Customer Accounts
Customer fails to deliver must be bought in:
10 business days after settlement date
What are the 4 critical pieces of information that must be collected to open a new account for an individual customer?
Name, address, birthdate, and SSN
Who creates the list of SDNs that must be checked when opening an account for a foreigner or foreign entity?
OFAC
How often should fixed fee accounts be reviewed?
annually
"Restriction" in a margin account: I is defined by the Federal Reserve Board II is defined by the Financial Industry Regulatory Authority III occurs if the account falls below initial Regulation T margin IV occurs if the account falls below minimum maintenance margin
I and III
Which statements are TRUE about non-managed fee based accounts? I The customer must be provided with a disclosure document prior to account opening II The customer must be provided with a disclosure document within 15 business days of account opening III The account must be reviewed at least annually for its appropriateness as a fee based account IV The account must be reviewed at least bi-annually for its appropriateness as a fee based account
I and III
If a customer effects a short sale, the broker-dealer: I will borrow the shares to be sold from someone else II will buy the shares to be sold from someone else III can demand that shares be replaced within the first 7 days of establishment of the position IV can demand that the shares be replaced at any time
I and IV
Information about SIPC, including a copy of the SIPC brochure, must be made available to customers: I at account opening II on each trade confirmation III on each account statement IV annually
I and IV Customer must be provided withj Securities Investor Protection Corp (SIPC) information at or prior to opening and account. It is sent annually as well.
Which of the following are types of joint accounts? I Tenancy by Entireties II Tenancy in Common III Join Tenants with Rights of Surviorship IV Partnership
I, II, III
Which of the following procedures are required for discretionary accounts? I A written power of attorney must be obtained from the customer before discretionary trades are effected II Every discretionary order ticket must be approved promptly by the manager or principal III Every order ticket initiated by the registered representative must be marked "discretionary" IV The customer must be contacted before each discretionary trade is executed
I, II, III
A social security number or tax identification number is needed to open a securities account for a: I U.S. resident II Foreign resident III U.S. corporation IV Foreign corporation
I, II, III, IV
As the initial transaction in a new margin account, a customer sells short 100 shares of DEF stock at $26 per share. The customer must deposit:
$2000
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
An initial transaction on the same day in a new margin account consists of: 200 shares of ABC @ $50 1500 shares of ACME Fund @ $10 10 PDQ Jan 50 calls @ $5 What is the margin call?
$25,000
A customer establishes a combined margin account by purchasing $30,000 of ABC stock and selling short $40,000 of XYZ stock, depositing the Regulation T requirement. Subsequently, the market value of the ABC position increases to $45,000, while the market value of the XYZ position decreases to $25,000. If no other activity occurs in the account, the account will show a current SMA balance of?
$30,000
A customer buys 100 shares of ABC at $90, depositing the Regulation T requirement. She holds the position for two months, during which $100 of interest is charged on the debit balance. What is the adjusted debit balance at the end of the two month period?
$4600
A customer buys 1 ABC Jan 40 Call @ $12 and sells 1 ABC Jan 55 Call @ $3 when the market price of ABC is $45. How much does the customer need to deposit:
$900
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
A customer has how many days after opening an options account to sign and return the options agreement?
15 days
Within how many days after opening an options account should the options agreement be signed and returned?
15 days after opening account
The minimum maintenance margin requirement for long stock position is:
25%
An option with over 9 months to expiration held in a margin account has how much loan value?
25% loan value LEAPs with over 9 months to expiration require 75% margin deposit, so the loan value is 25%
The minimum maintenance margin requirement for short stock positions is:
30%
The definition of a pattern day trader is a person who executes at least
4 day trades in a 5 business day period
Which statement is TRUE about donations into accounts opened under the Uniform Gifts to Minors Act? A. Any adult can donate into a custodial account for a minor B. Only a relative of the minor may donate into a custodial account for a minor C. Only a parent of the minor may donate into a custodial account for a minor D. Only a minor may donate into a custodial account for a minor
A. any adult can donate into a custodial account for a minor
In order to recommend a fee based account to a customer, under FINRA rules, the customer must be provided with a(n): A. disclosure document, at or prior to, account opening B. disclosure document within 15 days of account opening C. investment adviser brochure, at or prior to, account opening D. investment adviser brochure within 15 days of account opening
A. disclosure document, at or prior to, account opening
When must a customer sign and return a hypothecation agreement when opening a margin account?
At, or prior to, settlement of the first transaction in the account
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: A. the registered representative must perform a new suitability determination to determine that naked options writing is appropriate for this client B. The "Special Statement for Uncovered Options Writers" must be provided before executing the transaction C. "Options Disclosure Document" must be provided before executing the transaction D. The Registered Options Principal must reapprove the account for naked options writing
C
All of the following information is needed to open a new cash account for a customer EXCEPT: A. the citizenship of the customer B. whether the customer is an officer or director of a publicly held company C. whether the customer owns the stock of another publicly traded broker-dealer D. whether the customer is an employee of another broker-dealer
C. Whether a customer owns stock of another publicly traded broker-dealer is not essential.
An unmarried couple wishes to open a new account as "JTWROS." What should the registered representative do? A. Open the account without making any further inquiries B. Explain the risks involved with opening such an account C. Ask why they wish to open this type of account D. Refuse to open the account
C. Ask why they wish to open this type of account JTWROS is usually chosen by a married couple.
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 Written POA is required only if a registered representative chooses more than price and/or time of execution in a customer transaction. Registered representative either selects the security to be traded or selects the size of the transaction.
A representative meets a potential client at a convention. The client is interested in an investment giving life-long income, and the representative recommends a variable annuity contract. The customer opens an account and completes the purchase, but 30 days later, the customer calls the representative, telling him that he is not happy and he wants to move to another firm. What action should the representative take? A. The representative should recommend another variable annuity to the client that better meets the customer's needs B. The representative should file a SAR report about the customer C. The representative should talk to the manager to determine if there was a Know Your Customer violation D. The representative should offer the customer a full refund of his investment
C. The representative should talk to the manager to determine if there was a Know Your Customer violation
Assets in a customer account may be subject to a delay in transfer to another brokerage firm if they are held in: A. the name of that customer B. street name at DTCC (Depository Trust and Clearing Corporation) C. proprietary products at that broker-dealer D. non-proprietary products at that broker-dealer
C. proprietary products at that broker-dealer
Who would the firm contact is they believe a senior citizen w/an account at the firm is being exploited?
Client's trusted contact person
What transactions are permitted if a customer does not return a signed options agreement in time?
Closing transactions
All of the following are true statements about managed wrap accounts EXCEPT: A. a single annual fee is charged for account maintenance B. no separate commission charges are imposed for each transaction performed in the account C. no separate charges are imposed for safekeeping of securities in the account D. no options transactions are permitted in such account types
D no options transactions are permitted in such account types
A customer asks her representative for a quote on XYZ stock, which the representative informs the customer is currently $31.00 Bid - $32.10 Ask. The customer tells the representative to buy 1,000 shares at $32.10. The representative places a marketable limit order to buy. When the trade is confirmed with the representative, it shows execution at $33.10. The representative contacts the firm's operations department about this, and after making an inquiry to the exchange, the operations department determines that the exchange quotation of $32.10 was erroneous. Which statement is TRUE? A.The customer must buy 1,000 shares at $33.10 for a total fill price of $33,100 B. The customer must buy 970 shares at $33.10 for a total fill price of $32,107, so the customer will not pay more than he originally intended C. The customer must buy 1,000 shares at $32.10 for a total fill price of $32,100 D. The transaction can be canceled at the discretion of the customer
D. The transaction can be canceled at the discretion of the customer.
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? A. opening purchase B. opening sale C. closing purchase D. closing sale
D. closing sale
A FINRA member firm uses a structure for its wealthy client group where a "team" of registered representatives with differing specializations services those accounts. In order to do this, the member firm must: A. have a written agreement signed by all of the representatives in the team that details the compensation sharing arrangement, if any, between the team members B. tape the phone conversations of each team member when talking to clients to maintain a record of which registered person made recommendations to that client C. maintain a record of the CRD number of each representative assigned to the account D. document the role and responsibilities of each member of the team
D. document the role and responsibilities of each member of the team
A customer opens a margin account by purchasing 400 shares of XYZ stock at $60 per share and deposits the required margin. If the stock increases in value by 25%, the customer's equity in the account will: A. remain unchanged B. increase by 12.5% C. increase by 25% D. increase by 50%
D. increase by 50%
A customer opens a short margin account by selling short 600 shares of XYZ stock at $80 per share and deposits the required margin. If the stock declines in value by 25%, the customer's equity in the account will: A. remain unchanged B. increase by 12.5% C. increase by 25% D. increase by 50%
D. increase by 50%
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: A. husband only B. wife only C. husband on one report; and the wife on another report D. person whose social security number was given on the account form
D. person whose social security number was given on the account form
All of the following transactions are permitted in a custodial account EXCEPT the: A. purchase of mutual fund shares B. purchase of warrants C. sale of pre-emptive rights D. short sale of common stock
D. short sale of common stock Custodial accounts cannot be margin accounts.
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 information about the customer's: I Age II Life stage III Liquidity needs IV Tolerance for risk
I, II, III, IV
In order to determine suitability for a day trading account, the member firm must ascertain the essential facts relative to the customer's: I Investment objectives II Investment and trading experience III Financial situation, including tax status IV Age, marital status and number of dependents
I, II, III, IV
In order to determine suitability for a day trading account, the member firm must ascertain the essential facts relative to the customer's: I Investment objectives II Investment experience III Financial situation IV Trading Experience
I, II, III, IV
Under the Know Your Customer Rule, in order to open and maintain a customer account, each registered representative must collect essential information so that the member firm can: I effectively service the customer's account; II act in accordance with any special handling instructions for the account; III understand the authority of each person acting for the customer; IV comply with applicable laws and regulations
I, II, III, IV
When recommending fee based accounts to customers, member firms should consider: I Cost of trading in the account II Anticipated level of trading activity in the account III The importance that the customer places on aligning his interests with the broker IV The customer's fee structure preferences
I, II, III, IV
Which of the following recommendations are "red-flags" that are usually unsuitable for seniors? I Variable annuities II Structured products III Mortgaging home equity for investment purposes IV Using retirement savings to invest in high-risk investments
I, II, III, IV
Which of the following are provisions of Regulation T? I Payment is required promptly but no later than 4 business days after trade date II Minimum maintenance margin requirement is $2,000 per account III Retention requirement is 50% in restricted accounts IV Initial margin requirement is 50% on stocks
I, III, IV Minimum maintenance margins are set by FINRA
Cash dividends received from stock held in a margin account: I increase the debit balance II reduce the debit balance III are 100% credited to SMA for 30 days IV are 50% credited to SMA for 30 days
II and III
Regarding arbitration agreements between member firms and customers, which statements are TRUE? I FINRA requires each customer to sign an arbitration agreement as part of the account opening process II Each member firm can require each customer to sign an arbitration agreement as part of the account opening process III Industry arbitration is preferred over litigation as a means of settling disputes because it is cheaper and faster IV If an arbitration agreement is signed, a copy must be sent to the customer annually for reconfirmation
II and III
Which of the following are types of joint accounts? I Partnership account II Tenancy in common account III Joint tenants with rights of survivorship account IV Custodial account
II and III
Under the Uniform Gifts To Minors Act, which of the following statements are TRUE? I Only adults related to the minor may open a custodial account II Any adult can open a custodial account for a minor III Any gift donated into the account is revocable IV Any gift donated into the account is irrevocable
II and IV
When comparing fixed fee accounts to those that charge a per trade commission charge accounts: I Fixed fee accounts are considered to be a brokerage product II Fixed fee accounts are considered to be an advisory product III Per trade commission charge accounts are considered to be a brokerage product IV Per trade commission charge accounts are considered to be an advisory product
II and IV
Which of the following statements are TRUE if a customer signs a non-durable power of attorney? I The power of attorney continues in effect if the grantor becomes mentally incompetent II The power of attorney ceases if the grantor becomes mentally incompetent III The power of attorney continues in effect if the grantor dies IV The power of attorney ceases if the grantor dies
II and IV
Which of the following statements are TRUE regarding joint accounts? I If a party in a Joint Tenants With Rights of Survivorship account dies, his or her share is excluded from his taxable estate II If a party in a Joint Tenants With Rights of Survivorship account dies, his or her share is included in his taxable estate III If a party in a Tenancy in Common account dies, his or her share is excluded from his taxable estate IV If a party in a Tenancy in Common account dies, his or her share is included in his taxable estate
II and IV
Which statements are TRUE when comparing a full power of attorney given in a brokerage account to a limited power of attorney? I The individual given a full power of attorney can draw checks only II The individual given a full power of attorney can enter orders and draw checks III The individual given a limited power of attorney can draw checks only IV The individual given a limited power of attorney can enter orders only
II and IV
Which of following documents are unique to margin accounts? I new account form II margin agreement III loan consent agreement IV credit disclosure statement
II, III, IV
What is the 3 level suitability rule?
Reasonable basis suitability, customer-specific suitability, and quantitative suitability
Who's signatures must appear on the new account form?
Registered representative and manager or PRINCIPAL
What is structuring?
Structuring is the illegal practice of making a pattern of deposits or withdrawals of cash in amounts under $10,000 to avoid CTR rules
Customers must be given information about SIPC:
at, or prior to, account opening
To send trade confirmations to a person holding a power of attorney over a customer's account, written approval must be obtained from the
customer
Under FINRA rules, initial approval of new accounts, in writing is performed by the
general principal
To open a partnership account, the social security number or tax ID number to be used is the number of:
the partnership