Series 6 - Customer Accounts

Under the Bank Secrecy Act, a record is required to be retained if a financial institution issues a money order for which of the following dollar amounts?

$3,000

An older customer, age 63, that is in the lowest tax bracket, seeks an investment that will give him an income stream. The best recommendation would be:

AAA Corporate Bond Fund

A customer account with a "full power" third party trading authorization

Checks drawn on the account can only be made out to the name of the customer, not to the third party Upon the death of the customer, the power of attorney is revoked The third party can enter orders in the account

Under FINRA rules, a registered representative must obtain and retain which of the following information relating to the customer's account?

Customer address country of citizenship financial status

Regulation SP

Customers must be offered both an initial privacy notice and an annual notice thereafter Consumers must be offered only an initial privacy notice

A customer would like to add her daughter as the beneficiary of her brokerage account without giving the daughter any authority to trade in the account. Which of the following ways to arrange account ownership is most appropriate for this customer?

Individual account - Transfer on Death.

A customer wants to avoid the costs of probate for his account. What kind of account ownership should you recommend?

JTWROS Transfer on death

UGMA Accounts:

The custodian is not entitled to a fee for managing the UGMA account for a minor UGMA account assets can be used for the minor's benefit before the minor becomes an adult

Discretionary Orders

The manager or principal must approve each order Approval is required no later than the end of the day of order entry

A customer has placed an order to buy stock in a cash account but does not deposit required funds by settlement. The firm requests a first extension for payment. Then, it requests a second extension for payment and still does not receive the funds from the customer. Under Regulation T, which statements are true?

The position must be closed out promptly by the broker-dealer The account must be frozen for 90 days

A customer places an order to buy a security at $40 and the trade is executed at $50. When the customer gets the trade confirmation, the purchase price is shown as $50 a share. If the security traded as low as $40 after the order was placed, which statement is TRUE?

The registered representative should tell the customer that the confirmation will be corrected to the $40 price per share

Your customer is the executor of his father's estate and wants to invest his father's remaining assets for his mother's care. His elderly mother is in very poor health and recently moved into a nursing home. She has long-term care insurance and pension income that pay most of her monthly expenses. The customer is interested in supplementing his mother's current monthly income with a low risk investment. What is the most suitable recommendation for this client?

Treasury Fund - A U.S. Treasury Fund holds Treasury notes and bonds, which are AAA rated, so these are as safe as it gets, and they generate a decent level of income since the bonds and notes pay interest semi-annually.

Preservation of Capital

US treasury notes, GNMA certificates

When must a firm verify the identifying information provided by a customer to open a new account?

Within a reasonable time after opening the account

A working couple has saved $6,000 for college educations for their children, who are 3 and 4 years of age. They would like their children to be able to select private colleges if they wish. They understand that this choice will be very expensive and that they must accept some risk in their investments to achieve this objective. They have no other current savings, but they will be able to contribute $3,000 each year to the college education fund for their children. Which is the most suitable recommendation for this couple?

XYZ Growth Fund - offers capital appreciation, and the clients are willing to accept the fund's moderate risk to achieve their objective.

A customer can suffer an unfortunate experience based on a margin opportunity when making an investment in a(n):

closed end fund

Regulation U

controls the extension of credit on securities by banks

Regulation T

controls the extension of credit on securities from broker to customer.

The primary reason for a registered representative to inquire about a customer's net worth is to:

determine the customer's ability to invest

Mutual fund distributions

may be reinvested or taken in cash investors may reinvest capital gains and dividends at NAV

Requirements for an open account with a mutual fund

minimum amount to open an account minimum amount for subsequent investments

UGMA / UTMA accounts

must be a cash account The account may have no more than one custodian and one minor opened using the minor's Social Security number taxed at the gift and estate tax bracket if the account has substantial income (above $2100)

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 must follow KYC procedures regardless of whether transactions in the account are recommended or not recommended

Mailing of account statements

no activity - quarterly actively - monthly

If a customer fails to pay for a securities purchase in the time period specified by Regulation T, an extension request is:

permitted only for an exceptional reason made to FINRA

Currency Transaction Report

report to FinCEN for deposits or withdrawals exceeding $10,000

A customer who makes full payment for a mutual fund purchase in a cash account is:

subject to the provisions of Regulation T

Joint Accounts

tenancy by entireties tenancy in common joint tenants with rights of survivorship

When opening an account for a customer,

the customer's name, address, birthdate and social security number must be independently verified by the member firm.