Unit 1
A husband and wife wish to open a Roth IRA. She is 49 years old and earns $99,000 per year; he is 51 and earns $49,000 per year. What is the maximum permitted contribution for the married couple, based on age and income? A) Husband $7,000 and wife $6,000 B) Husband $6,000 and wife $0 C) Husband $7,000 and wife $0 D) Husband $6,000 and wife $6,000
A) Husband $7,000 and wife $6,000 The husband may contribute $7,000 and his wife may contribute $6,000. For married couples, an adjusted gross income level of $196,000 (2020) begins to limit the amount of contribution that is permitted into a Roth IRA (although this specific amount is never tested). The married couple has an income level of $148,000, well below that AGI. Therefore, each would be permitted to make the maximum contribution. The wife may contribute a maximum amount of $6,000. Because the husband is 51, he is eligible to contribute an additional $1,000 per year (the catch-up provision applied to those age 50 and older) for a contribution of $7,000. LO 1.g
Which of the following would be the least appropriate investment in a traditional IRA for a 67-year-old client? A) Corporate bonds B) Variable annuities C) Common stock D) Treasury notes
B) Variable annuities Why buy a tax-deferred product in a tax-deferred account? A variable annuity will provide no additional tax savings and will likely increase the expense of the IRA. In addition to sales and surrender charges, variable annuities may impose other charges such as mortality and expense risk charges, administrative fees, et cetera. In five years, your client will have to begin making withdrawals, regardless of any surrender charges the annuity may impose. LO 1.g
A financial institution sends a communication to its clients indicating an action the institution plans to change. The communication states that this change will take place in 45 days and any client wishing to opt-out must notify the institution before the end of that period. This is known as A) a change letter. B) a negative response letter. C) an unethical procedure. D) an informational communication.
B) a negative response letter. A negative response letter is a communication where, unless the recipient responds negatively, the proposed action is accepted. The letter must contain certain disclosures such as different costs or features. LO 1.e
Under ERISA, all of the following retirement plans must set standards for vesting, eligibility, and funding except A) corporate pension plans. B) deferred compensation plans. C) profit-sharing plans. D) 401(k) plans.
B) deferred compensation plans. Deferred compensation plans are not qualified plans and may be discriminatory. 401(k), profit-sharing, and corporate pension plans must meet set standards for vesting, eligibility, and funding under ERISA. LO 1.i
In which of the following qualified plans might a graduate student teaching two classes daily as a teaching assistant at a state university be able to participate? A) 457(b) B) 403(b) C) 501(c)(3) D) 401(k)
B) 403(b) Students are not eligible to participate in qualified plans. However, if the student is teaching for the public institution and meets the minimum eligibility qualifications, the student is an employee like any other teacher. These plans, also known as tax-sheltered annuities (TSAs), are available for state, municipal, and government employees, as well as employees of nonprofit organizations. Although a teacher at a state university can participate in a 403(b) plan, students who are there solely to attend class are not eligible. LO 1.h
A distribution from a corporate pension plan to be rolled over into an IRA must be completed within how many days to maintain its tax-deferred status? A) 30 B) 60 C) 45 D) 90
B) 60 Rollovers from pension plans into IRAs must be accomplished within 60 days to retain tax-deferred status. LO 1.g
All of the following may be used to verify a customer's identity except A) a valid military ID card. B) a certified birth certificate. C) a valid passport. D) a current drivers license.
B) a certified birth certificate. Verifying a customer's identity requires presentation of at least one government-issued document with a photograph. Your birth certificate may have had a photo of you as a newborn, but that certainly will not suffice to identify you today. LO 1.d
Which of the following statements regarding Coverdell ESAs is true? A) Contributions are tax deductible, and distributions are always taxable. B) Contributions are tax deductible, and distributions for any reason are tax free. C) Contributions are not tax deductible, and distributions are tax free when used for qualified educational expenses. D) Contributions are not tax deductible, and distributions for any reason are tax free.
C) Contributions are not tax deductible, and distributions are tax free when used for qualified educational expenses. Coverdell ESAs offer after-tax contributions of up to $2,000 per student, per year for children under age 18. Distributions are tax free as long as the funds are used for education. LO 1.g
Broker-dealers are required to maintain customer identification programs and check the names of new clients against A) a list maintained by the Securities Exchange Commission. B) a list of sanctioned people and organizations maintained by the Department of Enforcement. C) a list compiled by the Office of Foreign Assets Control (OFAC). D) the FBI's most wanted list.
C) a list compiled by the Office of Foreign Assets Control (OFAC). All financial institutions are required by federal law to maintain a customer identification program and check the identifying information against a list maintained by the OFAC for suspected terrorists or terrorist organizations. LO 1.d
All of the following are the advantages of a margin account except A) less cash is needed. B) money is borrowed. C) losses are minimized. D) leveraging is possible.
C) losses are minimized. Any losses on a margin trade are magnified because of the leverage. LO 1.a
What type of account allows for the irrevocable transfer of almost any kind of asset, including works of art and real estate, for the benefit of a minor? A) Tenants in common B) UGMA C) UTMA D) Coverdell ESA
C) UTMA UTMA expanded the types of property that are transferable into a custodial account. One of the main differences between an UTMA and UGMA is the types of assets they can hold. Assets within an UGMA are limited to cash (bank deposits), stocks, bonds, mutual funds, and other securities and insurance policies. UTMAs allow almost any kind of asset, including works of art and real estate. As with other assets, the title is registered in the name of a custodian for the benefit of the minor. Although there are a few states that allow the custodial property to remain in an UTMA account until the minor reaches age 25, more than half of the states set the age of majority for UTMA at 21 instead of 18. LO 1.b
Which of the following permits the highest annual contributions? A) A traditional spousal IRA for which the contribution has been deducted B) A Coverdell Education Savings Account C) A traditional nondeductible IRA D) A SEP IRA
D) A SEP IRA Under most circumstances, the annual contribution to a SEP IRA will be higher than those allowed for education savings accounts or traditional or Roth IRAs. LO 1.h
Which of the following statements regarding tax-deferred, noncontributory, defined benefit plans are true? Contribution amounts are fixed. Contribution amounts vary. Benefit payments are fixed. Benefit payments vary. A) II and IV B) I and III C) I and IV D) II and III
D) II and III In an employer-sponsored defined benefit plan, the contribution amounts vary according to the assumptions used. The benefit amount, however, will be fixed per person based on a formula combining age, years of service, salary, et cetera. LO 1.h
When a customer instructs a registered representative to transfer and ship, the representative instructs the margin department to transfer ownership into A) the brokerage firm's name and deliver the securities to the customer. B) the customer's name and deliver the securities to the customer's bank for safekeeping. C) the brokerage firm's name and deliver the securities to the brokerage firm's commercial bank for safekeeping. D) the customer's name and deliver the securities to the customer.
D) the customer's name and deliver the securities to the customer. The term transfer and ship means to transfer the securities into the name of the customer and ship (deliver) the securities to the customer. To hold in street name would require the securities to be transferred into the name of the broker-dealer and held for safekeeping. LO 1.a
Two siblings have an account with your broker-dealer registered as joint tenants with right of survivorship (JTWROS). Both live in a state that recognizes community property as an ownership designation. If one of the siblings dies, which of the following will occur? A) The entire account will be liquidated and divided in accordance with the community property laws of that state. B) The deceased sibling's interest in the account will be divided in accordance with the community property laws of that state. C) The deceased sibling's interest in the account will become the property of her estate. D) The deceased sibling's interest in the account will pass to the surviving sibling in accordance with the JTWROS account registration.
D) The deceased sibling's interest in the account will pass to the surviving sibling in accordance with the JTWROS account registration. This account, registered as JTWROS, will be handled in accordance with that account registration at the time of the death of either sibling. The deceased sibling's interest in the account will pass to the surviving sibling. Community property laws in jurisdictions presuming that type of ownership designation only applies to marital property (property acquired by the two individuals while married). Therefore, community property laws would not be applicable to siblings. LO 1.b
Responding to the student loan crisis, the SECURE Act now permits qualified withdrawals from Section 529 plans to include payments of A) student loan interest up to a lifetime maximum of $10,000 per child. B) student loan interest up to a maximum of $10,000 per family. C) student loan principal up to an annual maximum of $10,000 per child. D) student loan interest up to a maximum of $10,000 per year.
A) student loan interest up to a lifetime maximum of $10,000 per child. The lifetime limit is $10,000 of interest or principal per child. If the child who is the beneficiary of the plan does not use all the money by graduation, the remaining funds can be used to pay the interest or principal (subject to the standard limits) for other siblings. LO 1.g
A customer opens an account, and payment and delivery instructions are established. Beyond the opening of the account, these instructions may A) be changed for individual transactions, or going forward, for all transactions. B) be changed for individual transactions only. C) be changed at any time for all transactions going forward. D) not be changed unless a new account is established.
A) be changed for individual transactions, or going forward, for all transactions. Once payment and delivery instructions are established at the time the account is opened, they can be changed for any individual transaction or for all transactions going forward. LO 1.a
Which of the following businesses must have more than one owner? A) An LLC B) An S corporation C) A partnership D) A C corporation
C) A partnership If you think about it, how could you have partners with less than one person? Although the other business forms usually have more than one owner, it is legally possible, for them to have a single owner. LO 1.c
Which of the following is required to sign a new account form for a cash account? A) The registered representative B) The spouse of the customer C) The customer D) The principal
D) The principal To open a cash account, only the signature of the principal accepting the account is required. For margin accounts, the signature of the customer is required on the margin agreement. The signature of the spouse is required only for a joint account. LO 1.d
If earnings decline significantly, which of the following employer-sponsored qualified retirement plans can reduce or even eliminate its contribution for the year? A) Profit-sharing plan B) 401(k) plan C) Defined contribution plan D) Defined benefit plan
A) Profit-sharing plan A special feature of the profit-sharing plan is that employer contributions may be reduced or skipped when earnings fall. In each of the others, contributions must be made at the stated or, in the case of the defined benefit plan, the actuarially computed amount. LO 1.h
Under the Uniform Transfer to Minors Act (UTMA), how can stock subscription rights be handled in a custodial account? A) The custodian can exercise or sell the rights as he deems prudent. B) The custodian can exercise, sell, or allow the rights to expire as he deems prudent. C) The rights can be exercised or sold only if the custodian is also the donor. D) The custodian cannot exercise rights; they can only be sold.
A) The custodian can exercise or sell the rights as he deems prudent. One thing that is never considered prudent is to let the rights expire. Even if the custodian does not believe adding more of the stock to the account is proper, there is a value to the rights, and the best interest of the minor is served by turning those rights into cash. Custodians in these accounts are able to sell or exercise the right, regardless of any relationship existing between them and the donor. LO 1.b
Which of the following accounts are billed a single fee annually for a group of services? A) Wrap account B) Margin account C) Option account D) Cash account
A) Wrap account Wrap accounts are accounts for which firms registered as both broker-dealers and investment advisers provide a group of services, such as asset allocation, portfolio management, executions, and administration, for a single fee. Wrap accounts are generally investment advisory accounts. LO 1.a
A customer wants to open a new cash account and give her sibling trading authorization. The required documents to accommodate her request would be A) a new account form and a limited power of attorney. B) a margin agreement and a limited power of attorney. C) a new account form and a loan consent agreement. D) a margin agreement and a loan consent form.
A) a new account form and a limited power of attorney. When a customer wants to give trading authorization or discretionary privileges to a third party in a cash account, a member firm requires a new account form (as with all new accounts) and a limited power of attorney. A limited power of attorney gives the third party trading authority but prohibits that party from withdrawing assets (cash or securities) from the account. LO 1.d
Many parents find that opening an UTMA account for their child is not only a good way to accumulate funds for the future but also a good way for the child to gain an appreciation for investing. The account custodian may use principal as well as income generated in the account to pay for all of the following for the child except A) new clothes. B) summer camp. C) the latest model smartphone. D) private school.
A) new clothes. The Uniform Transfer to Minors Act permits the custodian to use the funds for almost anything that is a benefit to the minor. The primary exceptions are those that most states consider to be the parental obligations of food, clothing, and shelter. LO 1.b
A distribution was made from a Coverdell Education Savings Account for $12,000 when the educational expenses were only $10,000. The amount distributed beyond the educational expenses will be A) taxable to the beneficiary on any portion of the excess representing earnings. B) taxable to the donor on any portion of the excess representing earnings. C) completely taxable to the donor. D) a tax-free distribution.
A) taxable to the beneficiary on any portion of the excess representing earnings. If a distribution exceeds education expenses, a portion representing earnings will be taxable to the beneficiary and may be subject to an additional 10% penalty tax. LO 1.g
A married couple are both employed by firms that cover them under the company pension plans, and each earns approximately $300,000 annually. If they both open a traditional IRA and make the maximum contribution, how much of their contribution could they deduct? A) They are ineligible to deduct any contribution made. B) Neither is eligible to make a contribution in any amount (deductible or not). C) Both may deduct the entire contribution. D) Only one spouse is eligible to deduct their entire contribution.
A) They are ineligible to deduct any contribution made. It is important to recognize that FINRA does not expect you to know the income level at which deductible contributions for those covered under employer-sponsored plans begins to phase out. The question uses numbers that are so much higher than current law just to remind you that such a regulation exists. While each are eligible to make the maximum contribution, at this income level, neither spouse—both of whom are covered under employer-sponsored plans—would be eligible to deduct their contributions to their respective IRAs. LO 1.g
When a broker-dealer sends a communication to its customers that the sweep account used for customer credit balances will be changed from one money market fund to a different one, the communication must include A) a tabular comparison of the nature and amount of the fees charged by each fund. B) a detailed explanation of the reason for the change. C) a statement that the change will not take place until at least 45 days after the communication was sent. D) a description of the objectives of the new fund and its prospectus.
A) a tabular comparison of the nature and amount of the fees charged by each fund. The only one of these meeting FINRA's requirement when a negative response letter is sent is the tabular comparison. While a description of the new fund and its prospectus is required, the communication must also include a comparison of the objectives of the two funds. The minimum time is 30 days (not 45) and there is no requirement to include an explanation. LO 1.e
A registered representative is explaining the characteristics of a Coverdell Education Savings Account (ESA) to a customer. Which of the following statements regarding this type of savings account is correct? I. Contributions are tax deductible. II. Contributions are not tax deductible. III. When used for qualified educational expenses, withdrawals are taxable. IV. When used for qualified educational expenses, withdrawals are not taxable. A) II and III B) II and IV C) I and IV D) I and III
B) II and IV Contributions to a Coverdell ESA are made with after-tax dollars. Distributions used for qualified educational expenses are tax free. LO 1.g
Buying municipal bonds would normally not be considered suitable for A) a corporation's investment account. B) a defined benefit plan portfolio. C) an individual investor. D) a mutual fund portfolio.
B) a defined benefit plan portfolio. A defined benefit plan is a form of qualified tax-deferred corporate pension plan. Tax-free municipal bonds would never be considered suitable for a tax-deferred account on the exam. An individual investor, a mutual fund portfolio, and a corporate investment account could benefit from receiving tax-free municipal bond interest. LO 1.h
One of your customers is a self-employed insurance agent specializing in long-term care insurance. She employs her eight-year-old daughter to perform certain clerical duties, such as filing and mailing. The daughter's hourly wage is competitive with industry standards. Your customer asks about her daughter's eligibility for a Roth IRA. The proper response is A) the daughter can open the account only if her parents' income does not exceed the Roth limit. B) because the daughter has earned income, she may contribute up to 100% of that or the current limit. C) no child under the age of majority may open any IRA. D) as a self-employed person, the mother would have to open a Keogh plan and then cover her daughter.
B) because the daughter has earned income, she may contribute up to 100% of that or the current limit. Any natural person, of any age, can open a Roth IRA as long as they meet two requirements. The first, as with any IRA, is that the person must have earned income. The second is that the income must not exceed certain limits. The daughter's hourly wage is evidence of meeting the earned income requirement. We do not know the amount of the wage, but it is highly unlikely that a competitive wage for a clerical worker, regardless of age, is going to exceed the Roth limits. This is an example of the test-taking tip of not reading anything into a question to make it more complex. LO 1.g
A margin account may not be used A) when opening a fee-based account. B) for retirement accounts. C) to purchase corporate bonds. D) to purchase listed stocks.
B) for retirement accounts. Investors cannot open a margin account for retirement plans. There are other restrictions on margin accounts, including accounts for minors. Listed and many OTC stocks and corporate bonds can be purchased on margin. LO 1.a
On March 1, an individual, age 40, wants to open and fund a Roth IRA at the maximum permitted level. She earns less than the adjusted gross income level that would limit her contribution. What is the maximum amount that she may place in a new Roth IRA? A) $6,000 B) $7,000 C) $12,000 D) $14,000
C) $12,000 Based on her age (less than 50), her maximum contribution would be $12,000, specified as $6,000 for two separate years of contributions. Because she is opening the account on March 1, she would be permitted to make contributions for the prior tax year (up until the April 15 tax filing deadline), as well as for the current tax year. LO 1.g
Which of the following would be considered an inappropriate investment for your client's traditional IRA? A) A taxable municipal bond B) A mutual fund whose portfolio consists solely of shares of over-the-counter stocks C) A unit investment trust whose portfolio consists solely of tax-free municipal bonds D) A valuable collection of rare postage stamps
C) A unit investment trust whose portfolio consists solely of tax-free municipal bonds Tax-free bonds, whether purchased individually or through a mutual fund or UIT, are considered inappropriate investments because the tax-free benefit is lost. On the other hand, taxable municipal bonds benefit from the tax deferral offered in an IRA. What about the stamp collection? That is an ineligible investment, not merely inappropriate. LO 1.g
Which of the following types of retirement plans would be most beneficial to a young employee of a corporation? A) Keogh plan B) Profit-sharing plan C) Defined contribution pension plan D) Defined benefit pension plan
C) Defined contribution pension plan The most beneficial corporate pension plan for a younger employee would be the defined contribution plan. The employee has many years in the workforce, so the investments made with the defined contributions will have a maximum amount of time to grow. LO 1.h
An agent may open a joint account for which of the following? I. Lee and his 13-year-old son, Tom II. Mary and Kelley, two adult college roommates III. Jerry and Mark, friends and partners in business for more than 20 years IV. Melinda and her minor nephew, John, for whom she is guardian A) II and IV B) I and IV C) II and III D) I and III
C) II and III Joint account owners share ownership of the account and must be adults. A minor may not legally exercise control over an account and may not be an owner of record of an account. LO 1.b
Which of the following would not be eligible for a tax-sheltered 403(b) annuity? A) Professor at a land grant college B) Employee of a county high school C) Student at a private college D) Custodian at a municipal public school
C) Student at a private college All of the individuals listed meet the requirement of being a school system employee except for the student, who is a client—rather than an employee—of the school system. LO 1.h
Many businesses open brokerage accounts to invest surplus funds. For which of the following business forms would suitability information on the owners not be required? A) An LLC B) An S corporation C) A C corporation D) A sole proprietorship
C) A C corporation A C corporation is the only business form where the tax and other consequences of the account do not accrue to the individual owners. Can you imagine a well-known publicly traded corporation with several million shareholders opening an account where the registered representative would have to obtain suitability information on all of them? Even when it is a small business, because the C corporation is its own taxable entity, the suitability requirements are not as critical as with the pass-through businesses (partnerships, LLCs, and S corporations). Of course, the sole proprietorship is the individual, so that is where the suitability is focused. LO 1.c
Which of the following accounts allow ownership of real estate? A) A margin account B) An UGMA account C) An UTMA account D) A cash account
C) An UTMA account One of the primary differences between UTMA and UGMA is the investment flexibility. Real property can be transferred into an UTMA, while no such provision exists with UGMA. Brokerage accounts, cash or margin, are used to trade securities. Real estate is not a security (REITs and RELPs are, but that is not direct ownership of the real estate). There is nothing to stop an investor from depositing fully paid-for marginable securities into a margin account and using the margin loan to purchase real estate. However, that purchase is done outside of the margin account. LO 1.b
A new account is opened at your firm and you notice that there is a trusted contact person form attached to the documentation. You could safely surmise that this is an account for A) a corporation. B) a minor. C) a specified adult. D) a trust.
C) a specified adult. Per FINRA Rule 2165, a specified adult "is a natural person age 65 or older or a natural person age 18 or older who the member reasonably believes has a mental or physical impairment that makes the individual unable to protect his own interests." FINRA requires members to make reasonable efforts to obtain the name of and contact information for a trusted contact person. This person must be someone age 18 or older who may be contacted about the customer's account. The rules do not require a customer to provide trusted contact information, only that the firm make the effort. LO 1.d
Which of the following individuals would not be permitted to contribute to an IRA? A) An individual divorced on December 26, 2018,whose sole income is alimony and child support from a former spouse B) A self-employed attorney who already has a Keogh plan established C) A corporate officer who is covered by a company-sponsored 401(k) plan D) An individual with current income consisting of dividends and capital gains only
D) An individual with current income consisting of dividends and capital gains only An IRA contribution may be made only from earned income. While dividends and interest are investment income, alimony received as part of a divorce settlement entered into prior to January 1, 2019, is considered compensation for IRA purposes. Individuals may contribute to an IRA even if they are already covered by a corporate pension plan or Keogh plan. Although a contribution can be made, it may or may not be deductible, depending on the individual's income. LO 1.g
Which of the following statements regarding both traditional and Roth IRAs is true? A) Distributions must begin in the year after the owner reaches age 72. B) Contributions are tax deductible. C) Withdrawals at retirement are tax free. D) Contribution limits are the same.
D) Contribution limits are the same. The common factor for both traditional and Roth IRAs is that contribution limits are identical. A significant difference between the two is that Roth IRAs do not have RMDs. LO 1.g
An employer-sponsored retirement plan that pays a specific benefit to participants at their normal retirement age is A) a defined contribution plan. B) a supplemental employee retirement plan. C) a Section 401(k) plan. D) a defined benefit plan.
D) a defined benefit plan. A traditional defined benefit plan promises to pay a specific benefit to a participant at his normal retirement age, as specified by the plan document. LO 1.h
An incorporated business model that allows flow-through of business income and losses directly to shareholders in order to avoid double taxation is A) a limited partnership. B) a C corporation. C) a general partnership. D) an S corporation.
D) an S corporation. The S corporation, the general partnership, and the limited partnership are business models where all income or loss flows through to the owners. This avoids the double taxation on the business level and owner level, as is the case with the C corporation. With C corporations, corporate earnings taxed once at the business level and again when they are paid out to shareholders as dividends. Because the question is asking about the incorporated business model, the correct choice is the S corporation. LO 1.c
When opening a new retail account or updating account information for a specified adult, FINRA Rule 2165 urges member firms to obtain the name and contact information of a "trusted contact person." If the client supplies that information, the person A) has authority to request duplicate confirmations and account statements from the client's account. B) has authority to withdraw funds or securities from the client's account. C) has authority to submit buy and sell orders for the client's account. D) may help the member firm respond to possible financial exploitation or fraud in the client's account.
D) may help the member firm respond to possible financial exploitation or fraud in the client's account. The primary reason behind Rule 2165 is to try to prevent senior exploitation. By obtaining the name and contact information of a trusted contact person (who must be at least 18 years of age), the firm has someone to reach out to when red flags appear. It is important to understand that the naming of this person does not convey any rights over the account. This is not a power of attorney. LO 1.d
If a person wishes to enter orders in his spouse's account, he A) is free to do so. B) needs verbal permission from his spouse. C) could never be permitted to do so, as there is no provision that would allow for it to occur. D) needs written permission from his spouse through a power of attorney.
D) needs written permission from his spouse through a power of attorney. The only persons permitted to enter orders in an account are the account owners. For a person to enter orders in his spouse's account, the spouse whose name is on the account must sign a power of attorney. LO 1.d
When opening a new account for an individual investor, FINRA asks its member to make a reasonable effort to obtain certain information about the account. Included information would be all of the following except A) the occupation of the customer and name and address of the employer. B) whether the customer is an associated person of another member. C) the customer's tax identification or Social Security number. D) the name(s) of the customer's dependents.
D) the name(s) of the customer's dependents. Nowhere in the FINRA rules on account opening does it require or suggest obtaining personal information about family members. That information becomes important when we look at the suitability rules. Please note that the tax ID or Social Security number is required under the customer identification program (CIP), but not FINRA rules. LO 1.d
All of the following statements regarding a Coverdell Education Savings Account (ESA) are true except A) the maximum annual contribution is $2,000 per beneficiary. B) a beneficiary's unused balance may be rolled over to an ESA account for another child. C) the beneficiary may be the contributor's child or grandchild, or child of a friend of the contributor. D) unused balances may be used for any purpose the beneficiary chooses.
D) unused balances may be used for any purpose the beneficiary chooses. The maximum contribution permitted for any beneficiary is $2,000 per year. The beneficiary need not be related to the contributor(s). ESA accounts may be rolled over to change investment vehicles or to change beneficiaries. Account balances may be used for education only. LO 1.g
While interviewing a person to fill out the new account form, a registered representative asks the potential new client a number of questions. Information regarding which of the following would not be required on the form? A) Physical address B) Social Security number or tax ID number C) Name D) Educational background
D) Educational background When opening a new account, the registered representative must obtain the name, date of birth, physical address, and Social Security number. Information such as educational background may be inquired about and useful to know, but is not required to open the account. LO 1.d
Which of the following regarding a Roth IRA are true? I. The contributions are nondeductible. II. Contributions must cease at age 72. III. Withdrawals must begin at age 72. IV. Withdrawals after age 59½ can be tax free. A) II and III B) I and III C) II and IV D) I and IV
D) I and IV With a Roth IRA, the contributions are not deductible from current income. Withdrawals after age 59½ are tax free, provided the account has been open for at least five years. There is no age at which withdrawals must begin or contributions must cease. LO 1.g
An employee of a FINRA member firm wishes to open an account at another member firm. The employee opening the account must A) make written notification to the SEC before the account can be opened. B) obtain prior written consent from FINRA before opening the account. C) notify FINRA, in writing, of the intent to open the account. D) receive prior written consent from his employer.
D) receive prior written consent from his employer. Persons associated with one FINRA member firm may open securities accounts at other member firms, as long as prior written notice was made to, and prior written consent was received from, the employing broker-dealer before the account is opened. Neither notification nor consent is required from FINRA or the SEC. LO 1.d
