Customer Accounts: Opening Procedures Different Types of Accounts

Which of the following verbal orders can be accepted from a customer without further documentation? A: "Buy 100 shares of ABC stock sometime today" B: "Invest $20,000 in bank stocks" C: "Increase my portfolio position in ABC" D: "Buy 200 shares of an auto stock"

A: "Buy 100 shares of ABC stock sometime today"

All of the following are types of joint accounts EXCEPT: A: Tenants by Entireties B: Custodian for a minor C: Tenants in Common D: Joint Tenants with Rights of Survivorship

B: Custodian for a minor

Custodial accounts can be opened as a: A: cash account only B: margin account only C: either a cash or margin account D: either a joint cash or margin account

A: cash account only

Interest income in a custodial account is reported on the tax return of the: A: minor B: custodian C: parent(s) D: grantor

A: minor

Which of following documents is NOT unique to margin accounts? A: new account form B: margin agreement C: loan consent agreement D: credit disclosure statement

A: new account form

A member or associated person is allowed to select all of the following relating to a customer transaction without requiring a written trading authorization EXCEPT: A: Price of the security to be purchased B: The security to be purchased C: The trading venue in which the security will be purchased D: The time of trade execution

B: The security to be purchased

Which statement is TRUE when comparing a custodial account is opened under UTMA (Uniform Transfers to Minors Act) to one opened under UGMA (Uniform Gifts to Minors Act)? A: Under both UGMA and UTMA, assets in the account are transferred to the new adult at legal age B: Under UGMA, assets in the account are transferred to the new adult at the age specified by the custodian, while under UTMA, assets in the account are transferred to the new adult at legal age C: Under UGMA, assets in the account are transferred to the new adult at legal age, while under UTMA, assets in the account are transferred to the new adult at the age specified by the custodian D: Under both UGMA and UTMA, assets in the account are transferred to the new adult at the age specified by the custodian

C: Under UGMA, assets in the account are transferred to the new adult at legal age, while under UTMA, assets in the account are transferred to the new adult at the age specified by the custodian

When comparing a full power of attorney given in a brokerage account to a limited power of attorney, the person given the: A: full power of attorney can draw checks only B: full power of attorney can enter orders only C: limited power of attorney can draw checks only D :limited power of attorney can enter orders only

D :limited power of attorney can enter orders only

Under FINRA rules, all of the following are necessary to open a corporate account EXCEPT: A: New Account Form B: Corporate Charter C: Corporate Resolution with Embossed Corporate Seal D: Evidence of Domicile

D: Evidence of Domicile

All of the following paperwork is customarily needed to open a margin account EXCEPT: A: Customer's agreement B: Loan consent agreement C: Credit agreement D: Trading authorization

D: Trading authorization

An account is opened "joint tenants with rights of survivorship." All of the following statements are true EXCEPT: A: orders may be given by either party B: mail can be sent to either party C: in the event of death, the other party assumes whole ownership of the account D: checks can be drawn in the name of either party

D: checks can be drawn in the name of either party

Which statement is TRUE about opening a numbered account at a broker-dealer? A: Numbered accounts cannot be opened at broker-dealers B: Numbered accounts can only be opened if the firm obtains an attestation from the customer of account ownership C: Numbered accounts can only be opened if the firm maintains an AML program D: Numbered accounts can be opened without restriction

B: Numbered accounts can only be opened if the firm obtains an attestation from the customer of account ownership

An individual 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? A: An executed power of attorney must be obtained from the customer prior to accepting the order B: The order must be executed by the close of the market on that trading day C: The order can be accepted as given, and can be executed at the discretion of the brokerage firm at any time or day D: This order can only be accepted if the customer places it via fax or e-mail

B: The order must be executed by the close of the market on that trading day

Under FINRA rules, a written power of attorney is NOT required for a registered representative to choose which of the following order related items? A: Security to be traded B: Time of execution C: Dollar amount of the order D: Share Size of the order

B: Time of execution

Which statement is TRUE regarding 3rd party trading authorizations in fiduciary accounts? A: Trading authorization can be given to a third party other than the fiduciary without restriction B: Trading authorization cannot be given to a third party other than the fiduciary unless the account documentation permits C: Trading authorization cannot be given to a third party other than the fiduciary unless the beneficiary approves D: Trading authorization cannot be given to a third party under any circumstances

B: Trading authorization cannot be given to a third party other than the fiduciary unless the account documentation permits

If a customer wishes to open an account for a minor without additional documentation, the account must be opened as a: A: guardian account B: cash account C: margin account D: conservator account

B: cash account

All of the following statements are true regarding joint accounts EXCEPT: A: mailing of account statements may be directed to any single party B: checks drawn on the account may be made out in the name of any single party C: orders may be entered into the account by any single party D: open unexecuted orders may be canceled by any single party

B: checks drawn on the account may be made out in the name of any single party

All of the following statements are true regarding a custodial account EXCEPT: A: tax liability is the responsibility of the minor B: tax liability is deferred until the minor reaches adulthood C: any income is reported to the IRS each year D: the minor's social security number is on the account

B: tax liability is deferred until the minor reaches adulthood

When comparing a "Convenience Account" to Transfer on Death (TOD) registration: A: opening a Convenience Account does not require a court order while a Transfer on Death account does B: 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 C: the named person in a Convenience Account has access to account funds only upon the death of the account owner, while the named person in a TOD account has access to account funds at will D: opening a Convenience Account requires a smaller minimum deposit than the opening of a Transfer on Death account

B: 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

Which one of the following orders requires specific customer authorization? A: "Buy 100 shares of ABC at the best price available" B: "Sell 100 shares of ABC at the market" C: "Buy 100 shares of any computer stock priced at under $40" D: "Sell 100 shares of ABC at $40 if it gets to that level"

C: "Buy 100 shares of any computer stock priced at under $40"

Which of the following can open a joint account without restriction? A: Parent and minor B: Guardian and custodian C: 3 limited partners D: Registered representative and client

C: 3 limited partners

Which statement is TRUE regarding trading authorization in a brokerage account? A: A first party can give trading authorization to a third party B: A first party can give trading authorization to a second party C: A second party can give trading authorization to a third party D: A third party can give trading authorization to a second party

C: A second party can give trading authorization to a third party

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? A: Social security number of each limited partner B: Signature of each limited partner C: Certificate of limited partnership D: Authorizing resolution

C: Certificate of limited partnership

How must an account opened under the Uniform Gifts to Minors Act be titled? A: In the name of the custodian only B: In the name of the minor only C: In the name of the custodian for the minor D: In the name of the minor for the custodian

C: In the name of the custodian for the minor

All of the following are types of fiduciary accounts EXCEPT: A: Custodial Account B: Guardian Account C: Joint Account D: Trust Account

C: Joint Account

When referring to a client account that has a trading authorization, the "third party" in the account is the: A: Customer B: Broker C: Named person other than the customer D: Clearing corporation

C: Named person other than the customer

Which joint account CANNOT be opened? A: Adult brother and sister B: Husband and wife C: Parent and minor D: Business partner and business partner

C: Parent and minor

All of the following are types of joint accounts EXCEPT: A: Tenancy by Entireties account B: Tenancy in Common account C: Partnership account D: Joint Tenants with Rights of Survivorship account

C: Partnership account

A registered representative is allowed to choose which of the following in a transaction without requiring written trading authorization from the customer? A: Quantity and price B: Security and time C: Price and time D: Security and price

C: Price and time

Under FINRA rules, all of the following are necessary to open a corporate account EXCEPT: A: New account form B: Corporate charter C: Shareholder approval D: Corporate resolution

C: Shareholder approval

In order to open a discretionary cash account, which of the following is NOT required? A: Completed Customer New Account Form B: Signed Trading Authorization C: Signed Customer's Agreement D: Signature of Manager on New Account Form

C: Signed Customer's Agreement -only required for margin accounts

Three individuals wish to open a joint account as "tenants in common." If one of the individuals dies, which statement is TRUE? A: The account is liquidated and the proceeds divided into 3 equal parts, shared among the 2 survivors and the decedent's estate B: Trading must be halted in the account until the executor is named as the replacement for the decedent C: The 2 survivors continue as co-tenants in the account, along with the estate of the decedent D: The 2 survivors remain as joint tenants in the account; with the estate opening a separate account representing its interest

C: The 2 survivors continue as co-tenants in the account, along with the estate of the decedent

All of the following statements are true about opening a new margin account for the customer of an investment adviser EXCEPT: A: The customer must sign an advisory agreement with the adviser B: The customer must sign a power of attorney, giving trading authorization to the adviser C: The customer must sign a margin agreement D: The investment adviser must sign a margin agreement

C: The customer must sign a margin agreement

A married registered representative with 2 children has a client who is her father-in-law. The father-in-law wants to establish a Trust account for his son (the representative's husband) and his 2 grandchildren. The grandfather wants to appoint the representative as the trustee and pay her a trustee fee. Which statement is TRUE about this? A: The registered representative cannot act as the trustee because she is an immediate family member B: The registered representative cannot act as the trustee because she is being paid C: The registered representative cannot act as the trustee because of the conflict of interest D: The registered representative can act as the trustee without restriction

C: The registered representative cannot act as the trustee because of the conflict of interest

All of the following procedures are required for discretionary accounts EXCEPT: A: every order ticket initiated by the registered representative must be marked "discretionary" B: every discretionary order ticket must be approved by the manager or principal C: the customer must be contacted before each discretionary trade is executed D: a written power of attorney must be obtained from the customer before discretionary trades are effected

C: the customer must be contacted before each discretionary trade is executed

When completing a new account form, you discover that the customer is an accounting supervisor at another FINRA member firm. Under FINRA rules, all of the following procedures are required EXCEPT: A: Prior to opening the account, written approval of the employing member must be obtained B: The associated person opening the account must give written notice to the executing member of his or her association with the employer member C: Duplicate confirmations and statements must be sent to the employer member on request D: Annual account summaries of all activity must be sent to the employer member

D: Annual account summaries of all activity must be sent to the employer member

All of the following procedures are required to open an account for an employee of another municipal securities firm EXCEPT: A: Prior notice of the opening of the account must be given to the municipal employer B: Duplicate trade confirmations must be sent to the municipal employer C: Any instructions of the municipal employer must be followed D: Duplicate account statements must be sent to the municipal employer

D: Duplicate account statements must be sent to the municipal employer

If an employee of another municipal securities firm wishes to open an account at your firm, which statement is TRUE? A: Written notice of the opening of the account must be sent to the MSRB B: A surety bond of $10,000 must be posted before the account can be opened C: Duplicate confirmations must be sent to the MSRB D: Duplicate confirmations must be sent to the employer member

D: Duplicate confirmations must be sent to the employer member

Unless specific authorization is given, all of the following accounts cannot be opened as margin accounts EXCEPT a: A: Trust Account B: Custodial Account C: Guardian Account D: Joint Tenants Account

D: Joint Tenants Account

Mr. Jones, a New York resident, is a widower with a 6 year old son. He opens an account for the son under the Uniform Gifts to Minors Act. Three years later, Mr. Jones remarries, and moves to California, a community property state. Under what conditions can Mrs. Jones enter orders into the UGMA account? A: Only if a power of attorney is granted by the son B: Only if a power of attorney is granted by Mr. Jones C: Mrs. Jones can enter orders without restriction because California is a community property state D: Mrs. Jones can not enter orders into the account under any circumstances

D: Mrs. Jones can not enter orders into the account under any circumstances

A customer wishes to give a gift of securities to her nephew under the Uniform Gifts To Minors Act. Which statement is TRUE? A: The account cannot be opened because only parents are permitted to be custodians B: The account can be opened only with the written permission of the minor C: The securities can only be donated if they are included on that state's "legal list" D: The account can be opened without further documentation

D: The account can be opened without further documentation

What is an acceptable method for opening an investment adviser account? A: The adviser opens an Advisory UGMA account under each client's name B: Each individual client of the adviser opens an account under the adviser's name C: The adviser opens a Third Party account for each client D: The adviser opens an Omnibus account holding all of his or her clients' funds and securities

D: The adviser opens an Omnibus account holding all of his or her clients' funds and securities

Which statement is FALSE regarding a customer account with a "full power" third party trading authorization? A: The third party can enter orders in the account B: Checks drawn on the account can only be made out to the customer, not to the third party C: Upon the death of the customer, the power of attorney is revoked D: The customer cannot designate that confirmations be sent only to the third party

D: The customer cannot designate that confirmations be sent only to the third party

An institutional hedge fund investor will open a prime brokerage account for all of the following reasons EXCEPT to: A: consolidate account positions with one broker to ease recordkeeping B: use a variety of executing brokers who, in return for receiving commissions on trade executions, give research to the investor C: get lower financing rates on borrowed funds because all positions are aggregated D: be able to charge lower management fees to its investors

D: be able to charge lower management fees to its investors

All of the following statements are true regarding a customer account with a "full power" third party trading authorization EXCEPT: A: upon the death of the customer, the power of attorney is revoked B: the customer can designate that confirmations be sent only to the third party C: the third party can enter orders in the account D: checks drawn on the account can be made out to the customer or to the third party

D: checks drawn on the account can be made out to the customer or to the third party

A registered representative ("RR") manages a corporate account. The corporation recently elected a new CEO who contacts the "RR" and gives trade instructions. Which statement is TRUE? The trade should be: A: refused until a new account form has been completed by the new CEO B: entered without restriction C: entered after the branch manager approves the transaction D: entered once the "RR" verifies that the CEO is an authorized trader in the account

D: entered once the "RR" verifies that the CEO is an authorized trader in the account

A non-durable power of attorney signed by a customer: A: remains in force upon the death of the customer B: is irrevocable C: remains in force upon the mental incapacitation of the customer D: is terminated upon the mental incapacitation of the customer

D: is terminated upon the mental incapacitation of the customer

If a tenant in a joint account dies, the decedent's share is excluded from the taxable estate for accounts held as: A: Joint Tenants with Rights of Survivorship only B: Tenants in Common only C: both Joint Tenants with Rights of Survivorship and Tenants in Common D: neither Joint Tenants with Rights of Survivorship nor Tenants in Common

D: neither Joint Tenants with Rights of Survivorship nor Tenants in Common

A customer has been following the price movements of XYZ stock during this day's trading session. At 10 minutes prior to market close, the customer calls her representative and says: "Buy XYZ stock for me - get it at a good price - but make sure you get it." The customer hangs up and the representative calls the client back to ask how many shares she wants to buy, but she cannot be reached. The representative should: A: enter a market order to buy the normal trading unit of 1 round lot of XYZ stock B: enter a marketable limit order at the current market price to buy the normal trading unit of 1 round lot of XYZ stock C: enter a market on close (MOC) order using the same order size as the most recent order placed by that customer for another equity security D: not place the order

D: not place the order

For an employee of another firm to open an options account, which statement is TRUE? A: Prior written approval must be obtained from the employing firm to open the account B: Prior written approval must be obtained from the CBOE to open the account C: Prior written approval of the employer is required before executing each trade D: Prior verbal notification to the employer is required before executing each trade

A: Prior written approval must be obtained from the employing firm to open the account

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? A: The account will be transferred from the customer's name to a guardian account B: The account will be transferred from the customer's name to a custodial account C: The account will be transferred from the customer's name to the son's name D: The account will be transferred from the customer's name to the state's name

A: The account will be transferred from the customer's name to a guardian account

Which statement is TRUE if a customer signs a durable power of attorney? A: The power of attorney continues in effect if the grantor becomes mentally incompetent B: The power of attorney ceases if the grantor becomes mentally incompetent C: The power of attorney continues in effect if the grantor dies D: The power of attorney is perpetual and irrevocable

A: The power of attorney continues in effect if the grantor becomes mentally incompetent