provide a group of services, such as asset allocation, portfolio management, executions, and administration, for a single fee. Wrap accounts are generally investment advisory accounts. Reference: 5.1.3.4 in the License Exam