SIE - Customer Accounts Pt. 2

All of the following transactions are permitted in a custodial account EXCEPT the:

A purchase of a common stock fund B purchase of mutual fund shares C sale of pre-emptive rights Correct answer D purchase of common stock on margin Custodial accounts cannot be margin accounts - so margin transactions are prohibited. If securities are purchased, they must be paid in full. If securities are sold, they must be long sales with the proceeds being used for other investments that benefit the minor.

All of the following statements are true regarding a custodial account EXCEPT:

A tax liability is the responsibility of the minor Correct answer 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 Tax liability in a custodial account is the responsibility of the minor and each year any income is reported to the IRS using the minor's social security number. Tax is due on that income in the year it was received - this is not a tax-deferred account.

Which of the following accounts can be opened by a minor?

A minor cannot open an account A minor cannot open an account, nor does the minor have legal capacity to participate in any joint account. The acceptable method of opening such an account is an adult custodian opening an account for the benefit of the minor.

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 Any adult can donate into a custodial account for a minor. The adult does not have to be related to the minor.

All of the following documents are unique to margin accounts EXCEPT the:

Correct answer A new account form B margin agreement C loan consent agreement D credit disclosure statement A new account form must be completed whether an account is set up as a cash or a margin account. The paperwork that is unique to opening margin accounts includes the margin agreement, which the customer must sign, pledging the securities in the account as collateral for the margin loan; the loan consent agreement, which is customarily signed, where the customer permits the securities in the account to be lent out for short sales by others; and the credit disclosure statement, which explains how the loan balance is computed and interest is charged.

Which statement is TRUE regarding joint accounts?

If a party in a Tenancy in Common account dies, his or her share is included in his taxable estate If a joint account owned as "Tenancy In Common," then if one person dies, that person's share goes into his or her estate, and is subject to estate tax. Even though a "Joint Tenancy with Rights of Survivorship" gives each owner a legally undivided interest in an account, if one owner dies, the IRS assigns a portion of the account to that person and taxes it (nothing is so certain in life as death and taxes!). If the owners are married, then the unlimited marital exclusion stops the tax bill from hitting until the second spouse dies.

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?

Mrs. Jones can not enter orders into the account under any circumstances Custodial accounts are not permitted to have "third parties" that can trade the account. Only the custodian can enter orders. If the wife wishes, she can open a separate custodial account for the minor. The fact that California is a community property state is irrelevant to this question.

Which statement is TRUE regarding joint accounts?

Orders can be given severally Any party in a joint account can enter orders. "Severally" means individually, so Choice A is a true statement. However, any checks drawn on the account must be made out to all names on the account. Joint accounts do not have to be owned 50/50 - they may have disproportionate ownership.

Which statement is TRUE regarding a customer account with a "limited power" third party trading authorization?

Upon the death of the customer, the power of attorney is revoked The individual granted a third party trading authorization with a limited power of attorney can enter orders (it makes no difference if they are solicited or unsolicited), but cannot draw checks on the account (that requires a full power of attorney). Any power of attorney - either limited or full - dies when the customer dies. A limited power of attorney has nothing to do with being a limited partner!

Which of the following is a TRUE statement about managed wrap accounts? The customer is charged:

a single annual fee based on total assets in the account for account transactions and maintenance Wrap accounts are a type of customer account, where all services performed by the broker are "wrapped" into a single account; and a single annual fee based as a percentage of assets under management is charged. There is no commission charge for each transaction performed in such an account; all services are covered in the single "wrap" fee. Also note that "wrap" accounts, because they charge a flat annual fee and not commissions, are defined as investment adviser products. These must be sold through an investment adviser subsidiary of a broker-dealer, and the representatives that sell them must be registered as "IARs" - Investment Adviser Representatives - in each state where they offer the product.

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:

entered once the "RR" verifies that the CEO is an authorized trader in the account A corporate resolution will name the person(s) authorized to trade the account. Once the "RR" verifies that the CEO is an authorized trader listed in the corporate resolution, the trade can be entered as given.

An elderly customer has gifted stock from her brokerage account to her four children every year for the last 20 years, with the gift amount set at the annual IRS gift tax exclusion amount. You receive a phone call from the customer's oldest daughter stating that her mother is suffering from advanced dementia and has been moved to a long-term care facility. She instructs you to make the annual stock gift distributions to herself and her siblings. You should:

follow the daughter's instructions only if she can produce a durable power of attorney that was signed by her mother The mother is now mentally incapacitated. You can do nothing requested by the daughter unless she produces a durable power of attorney signed by the mother. Note that a non-durable power of attorney would be useless, since it stops when the grantor becomes mentally incapacitated.

An officer of a trust wishes to open a margin account with your firm. This is allowed:

if the trust agreement specifically authorizes the opening of a margin account As a general rule fiduciary accounts must be cash accounts. A trust account will be opened as a cash account unless the agreement specifically authorizes the opening of a margin account.

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 Custodial accounts use the social security number of the minor.

If a tenant in a joint account dies, the decedent's share is excluded from the taxable estate for accounts held as:

neither Joint Tenants with Rights of Survivorship nor Tenants in Common If a joint account owned as "Tenancy In Common," then if one person dies, that person's share goes into his or her estate, and is subject to estate tax. Even though a "Joint Tenancy with Rights of Survivorship" gives each owner a legally undivided interest in an account, if one owner dies, the IRS assigns a portion of the account to that person and taxes it (nothing is so certain in life as death and taxes!). If the owners are married, then the unlimited marital exclusion stops the tax bill from hitting until the second spouse dies.

Under FINRA rules, numbered accounts are:

permitted if the firm maintains a written statement of the customer attesting to ownership FINRA requires that accounts be maintained in customer name; however it will allow a numbered account to be maintained if the firm keeps on file a written statement by the customer attesting to ownership. For example, professional traders might worry that if their trades are seen in their name in the firm, that unscrupulous employees might try to "ghost" their trades. If the account is maintained as a numbered account, then whoever sees the order does not know the identity of the customer.

If a retail customer gives a market-not held order:

the order is treated as a "day" order Market-Not Held orders give discretion to the broker over price and time of execution. These orders must be executed that day if given verbally. If discretion is to last longer than 1 day, written authorization of the customer is required.

To open a margin account for a partnership, all of the following documentation is required EXCEPT:

A New account form B Customer's agreement C Partnership agreement Correct answer D Joint account agreement To open any account, a new account form must be completed. To open a margin account, the customer's agreement (margin agreement) must be signed, pledging the securities purchased in the account as collateral for the margin loan. In addition, to open a partnership account, a copy of the partnership agreement must be obtained. Joint account agreements are only used when individuals who are not part of a larger "business entity" wish to pool their monies in a single account.

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 Correct answer D Duplicate account statements must be sent to the municipal employer To open an account for an employee of another municipal securities firm, the MSRB requires that prior notice be given to the employing firm; and that duplicate confirmations of each trade be sent to the employer. There is no requirement to send duplicate statements to the employer. Also, any instructions of the employer regarding the account must be followed - for example, if the employer says "Don't open the account," then those instructions must be followed.

All of the following are types of joint accounts EXCEPT:

A Tenancy in Common account B Joint Tenants with Rights of Survivorship account C Tenants by Entireties account Correct answer D Omnibus account The joint account ownership options are: Tenants in Common - each person has a divided interest with a specified ownership percentage for each party; Joint Tenancy With Rights of Survivorship (JTWROS) - each person has an undivided interest with each owning 100% of the account; or Tenants by Entireties - only allowed in some states, it is similar to JTWROS, however if a single tenant is sued, the assets of the joint account cannot be claimed. An Omnibus account is an account of pooled customer monies, where there is no specific identification to the broker carrying the account of who the specific customers are. These accounts are most often used by Investment Advisers who manage money for clients.

All of the following statements are true regarding Trust Accounts EXCEPT:

A The trust agreement will specify the transactions that the trustee is allowed to perform B A copy of the trust agreement must be obtained before any transactions are allowed C The account will be a cash account unless the trust agreement authorizes the opening of a margin account Correct answer D Options trading is prohibited in trust accounts The trust agreement will specify what transactions are allowed. A copy of the trust agreement must be obtained before any transactions are allowed. As a general rule, fiduciary accounts must be cash accounts. A trust account will be opened as a cash account unless the agreement specifically authorizes the opening of a margin account. Options trading is permitted in a trust account - one of the most conservative options strategies is the sale of covered calls against stock positions held to generate income in a flat market. And covered call writing can be done in a cash account against fully paid stock positions.

All of the following are true statements about trust accounts EXCEPT:

A a copy of the trust agreement must be obtained prior to opening the account B transactions in the account are limited to the types specified in the trust document C margin transactions are prohibited unless specific authorization to open a margin account is given in the trust document Correct answer D securities that may be purchased in the account are restricted to those included in that state's "Legal List" To open a trust account, a copy of the trust document must be obtained. The document will spell out the types of transactions that are permitted. The account must be opened as a cash account unless the document specifically permits margin transactions. Finally, there is no requirement that investments be limited to that state's "legal list" (these are lists of so-called "prudent" investments that are considered to be conservative, such as government bonds), though this can be the case if only "legal list" investments are authorized in the trust document.

Who can give trading authorization to another party in a brokerage account?

A second party can give trading authorization to a first party The parties to an account are: First Party: Brokerage Firm Second Party:Customer Third Party:Someone Other Than the Broker or Customer Since only Second Parties can open accounts, only a Second Party can give trading authorization to either a First Party (a discretionary account) or to a Third Party (a Third Party trading authorization).

If an employee of another municipal securities firm wishes to open an account at your firm, which statement is TRUE?

Duplicate confirmations must be sent to the employer member To open an account for an employee of another municipal securities firm, the MSRB requires that prior written notice be given to the employing firm; and that duplicate confirmations of each trade be sent to the employer. (In contrast, FINRA requires that confirmations and/or statements be sent only if the employer requests in writing.) There is no requirement to post a surety bond!

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 A registered representative is allowed to select the price and time of execution without the order being considered as "discretionary." If he or she selects any more, such as the security to be traded or the number of shares, then the order is discretionary and requires a written power of attorney from the customer.

For an employee of another firm to open an options account, which statement is TRUE?

Prior written approval must be obtained from the employing firm to open the account For an employee of another CBOE member firm to open an options account, prior written approval of the employer is required and duplicate confirmations of all trades must be sent to the employer. There is no requirement to notify or get approval from the employer prior to executing each trade. There is no requirement to get approval from the CBOE.

What type of account bypasses probate upon the death of the owner, or one of the owners?

TOD Account TOD stands for "Transfer on Death" registration. It is available for an individual account, and also for a joint account only if both owners die simultaneously. Upon the owner's death, the assets in the account pass directly to a beneficiary named when the account is opened, bypassing the estate and probate (but not necessarily bypassing estate taxes). With an individual account or custodial account, if the owner dies, the assets go the estate, to be passed by will or according to state law - and go through probate as part of this process. With a tenants in common account, the percentage share of the deceased joint tenant also goes to that individual's estate, to be passed by will or according to state law.

A mother and father of twin girls (Girl "A" and Girl "B") want to open UTMA accounts to save for their college education. Who can be the custodian on the account(s)?

The mother on an account for Girl "A' and the mother on an account for Girl "B" UTMA is the Uniform Transfers to Minors Act - adopted in each state and governing custodial accounts. Custodial accounts must be cash accounts, with all securities registered in account name - and the rule is "one custodian for one minor" per account. There cannot be joint custodians, nor can there be joint minors, in a custodial account. Our big issue with this question is: "Why do they want to open a custodial account, which has no tax benefits? Why not open a 529 Plan for each?" 529 Plans have basically replaced custodial accounts as a way of saving for college, but you still must know UTMA for the exam!

Two brothers wish to open an account at a broker-dealer. One brother will contribute $100,000 for a 25% interest and the other brother will contribute $300,000 for a 75% interest. They have stated that if one should die, then that person's share will go to a designated beneficiary. What kind of account should be opened?

joint account with tenants in common In an account opened "Tenants in Common," each person has a specified ownership interest. If one participant dies, that share in the account goes to the estate.

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:

not place the order The client never told the representative how many shares to buy. The question does not tell us if the representative has been given a power of attorney by the client, so we cannot assume this. Nothing can be done until the client tells the representative how many shares to buy!

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 The registration on a custodial account is one custodian for one minor. There can not be more than one of each on an account.

Which statement is TRUE regarding a minor in a custodial account opened under UGMA reaching legal age?

The new adult must take control of the account Under UGMA, when a minor reaches legal age, the registration on the custodial account is changed to the sole name of the new adult. To do so, the new adult must present proof of age and a government issued photo I.D. The new adult is free to do as he or she wishes with the account.

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 Before opening the account, written permission must be obtained from the employing firm

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 Correct answer 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 There is no requirement to contact a customer before executing each discretionary trade. The customer must give a written power of attorney; every order ticket that is discretionary must be marked as such; and the principal must approve all discretionary orders "promptly" (meaning by the end of that day).

All of the following statements are true regarding joint accounts EXCEPT:

A opening a joint account requires new account information on each account participant B if a party in a Tenancy in Common account dies, his or her share of the account is included in his taxable estate Correct answer C if a party in a Joint Tenants With Rights of Survivorship account dies, his or her share is excluded from his taxable estate D any party in the account can authorize trades or withdraw funds Even though a "Joint Tenancy" gives each owner an undivided interest in an account, if one owner dies, the IRS assigns a portion of the account to that person and taxes it. If the owners are married, then the marital exclusion stops this from happening. The other statements are true - in a joint account, any party can trade or draw checks; new account information is needed for each party to the account; and if the account is Tenancy in Common and one person dies, that person's share goes to his or her estate.

All of the following persons require additional documentation to open an account at FINRA member firm EXCEPT a(n):

A registered employee of another FINRA member firm B unregistered employee of another FINRA member firm C officer of another FINRA member firm Correct answer D clerical employee another FINRA member firm FINRA requires that if an employee of another FINRA member firm (whether registered or unregistered) wishes to open an account: prior written consent of the employing member firm must be obtained; the executing member must be notified in writing of the employee's association with another member firm; and on written request of the employer member, the executing member must provide duplicate confirmations and statements. Note that the rule applies to "associated persons" of a member firm opening an account at another member - and an associated person is either an officer or a registered or unregistered employee of the member firm, with an exception given to anyone who only performs clerical or ministerial duties. Not only does the rule apply to accounts opened at other member firms by associated persons, it also applies to securities accounts opened at non-member financial institutions such as banks and investment advisers.

In order to open a discretionary cash account, all of the following are required EXCEPT:

A signature of manager on new account form B signed trading authorization Correct answer C signed customer's agreement D completed customer new account form A signed customer's agreement is only required for a margin account; it is not used in a cash account. The customer's agreement is the hypothecation agreement. To open a discretionary cash account, a new account form must be completed by the registered representative and approved in writing by the manager. New account forms are not required to be signed by the customer. However, the customer must provide a signed trading authorization to the firm (first party trading authorization) allowing discretionary trades because this is a discretionary cash account.

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 Correct answer D checks drawn on the account can be made out to the customer or to the third party In an account with a trading authorization, the power of attorney dies if the customer dies; the customer can designate that confirms go to the third party only (this must be done in writing); and the third party can enter orders. However, any checks must be drawn to the account name (that is customer, or second party name) - not third party name.

What is NOT a fiduciary account?

A Custodial Account B UGMA Account Correct answer C Partnership Account D Trust Account Both Trust accounts and Custodial accounts are "fiduciary accounts," where a third party is designated to manage the account in the best interests of the account owner. UGMA accounts are custodial accounts. Partnership accounts and joint accounts are directly managed by an owner of the account, and thus are not fiduciary accounts.

Julia and Jim are the parents of twins who are just turning 4 years old. They want to open a custodial account for each under the Uniform Transfers to Minors Act to start saving for their school expenses. Who can be the custodian in this type of account?

Any adult, related or unrelated, as individual custodian Any adult can be a custodian under either UGMA (Uniform Gifts to Minors Act) or UTMA (Uniform Transfers to Minors Act). The custodian does not need to be related to the minor. The registration on the account must be "One Custodian for One Minor." There cannot be more than 1 custodian, nor can there be more than 1 child, named on the account registration.

An unmarried couple wishes to open a new account as "JTWROS." What should the registered representative do?

Ask why they wish to open this type of account Joint Tenants with Rights of Survivorship is the account ownership option usually chosen by a married couple. Legally, each 100% owns the account - if 1 dies, the other automatically 100% owns the account. The transfer bypasses the estate and cannot be challenged. If the account is titled as "Tenants in Common," then each tenant owns a stated percentage of the account. If one dies, that percentage goes to that person's estate and is passed by will. The registered representative should inquire as to why this unmarried couple wants JTWROS ownership. The big question is: "Do they understand how it all works?"

Custodial accounts can be opened as a:

Cash account The "default" setting of the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act is that custodial accounts can only be opened as cash accounts. They can be opened as margin accounts only if the state permits it in its version of the law (which some states do, most do not). For the exam, custodial accounts can only be opened as cash accounts, since this is the rule in most states.

What is one of the benefits of a prime brokerage account?

Consolidated account statement Sophisticated institutional investors, such as hedge funds, open accounts called "prime brokerage accounts." The "prime broker" is a firm that caters to institutional clients, such as Goldman Sachs, J. P. Morgan or Merrill Lynch. The main advantage of using a "prime broker" is that the hedge fund can route its trades to different executing brokers other than the "prime broker." In return for sending its trades to different executing brokers and paying them commissions, the hedge fund gets research and other valuable market information from the executing brokers. The trades done through the executing brokers "roll up" to the prime broker. The prime broker holds all of the positions, arranges for stock loans on short positions taken, provides financing (margin loans) on positions taken, and provides consolidated account statements, among other services. Because all positions taken are consolidated, the loan amounts against them are larger and result in lower interest rates than if the positions were held separately at different brokerage firms.

If an investor wishes to open a margin account, which paperwork is typically NOT required?

Correct answer A ACATS Form B Hypothecation Agreement C Loan Consent Agreement D Credit Agreement To open any account, the new account form must be completed. In addition, if the account is a margin account, then the customer must sign a hypothecation agreement (where the customer pledges the securities to the broker in return for the margin loan). The customer is asked to sign a loan consent agreement, allowing the broker to lend out the customer's securities for short selling by other customers of the firm - it is customary, not mandatory, for the customer to sign this. The customer must receive credit disclosure agreement, which explains how the loan balance is computed and how interest will be charged on the loan (basically, this is a "truth in lending" document. ACATS is the acronym for the Automated Customer Account Transfer System. The ACATS Form is used to transfer customer positions from one brokerage firm to another.

All of the following are allowable joint accounts EXCEPT:

Correct answer A father and 12-year old son B father and 25-year old son C husband and wife D two partners in a business Joint accounts can only be opened between adults. Accounts for a minor can only be opened as fiduciary accounts such as a Guardian account or Custodial account. These are not joint accounts - the minor or incompetent is not authorized to trade the account nor can he or she draw checks from the account. Only the Guardian or Custodian can perform these actions. A 12-year old person is a minor; a 25-year old person is an adult.

What is an acceptable way to open a brokerage account for an Investment Adviser?

Separate client accounts with a power of attorney given by each client to the broker dealer who will then oversee the investment adviser One way for an Investment Adviser account to be opened is for each client to open an account at a brokerage firm, with the client giving the investment adviser Third Party power of attorney. The account is held in the name of the Second Party - that is, the customer.The other way for an investment adviser to open an account is on an Omnibus basis. In this situation, the Investment Adviser is the Second Party, opening a "group account." The names of the individual customers in the account are not known to the brokerage firm. From the brokerage firm's standpoint, the customer is the Adviser. Investment advisers are prohibited from opening joint accounts containing many different clients, nor can they open partnerships accounts with many different clients. Under federal and state law, investment advisers must either keep customer monies segregated in separate accounts or must be able to account for each customer's positions separately within a "master" account - that is, an Omnibus account.

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 Since this customer is not of legal age, he or she does not have the legal capacity to open the account. A custodian must be present to open the account for the minor. Custodians can only be human beings; brokerage firms cannot be custodians.

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?

The registered representative cannot act as the trustee because of the conflict of interest The trustee over a trust account is a fiduciary who must manage the account in the best interest of the beneficiaries. It is an inherent conflict of interest for a registered representative handling an account to act as the trustee over that account. As an example of the potential conflict, is the representative effecting trades in the account to benefit the beneficiaries or is the representative effecting trades to generate personal commission income? Typically, a trustee is a bank or an investment adviser, both of whom are already under a fiduciary obligation. While it is "possible" for a registered representative to be a trustee in such an account (if there is written disclosure to the grantor of the trust (the father-in-law) of the nature of the conflict of interest and if the fees charged by the trustee are "reasonable"), most brokerage firms have an internal policy of prohibiting their representatives from being trustees in any accounts that they oversee.

A customer wishes to give a gift of securities to her nephew under the Uniform Transfers To Minors Act. Which statement is TRUE?

The transfer age is set by the custodian, up to the maximum age permitted by the state The main difference between UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) is that while the assets in an UGMA account transfer to the new adult at legal age, and an UTMA account, the custodian sets the transfer age (up to the maximum age set by that state - in most states, the maximum age is 21, a few have a maximum age of 25).

Which statement is TRUE regarding 3rd party trading authorizations in fiduciary accounts?

Trading authorization cannot be given to a third party other than the fiduciary unless the account documentation permits The basic "default" setting for a fiduciary account is that third party trading authorizations are not permitted. Since the fiduciary is the "third party" handling the account, only he or she is permitted to trade that account. As a general rule, a third party cannot give a trading authorization to another third party. However, if the authorizing document specifically permits the fiduciary to give a power of attorney to another investment manager, then this would be permitted. This is becoming more common - trustees for trust accounts often delegate investment management to an outside professional manager, who is paid a management fee.

Your customer has been declared legally incompetent and his daughter has presented the proper legal papers appointing her as the guardian. Which statement is TRUE?

Trading instructions can be accepted only from the daughter Since the customer is legally incompetent, when the daughter presents the proper court papers, the account will be transferred from the customer's name to a guardian account, with the daughter acting as trustee. No instructions can be taken from the customer, since he does not have legal capacity to make decisions. All instructions regarding the account can only be taken from the guardian - who is the daughter.

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)?

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 The main difference between UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) is that while the assets in an UGMA account transfer to the new adult at legal age, and an UTMA account, the custodian (not the parents) sets the transfer age (up to the maximum age set by that state - in most states, the maximum age is 21, a few have a maximum age of 25).

A husband and wife have a joint account with a member firm. The wife calls the registered representative with instructions to liquidate their 500 share position of ABC stock. The registered representative should:

accept and execute the order as given In a joint account, any one of the owners can enter trades in the account. In addition, any one of the owners can authorize that checks be drawn on the account, however all checks must be drawn to full account name.

The "convenience signer" in a "Convenience Account" has the right to:

draw checks from the account only for the benefit of the account owner A Convenience Account is a "newer" type of account registration that is designed for an elderly parent who has many adult children. The elderly parent needs help managing his or her finances and wants one of the children to do this. The Convenience Account allows the elderly parent to name a person to use the funds in the account for the parent's benefit only. The "convenience" signer is simply an agent who can write checks from the account. There is no right of survivorship, so upon the parent's death, the funds in the account go to the estate. The "convenience signer" has no ownership rights, so all of the adult children know that the "convenience" signer, who is their sibling, will not have access to the funds in the account upon the parent's death. The funds will then be distributed according to the parent's will. The "convenience signer" cannot trade the account unless the owner gives that person a third party trading authorization in writing.

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 non-durable power of attorney. Upon the death of Jack Jones, the power of attorney:

is void Any power of attorney granted by a customer "dies" when that customer dies. The difference between a "durable" and a "non-durable" power of attorney only relates to mental incapacitation. If an individual who has granted a non-durable power of attorney becomes mentally incapacitated, then that power of attorney becomes void. If an individual who has granted a durable power of attorney becomes mentally incapacitated, the power of attorney continues in effect.

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 Custodians are obligated to manage the assets of the account in the best interests of the minor. Custodians cannot use account assets for their own benefit.