Customer Accounts
An employee of a member firm wishes to open an options account at another firm. Which statement is TRUE?
Before opening the account, written permission must be obtained from the employing firm
Where would you find the names of the persons authorized to trade a corporate account?
Corporate resolution
An individual is declared incompetent in a court proceeding. What type of account can be opened for this person with appropriate documentation?
Guardianship account
Brothers Joe and John have a joint account with tenants in common. Which statement is TRUE regarding the activities in the account?
Orders may be entered into the account by Joe only or John only
A client who wishes to have mail held must give a valid reason for the request:
if the time period of the hold exceeds 3 months, when aggregated with any hold requests received over the prior year
Under MSRB rules, a registered representative may perform a municipal securities transaction for a customer that he or she believes is unsuitable:
only at the specific direction of the customer
Which documents is NOT completed when opening a margin account?
options agreement
All of the following actions by a custodian in an account opened under the Uniform Gifts to Minors Act are permitted EXCEPT:
withdrawing funds from the account for the custodian's use
A type of brokerage account where the customer is charged a single annual fee for all account services, regardless of activity in the account, is known as a:
wrap account
A customer sells short 1,000 shares of ABC stock at $2.75 per share in an initial transaction in a new margin account. The customer must deposit:
$2,750
The maximum amount of customer securities that can be rehypothecated by a broker is:
140% of the debit balance
The minimum maintenance margin for short stock positions is set at:
30% of the short market value
Under FINRA rules, if a member suspects that a senior citizen is being financially exploited, a temporary hold may be placed on disbursements from the account for up to:
15 business days
When opening an options account, the customer must return the signed Options Agreement:
15 days after opening the account
At what age does a natural person have the legal capacity to open an individual account at a brokerage firm?
18
Under Regulation T, an extension request that is granted by FINRA typically gives a customer how many additional business days to pay for a securities purchase?
2 days
The minimum maintenance margin requirement for long stock positions is:
25% of the closing price of the security that day
The minimum maintenance margin for long stock positions is set at:
25% of the long market value
Which of the following can open a joint account without restriction?
3 limited partners
Which one of the following orders requires specific customer authorization?
"Buy 100 shares of any computer stock priced at under $40"
A customer has a margin account that shows the following positions: Long: 100 ABC @ $6 Debit: 0 Equity: $600 The customer wishes to buy 100 shares of XYZ at $10 in the account. The customer must deposit:
$1,000
A customer buys 100 shares of ABC at $17 as the initial transaction in a new margin account. The customer must deposit:
$1,700 Even though minimum equity to open a long margin account is $2,000, this does not apply if the securities in the account are fully paid. A customer cannot be asked to deposit more than 100% when buying since this is the maximum potential loss. The customer wants to buy $1,700 of stock, so 100% or $1,700 must be deposited.
A customer buys 1,000 shares of XYZ at $60 in a margin account, regular way settlement. Two days after the trade, XYZ has dropped to $40. The minimum maintenance margin requirement is:
$10,000 25% of 40,000
A customer is long 1,000 shares of ABC stock at $50 in a margin account. The minimum maintenance margin requirement is:
$12,500 25% of 50,000
A customer is long 1,000 shares of ABC stock at $60 in a margin account. The minimum maintenance margin requirement is:
$15,000 25% of 60,000
A customer sells short 100 shares of ABC at $15 as an initial transaction in a new margin account. The customer must deposit:
$2,000
As an initial transaction in a new margin account, a customer sells short 100 shares of ABC at $35. The customer must deposit:
$2,000
As an initial transaction in a new margin account, a customer buys 100 shares of ABC at $35. The customer must deposit:
$2,000 The Regulation T requirement to buy $3,500 of stock in a long margin account is 50% = $1,750. However, this is the initial transaction and the minimum equity to open an account is $2,000, so this amount must be deposited.
A customer sells short 1,000 shares of ABC stock at $1.50 per share in an initial transaction in a new margin account. The customer must deposit:
$2,500
A customer sells short 1,000 shares of ABC stock at $2 in a margin account. The customer must deposit:
$2,500
A customer makes a purchase of $22,100 of ACME Income Fund in her margin account. The customer must deposit:
$22,100
A customer sells short 1,000 shares of XYZ at $60 in a margin account, regular way settlement. Two days after the trade, XYZ has risen to $80. The minimum maintenance margin requirement is:
$24,000
A customer buys 100 shares of ABC stock at $60 as an initial transaction in a margin account. At the end of the day, the stock is worth $50. The customer must deposit:
$3,000 50% of 6000 = 3000
A customer sells short 100 shares of ABC stock at $60 as an initial transaction in a margin account. At the end of the day, the stock increases in value to $70 per share. The customer must deposit:
$3,000 50% of 6,000
A customer buys 100 shares of ABC stock at $70 as an initial transaction in a margin account. At the end of the day, the stock is worth $80 per share. The customer must deposit:
$3,500
A customer sells short 1,000 shares of ABC stock at $4 in a margin account. The customer must deposit:
$4,000
A customer shorts 1,000 shares of ABC stock @ $5 per share in a margin account. The customer must deposit:
$5,000
A customer is short 1,000 shares of ABC stock, valued at $5 per share. The minimum maintenance margin requirement is?
$5.00 per share
The minimum maintenance margin requirement for a short stock position valued at $9 per share is?
$5.00 per share
Under Regulation T, the maximum time period to collect monies owed by a customer prior to an extension request is:
4 business days
Barring an extension request, under Regulation T, payment for a securities transaction must be received no later than:
4 business days after trade date
Under Regulation T, an extension for payment may FIRST be requested, under extraordinary circumstances, on the:
4th business day after trade date
What are initial and maintenance margins for stock positions in a long margin account?
50 / 25
What are the initial margins for stock positions in long and short margin accounts?
50 / 50
The Regulation T initial margin requirement for long stock positions is:
50%
Regulation T sets the initial margin to sell short a marginable stock position at:
50% of the sale amount
Under Regulation T, if no payment for a trade is received, the account is "frozen" for how many days?
90 days
Which of the following is NOT personal information related to a customer account?
Aggregated information about activities in all customer accounts at that broker-dealer
If an investor wishes to open a margin account, which paperwork is typically NOT required?
ACATS Form
Which statements are TRUE if a customer's account is frozen?
All securities to be sold must be in possession of the firm prior to the trade
Which of the following BEST describes a guardianship account?
An account for an individual declared incompetent in a court proceeding
Which statement is TRUE about donations into accounts opened under the Uniform Gifts to Minors Act?
Any adult can donate into a custodial account for a minor
Under the Uniform Gifts To Minors Act, which of the following statements are TRUE?
Any gift donated into the account is irrevocable
Which statement is FALSE when comparing a full power of attorney given in a brokerage account to a limited power of attorney?
Both can draw checks on the account
Interest charges on customer debit balances are based on the:
Broker Loan rate
Which statement is FALSE about margin rules?
Broker-dealers can determine which securities are marginable
Regulation T applies to transactions in all of the following securities:
Convertible corporate bonds American Depositary Receipts Warrants EXCEPT: U.S. Government Bonds
Which statement about SEC rules covering customer account information is FALSE?
CIP (Customer Identification Procedures) information must be sent for verification, including date of birth and social security number TRUE The customer must be sent a copy of the collected information for verification within 30 days of account opening Collected suitability information must be sent for verification, including income and net worth The customer account profile must be resent to the customer every 36 months for reverification
Under Regulation T securities transactions can be effected in all of the following types of accounts:
Cash account Margin account Arbitrage account EXCEPT: Non-securities credit account
A limited partnership account is being opened at your firm. The general partner has provided the partnership tax identification number and has signed the appropriate paperwork. What other documentation is needed to open the account?
Certificate of limited partnership
If a customer does not return a signed options agreement, which statement is TRUE?
Closing transactions are permitted in the account
Under FINRA rules, all of the following are "essential facts" needed to open a customer cash account:
Customer citizenship Customer social security number Customer date of birth EXCEPT: Customer signature
Call loans made by bank to broker-dealers are secured by which of the following?
Customer margin securities
All of the following information is needed to open a new cash account:
Customer name Customer birthdate Customer citizenship EXCEPT: A list of external brokerage account holding
Which statement is FALSE about Regulation S-P?
Customers must be given the opportunity to opt out of the sharing of their personal information between their firm and its clearing broker-dealer
In order to adequately assess the suitability of a recommendation to a customer that is a senior citizen, the member should make reasonable efforts to obtain all of the following information about the customer EXCEPT:
General health status
Under FINRA rules, to ascertain which investments are suitable for the customer, the registered representative would NOT generally inquire about the customer's:
Daily living expenses
In order to open a new account for an individual customer, all of the following information is required on the new account form:
Date of birth Street address Social security number EXCEPT: Telephone number
Which of the following best describes "structuring"?
Depositing or withdrawing cash to or from an account in amounts just below Federal reporting requirements
Under the requirements of the USA PATRIOT Act, to open an account for a non-resident alien, which information is NOT required from the customer?
Driver's license number
The regulator that is responsible for enforcing the Bank Secrecy Act of 1970 is:
FinCEN
All of the following persons can approve the opening of an account under MSRB rules EXCEPT the:
Financial and Operations Principal
Under the requirements of the USA PATRIOT Act, when opening an account for a non-resident alien, the registered representative must obtain which of the following from the customer?
Foreign Country Passport Number
A customer must be sent which of the following at, or prior to, opening an options account?
Options Disclosure Document
Under FINRA rules, which complaint received from a customer is not required to be resolved under the supervision of a principal?
Oral complaints
On Monday, April 5th, a customer places an order to buy 100 shares of ABC at $60 in a cash account. On April 6th, the stock rises to $80 and the customer sells. Which statement is TRUE?
If payment is not received by Friday, April 9th, barring an extension request, the account must be frozen
What type of account can be opened as a margin account?
Investment Adviser account
All of the following are types of fiduciary accounts EXCEPT:
Joint Account
Which of the following information is NOT needed to open a new customer account?
Liquid net worth of the customer
A customer account holds $100,000 of Negotiable Certificates of Deposit that are maturing. The customer has inquired about alternative investments that can be made with these funds. To make a suitable recommendation, inquiry should be made as to all of the following:
Liquidity requirements Tax bracket Other investments EXCEPT: The name of the bank where the CD is held
Which of the following securities can be purchased on margin?
Listed Corporate Bond
Which of the following securities CANNOT be purchased on margin?
Listed stock options
What document, once signed, permits a broker dealer to borrow customer securities to effect short sales for other clients?
Loan consent agreement
Which statement is TRUE regarding joint accounts?
Orders can be given severally If a party in a Tenancy in Common account dies, his or her share is included in his taxable estate
Which statement is TRUE regarding initial and minimum maintenance margins for a long margin account?
Maintenance margin is 25%
When referring to a client account that has a trading authorization, the "third party" in the account is the:
Named person other than the customer
Under the rules of the Options Exchanges, if a customer's financial condition changes materially, then which of the following will be amended?
New Account Form and Options Agreement only
Under MSRB rules, if a customer refuses to disclose sufficient financial information to make a suitable recommendation, which statement is TRUE?
No recommendations are permitted
A corporation is preparing a registration statement for a new issue offering consisting of 300,000 new shares and 200,000 existing shares held by officers. Which statement is TRUE?
None of the shares can be purchased on margin
Who creates the list of SDNs that must be checked when opening an account for a foreigner or foreign entity?
OFAC
All of the following are types of joint accounts EXCEPT:
Omnibus account
Which statement is TRUE about entering trades into a custodial account?
Only the custodian can enter trades
The rules of the options exchanges require that if a customer's financial condition changes materially, which of the following must be amended?
Options Agreement
A social security number or tax identification number must be obtained to open which of the following accounts?
Partnership Account Joint Account Corporate Account
Under the requirements of the USA PATRIOT Act, when opening a new account for a non-resident alien, which of the following must be obtained from the customer?
Passport number
Under MSRB rules, inquiry should be made about all of the following in order to make suitable recommendations to customers EXCEPT:
Potential Inheritances
Which of the following is a TRUE statement about discretionary accounts?
Power of attorney must be obtained in writing from the customer before discretion can be exercised
A registered representative is allowed to choose which of the following in a transaction without requiring written trading authorization from the customer?
Price and time
All of the following procedures are required to open an account for an employee of another municipal securities firm:
Prior notice of the opening of the account must be given to the municipal employer Any instructions of the municipal employer must be followed Duplicate trade confirmations must be sent to the municipal employer EXCEPT: Duplicate account statements must be sent to the municipal employer
The FINRA suitability rule requires all of the following
Reasonable Basis Suitability Customer-Specific Suitability Quantitative Suitability
When opening an account to buy options, which of the following signatures is needed on the options new account form?
Registered options principal signature
The requirement for broker-dealers to disclose their privacy policies to customers, and to permit customers to "opt out" of having their information disclosed to third parties, is outlined under SEC:
Regulation SP
Credit on securities extended by brokers to customers is controlled by:
Regulation T
Which statement is TRUE?
Regulation T only applies to non-exempt securities
All of the following statements are true regarding Regulation T:
Regulation T requires payment for purchases within 4 business days Regulation T applies to non-exempt securities only Regulation T applies to both listed and unlisted securities EXCEPT: Regulation T sets both initial and maintenance margins
Credit from bank to broker is controlled under:
Regulation U
Under the requirements of the USA PATRIOT Act, if a member firm suspects that an account is engaging in money laundering, the firm is obligated to file a(n):
SAR
Which transaction can only be performed in a margin account?
Sale of a naked call
Which of the following customer actions could be an indicator of money laundering?
Selling a security that has depreciated after holding the position for 1 week and then directing that the sale proceeds be, wired to an overseas account
Which transaction may NOT be performed in a cash account?
Short sale of stock
In order to open a discretionary cash account, which of the following is NOT required?
Signed Customer's Agreement
A client has an options account that is qualified to buy options and sell covered calls. The client calls his representative, telling him that he wants to sell naked calls in the account. In order to do this, all of the following procedures are required EXCEPT:
The "Options Disclosure Document" must be provided before executing the transaction
A registered representative ("RR") has entered an order to buy 100 shares of ABC at $50 per share for a customer. The transaction is executed at $50 per share, and when the representative is reporting the trade to the customer, she notices that the account number on the executed order ticket is wrong. Which statement is TRUE?
The "RR" may change the account number on the order ticket to the correct number if the branch manager approves in writing
A client has an options account that is qualified to buy options and sell covered calls. The client calls his representative, telling him that he wants to sell naked calls in the account. Which statement is TRUE about this?
The "Special Statement for Uncovered Options Writers" must be provided before executing the transaction
Who sets Regulation T initial margin requirements and minimum maintenance margin requirements?
The FRB sets initial margins and FINRA sets minimum margins
An individual comes into your firm to open a cash account. When completing the new account form, the customer responds to the question "What is your age?" by stating "I am 15 years old." Which statement is TRUE?
The account can be opened by an adult as custodian for this person
Your customer has been declared legally incompetent by a state -appointed judge and his son has presented the proper legal papers appointing him as the guardian. Which statement is TRUE?
The account will be transferred from the customer's name to a guardian account
A new customer has come into your firm to open an account. He tells you that he is 21 years old, recently graduated from college and that he is looking for a job. He is contacting you because he recently inherited $250,000 and wants to invest it for growth and income. When you are completing the new account information, you ask him for his street address and he tells you that he was just evicted from his apartment and has moved into a long-stay hotel until he finds a new place to live. Which statement is BEST about this situation?
The address to be used for Customer Identification purposes is the address of a close relative
A custodial account is established under UTMA in a state with a transfer age of 21. Legal age in the state is 18. At age 19, the beneficiary leaves college to go into business setting up a software company. The beneficiary wishes to use the assets in the UTMA account as "seed money" for the business. Which statement is TRUE?
The beneficiary can use the account assets only with the approval of the custodian
A registered representative believes that municipal bonds may be an appropriate investment for her customer. In order to determine whether such a recommendation would be suitable, all of the following would be considered EXCEPT:
The cash balance in the customer's IRA available to invest
A customer places an order to sell 100 shares of XYZ at the market. The initial execution report shows the trade occurring at $38.50 and this is reported to the client. The firm later discovers that the trade occurred at $38.25. Which statement is TRUE?
The customer must accept the actual sale price of $38.25
A client has an options account that is qualified to buy options and sell covered calls. The client calls his representative, telling him that he wants to sell naked calls in the account. Which statement is FALSE about this?
The customer must cross-guarantee the account because of the increased risk level
Which statement is TRUE about making a recommendation to an elderly customer under the "Senior Citizen Rule?"
The customer must fully understand the benefits, risks and costs of the recommended product
All of the following statements are true about opening a new margin account for the customer of an investment adviser:
The customer must sign an advisory agreement with the adviser The customer must sign a power of attorney, giving trading authorization to the adviser The customer must sign a margin agreement EXCEPT: The investment adviser must sign a margin agreement
A customer places an order to sell 100 shares of ABC at the market. The initial execution report shows the trade occurring at $75.50. The firm later discovers that the trade occurred at $75.13. Which statement is TRUE?
The customer will receive $7,513 less any applicable commissions
Under FINRA rules, a registered representative must obtain and retain all of the following information relating to the customer's account
The customer's country of citizenship Whether the customer is employed by another FINRA member firm Customer's financial status EXCEPT:Whether the customer is an officer, director, or 5% or greater shareholder of a publicly traded company
If an employee of a FINRA member firm wishes to open up an account with another FINRA member firm, all of the following statements are true:
The employee must get written consent of his or her employing member firm to open the account The executing member firm must be notified, in writing, of the fact that the individual opening the account is associated with another member firm Duplicate confirmations and/or statements must be sent to the employing member, if requested in writing by the employer EXCEPT: Duplicate confirmations and/or statements must be sent to FINRA, if requested in writing
Which statement is TRUE about initial and minimum maintenance margins for stock positions in a long margin account?
The initial margin percentage is higher than the minimum set by FINRA
Which statement is TRUE about initial and minimum maintenance margins for stock positions in a short margin account?
The initial margin percentage is higher than the minimum set by FINRA
A customer is traveling outside the United States and wishes to have his mail held by the broker-dealer. Which statement is TRUE about this?
The mail can be held for up to 3 months
To open an options account, inquiry is NOT required regarding:
The name of other firms where the customer has accounts
An institutional customer says the following to his broker: "Buy 100,000 shares of ABC stock whenever you think the time is best. This order is good unless I call you to cancel." Which statement is TRUE about the handling of this order?
The order can be accepted as given, and can be executed at the discretion of the brokerage firm at any time or day
A customer sends an e-mail to his registered representative with an order to buy 500 shares of ABCD at the market. Which statement is TRUE about accepting this order from the customer?
The order cannot be accepted because the firm cannot verify that it was the customer who actually sent the order
A registered representative takes an order from a customer to buy 100 shares of EFFE stock at $40 and writes the order ticket for processing. The registered representative fails to include the customer account number on the ticket. Which statement is TRUE?
The order will be returned to the representative for entry of the account number
A registered representative takes an order from a customer to buy 100 shares of PSSS stock at $40 and writes the order ticket for processing. The registered representative fails to include the number of shares to be purchased on the ticket. Which statement is TRUE?
The order will be returned to the representative for entry of the order amount
A wealthy customer is very satisfied with her registered representative. She approaches the representative to ask him if he would like to be appointed as trustee over a trust account that she is establishing for her 2 grandchildren. If he accepts, he would be paid a trustee fee. Which statement is TRUE about this?
The registered representative cannot act as the trustee because of the conflict of interest
A registered representative is soliciting a customer to purchase a security that has just been placed on his firm's "recommended" list, and which the representative feels is suitable for that customer. After discussing the recommendation, the customer is still resisting making a purchase. Which action by the registered representative is appropriate?
The registered representative should accede to the customer's wishes
When opening a new account, a customer requests that duplicate confirmations and statements be sent to her attorney. What action should the representative take?
The representative should note the request on the new account form, along with the contact information for the customer's attorney
A customer wishes to buy a municipal bond that the registered representative feels is unsuitable for that customer. After explaining this, the registered representative is told by the customer "Just do the trade; let me worry about it." Which statement is TRUE under MSRB rules?
The trade must be accepted as given
A registered representative solicits an order from a customer to buy 200 shares of XYZZ at $50. The customer agrees and the registered representative completes the order ticket and enters the order for execution. Once the member firm processes the order, the order ticket record must contain all of the following information EXCEPT:
Time of order solicitation will contain: time of order receipt, entry, and execution
A registered representative is notified by a previously single customer that she has just come back from her honeymoon. What should the registered representative do?
Update the customer's account file
All of following statements about the conduct of customer accounts are true EXCEPT:
Verbal trading authorizations (granting price discretion) are valid until revoked in writing
A customer wishes to give a gift of securities to her nephew under the Uniform Gifts To Minors Act. The registration on a custodial account is:
one custodian for one minor
A social security number or tax identification number is needed to open a securities account for:
a U.S. individual only both U.S. and foreign individuals only U.S. individuals and corporations only
All of the following are true statements about trust accounts:
a copy of the trust agreement must be obtained prior to opening the account transactions in the account are limited to the types specified in the trust document margin transactions are prohibited unless specific authorization to open a margin account is given in the trust document EXCEPT: securities that may be purchased in the account are restricted to those included in that state's "Legal List"
Customer account records to be kept by a registered representative under FINRA rules are:
a record by customer name or account number of each security position
To prevent financial exploitation of seniors, FINRA requires that when opening an account for a client, reasonable efforts must be made to obtain the name, phone number, and mailing or e-mail address of:
a trusted contact person
A customer wishes to give a gift of securities to her nephew under the Uniform Gifts To Minors Act. When the minor reaches legal age in that state, the:
account must be transferred into the name of the minor
Credit can be extended on new issues:
after 30 days have elapsed from the completion of the offering
A copy of the member firm's Business Continuity Plan must be provided to each customer:
at account opening
A woman in the 15% tax bracket wishes to buy a municipal bond. The registered representative tells her that such an investment is not appropriate. The registered representative can execute the trade:
at the specific direction of the customer
Customers must be given information about SIPC:
at, or prior to, account opening
Long positions in margin accounts are marked to market:
based on the closing trade each day
A client has been living overseas for the past year. During that time, she has made no transactions in her account. During the time period that she is overseas, statements will:
be sent quarterly to the account address
If an execution report shows that an erroneous execution has occurred, the responsibility for the trade rests with the:
brokerage firm executing the transaction
If a customer places an order with a registered representative and calls back 20 minutes later stating "Cancel the order!" If the order has not been executed, it:
can be canceled without any further action needed
An elderly customer has a discretionary account with your firm. The power of attorney signed by the customer for the account is non-durable. If the customer becomes mentally incapacitated, the registered representative handling the account:
can no longer effect discretionary trades for that customer
A customer has an existing cash account that holds many different positions in blue chip stocks. The customer has an investment objective of moderate growth and income. The customer contacts his representative, stating that "I think the market will be flat for a while, but I don't want to see my portfolio return drop." The registered representative recommends that the customer sell covered calls against some of the stocks held in the customer account. The representative:
cannot do so unless the account is qualified to trade options
If a customer wishes to open an account for a minor without additional documentation, the account must be opened as a:
cash account
When comparing a cash account to a margin account:
cash account transactions require full payment on settlement while margin account transactions do not
A customer has bought an options contract and after 15 days, still has not returned the signed Options Agreement. The customer is only allowed to make which of the following transactions in this account?
closing sale
A customer has opened a margin account and has signed both the hypothecation agreement and the loan consent agreement. The brokerage firm can do all of the following with the customer's securities:
commingle the customer's securities with those of other customers lend the stock to another customer who wishes to effect a short sale pledge the customer's securities to a bank for a loan EXCEPT: commingle the customer's securities with securities owned by the brokerage firm
The principal reason for an institutional investor to open a prime brokerage account is:
consolidation of account positions with one broker
An elderly customer normally comes into your branch office each week on Monday to discuss his account and place trades. This week, he comes in on Wednesday, looking confused and disoriented. However, the trade that he wishes to place conforms to his normal investment practice. The representative should:
contact the firm's compliance department for guidance on how to handle the situation
The "convenience signer" in a "Convenience Account" has the right to:
draw checks from the account only for the benefit of the account owner
The requirement for independent verification of a customer's identity when opening an account can be satisfied by examining a copy of the customer's:
driver's license
Regarding arbitration agreements between member firms and customers:
each member firm must provide the customer with a separate copy of the arbitration agreement for signature and return within 30 days of account opening
Order ticket information must be recorded by the member firm prior to order:
entry
An account is opened for three individuals as "Tenants in Common." If one of the individuals dies, the:
estate assumes the tenancy of the deceased individual in the account
A customer places an order to buy 100 shares of ABC at the market. The broker enters the order and receives a report of execution shortly thereafter. Ten minutes later, the customer telephones, and states that he placed the order in error and wishes to cancel the order. The appropriate procedure is to:
explain to the customer that the order has already been executed and is binding
All of the following are allowable joint accounts:
father and 25-year old son / husband and wife / two partners in a business EXCEPT: father and 12-year old son
Under the Know Your Customer (KYC) Rule, in order to open and maintain a customer account, each registered representative must:
follow KYC procedures as part of an effective Anti-Money Laundering (AML) Program
All of the following should be considered when determining the suitability of a municipal bond recommendation EXCEPT the customer's:
formal education level
The approval to open a new margin account is given by the:
general principal
A customer calls and places an order to "Buy 200 shares of ABC at the Market" and the order is executed. 20 minutes later, the customer calls and says that she has changed her mind and does not want the stock. The registered representative should:
inform the customer that she owns the stock and can enter an order to sell it if she so desires
All of the following statements about margin requirements are true:
initial margin percentages are the same for both long and short accounts $2,000 equity minimum is the same for both long and short accounts payment is required promptly, but no later than 4 business days after trade date, in a long and short account EXCEPT: maintenance margin percentages are the same for both long and short accounts
Jack Jones, age 82, has an individual account at your firm. He gives a full written trading authorization to his son, Jack Jones Jr. under a durable power of attorney. Upon the death of Jack Jones, the power of attorney:
is void
Under the Know Your Customer Rule, in order to open and maintain a customer account, each registered representative must:
know "every essential fact" concerning the customer
All of the following statements are true regarding joint accounts
mailing of account statements may be directed to any single party orders may be entered into the account by any single party open unexecuted orders may be canceled by any single party EXCEPT: checks drawn on the account may be made out in the name of any single party
Interest income in a custodial account is reported on the tax return of the:
minor
The social security number(s) that is (are) used for Internal Revenue Service reporting in a custodial account is (are) the:
minor's social security number
Which of following documents is NOT unique to margin accounts?
new account form UNIQUE margin agreement loan consent agreement credit disclosure statement
The "convenience signer" in a "Convenience Account" has:
no claim on account assets upon the owner's death
A registered representative has been prospecting for new customers in neighboring states, and has contacted an individual who wishes to open an account with a $25,000 stock purchase. The customer is located 500 miles away from the representative's branch office. In order to open the account:
no physical contact is required between the customer and the registered representative, but the broker-dealer must verify the customer's identity by comparing information provided by the customer to a public database
An account is opened "joint tenants with rights of survivorship." All of the following statements are true:
orders may be given by either party mail can be sent to either party in the event of death, the other party assumes whole ownership of the account EXCEPT: checks can be drawn in the name of either party
The sending of customer account statements and confirmations by e-mail is:
permitted if the customer submits a valid e-mail address
Under FINRA rules, numbered accounts are:
permitted if the firm maintains a written statement of the customer attesting to ownership
A FINRA member firm uses a structure for its wealthy client group where a "team" of registered representatives with differing specializations services those accounts. This is:
permitted only if the firm documents name, role, and responsibilities of each member of the team
A married couple opens a joint margin account. The brokerage firm will send the Internal Revenue Service Form 1099 (Report of Interest and Dividends Earned) to the:
person whose social security number was given on the account form
Prior to opening an options account, all of the following steps must be taken EXCEPT:
receiving the signed options agreement from the customer
The contact information for customers who wish to report inaccuracies on their account statements CANNOT be the:
representative servicing the account
All of the following transactions can be performed in a Cash Account EXCEPT the:
sale "against the box"
As the first trade in a new cash account, a customer buys $4,000 of securities. The customer mails a check for $3,000. When this is received by the broker, the customer is called and asked "Where is the other $1,000?" The customer responds that the check is in the mail. 2 business days later, the check does not arrive. The registered representative should:
sell enough securities to cover the $1,000 shortfall and freeze the account for 90 days
A customer buys stock in a margin account, but does not pay in the 4 business days required under Regulation T. The brokerage firm can take all of the following actions EXCEPT:
sell short the position
All of the following transactions are permitted in a custodial account EXCEPT the:
short sale of common stock
If there is no trading activity in a customer's account, a statement must be mailed:
that quarter
A customer buys stock in an existing margin account, and fails to meet the Regulation T call within the specified maximum 4 business day limit. The action that may be taken is:
the broker-dealer can sell securities from the account in an amount to satisfy the call
All of the following are requirements for a broker-dealer's AML program:
the designation of a AML person who is responsible for creating and enforcing written AML procedures annual independent compliance testing of the firm's AML procedures ongoing training of personnel in the firm's AML procedures EXCEPT: annual background checks of all employees, both registered and unregistered
When comparing a "Convenience Account" to Transfer on Death (TOD) registration:
the named person in a Convenience Account has no ownership rights upon the owner's death, while the named person in a TOD account does
To open a partnership account, the social security number(s) or tax identification number to be used is (are) the number(s) of:
the partnership
A firm holds a joint cash account for a husband and wife. The wife calls the registered representative and says "Sell 500 shares of ABC out of the account immediately and send a check for the proceeds made out to my name." The representative should inform the wife that:
the trade can be performed but the check must be made out to both names on the account
An account registration that allows the customer to name the person into whose name securities in the account will be registered upon the death of the customer is known as:
transfer on death
All of the following statements are true regarding a customer account with a "full power" third party trading authorization:
upon the death of the customer, the power of attorney is revoked the customer can designate that confirmations be sent only to the third party the third party can enter orders in the account EXCEPT: checks drawn on the account can be made out to the customer or to the third party
