Unit 5 Quiz

If a customer wishes to open a cash account, who must sign the new account form? A) Only the principal B) The customer, the registered representative, and the principal C) Only the customer D) Only the registered representative

A) Only the principal

Under the provisions of an UGMA account, which of the following occurs when the minor reaches the age of majority? A) The account must be turned over to the donee. B) Any securities in the account must be converted to cash. C) The account remains as an UGMA account. D) The account must be turned over to the donor. .

A) The account must be turned over to the donee.

Several years after opening a brokerage account at a FINRA member firm, an individual joins another FINRA member as a research analyst. Regarding his responsibilities, which of the following is TRUE? A) The individual must notify both members of his relationship with the other. B) No notification is required, as the account was opened before his association with a member firm. C) The individual need notify only the employing member of the account. D) The individual need notify only the member carrying the account of his association with another member.

A) The individual must notify both members of his relationship with the other.

If three individuals have a tenants in common account with your firm, and one individual dies, which of the following statements is TRUE? A) Two survivors continue as co-tenants with the decedent's estate. B) The account is converted to joint tenants with rights of survivorship (JTWROS). C) The account must be liquidated and the proceeds split evenly among the two survivors and the decedent's estate. D) Trading is discontinued until the executor names a replacement for the deceased.

A) Two survivors continue as co-tenants with the decedent's estate.

A fiduciary acting under the prudent investor rule should recognize that one of the following transactions would not be acceptable or meet the standards of the rule. Which is it? A) Writing uncovered calls B) Purchasing BBB-rated debentures C) Buying sector funds D) Purchasing shares of a tech sector mutual fund

A) Writing uncovered calls

An arrangement in which the broker has the authority, or power-of-attorney, to make trades from funds in the account without prior approval from the investor is known as: A) a discretionary account. B) a nonapproval account. C) a power-of-attorney account. D) a stop loss account.

A) a discretionary account.

When a customer of a broker/dealer dies, all of the following documents may be required to release the decedent's assets EXCEPT: A) a power of attorney. B) a certified copy of the death certificate. C) an inheritance tax waiver. D) an affidavit of domicile.

A) a power of attorney.

An agent is permitted to open all of the following customer accounts EXCEPT: A) an account in the name of Mrs. Jones opened by Mr. Jones. B) a corporate account opened by the designated officer. C) a minor's account opened by a custodian. D) a partnership account opened by the designated partner.

A) an account in the name of Mrs. Jones opened by Mr. Jones.

A customer wishes to open a new account but refuses to provide suitability information. Under FINRA rules, the member A) may open the account but may not make any recommendations. B) may open the account but must limit recommendations to U.S. government securities. C) may open the account but must limit recommendations to investment-grade securities. D) must not open the account.

A) may open the account but may not make any recommendations.

Who is responsible for the taxes in an UTMA account? A) Custodian. B) Child. C) Donor. D) Parent.

B) Child.

Which of the following is NOT true in jurisdictions that recognize the marital property designation known as community property? A) There may be tax implications regarding the dissolution of community property at the time of a divorce, marriage annulment, or death. B) Community property applies to property owned individually before a marriage once the marriage has occurred. C) Community property laws do not apply to inheritances. D) Community property laws do not apply to gifts.

B) Community property applies to property owned individually before a marriage once the marriage has occurred.

Whose Social Security number is required to open a custodial account? A) Custodian's. B) Minor's. C) Parent's or guardian's. D) Custodian, parent or guardian and minor.

B) Minor's.

You have decided to open an UTMA account for your 10-year-old son. As you are completing the application to open the account, you are asked for a Social Security number. Whose Social Security number will be used to open the account? A) The custodian's. B) The beneficial minor's. C) The donor's. D) The parents' Social Security number.

B) The beneficial minor's.

Which of the following documents must an existing customer sign to establish a discretionary account? A) Options agreement. B) Trading authorization. C) New account application. D) Customer's agreement.

B) Trading authorization.

Under the Uniform Gift to Minors Act (UGMA), the custodian must be: A) court appointed. B) an adult. C) a member of the minor's family. D) bonded.

B) an adult.

In a discretionary account where the investment objective is preservation of capital and growth, all of the following practices are unsuitable EXCEPT: A) frequent and profitable short-term trading in volatile stocks. B) maintaining a fixed asset allocation mix which includes under-performing sectors. C) marking order tickets solicited or unsolicited when discretion is used. D) marking the investment objective on the new account form as high risk.

B) maintaining a fixed asset allocation mix which includes under-performing sectors.

Under the Uniform Transfer to Minors Act, all of the following statements are true EXCEPT: A) only an adult may make a gift to a minor in a custodial account. B) the maximum amount of money an adult may give to a minor in any one year is an amount indexed for inflation. C) an UTMA account may have only one custodian for only one minor. D) once a gift is given to a minor, it may not be reclaimed.

B) the maximum amount of money an adult may give to a minor in any one year is an amount indexed for inflation.

Which of the following verbal orders can be accepted from a customer without additional documentation? A) Increase my position in ABC. B) Buy 200 shares of computer stock. C) Buy 100 shares of ABC when the price is right. D) Buy $20,000 of quality bank stocks.

C) Buy 100 shares of ABC when the price is right.

Which of the following occurs in a partnership account if one partner dies? A) The surviving partners are considered joint tenants. B) The surviving partners are considered joint tenants and receive the deceased partner's share. C) The account is frozen until a new or amended partnership agreement is received. D) The surviving partners receive the deceased partner's share.

C) The account is frozen until a new or amended partnership agreement is received.

Which of the following is the beneficial owner of securities in an UTMA account? A) The guardian. B) The donor. C) The minor. D) The custodian.

C) The minor.

A broker/dealer has set up a prime brokerage account for one of its customers. This customer is most likely A) an individual retail customer B) an investment club C) an institutional customer D) 2 spouses, each having individual accounts and a joint account together

C) an institutional customer

An employee of a FINRA member firm wishes to open an account at another member firm. The employee opening the account must A) notify FINRA of the account B) obtain permission from FINRA to open the account C) give prior written notice to the employing broker/dealer before the account can be opened D) notify the SEC

C) give prior written notice to the employing broker/dealer before the account can be opened

All of the following are fiduciary accounts EXCEPT: A) trust accounts. B) guardian accounts. C) transfer on death (TOD) accounts. D) estate accounts.

C) transfer on death (TOD) accounts.

If a municipal dealer maintains an account for the employee of another municipal dealer and the employing dealer has not sent any written instructions, which of the following documents must be sent to the employing dealer? A) Written notice of a security recommended for account purchase. B) Form RE-3. C) Monthly statement of all transactions in the account. D) Duplicate confirmations of all securities purchased for the account.

D) Duplicate confirmations of all securities purchased for the account.

If a customer who has granted a durable power of attorney to her son dies, which of the following statements regarding the power of attorney is TRUE? A) It remains in effect only if the son is the sole heir to the estate. B) It remains in effect until the son cancels it. C) It remains in effect until the executor of the estate cancels it. D) It is canceled on the death of either principal.

D) It is canceled on the death of either principal.

All of the following are fiduciary accounts EXCEPT: A) trust accounts. B) guardian accounts. C) estate accounts. D) TOD accounts.

D) TOD accounts.

How must stock subscription rights be handled in a custodial account for a minor? A) The custodian cannot exercise or sell rights for the custodial account. B) The rights may be exercised or sold only if the donor is also the custodian. C) The rights may be exercised or sold only if the stock is held in street name. D) The custodian can exercise or sell rights as he deems prudent.

D) The custodian can exercise or sell rights as he deems prudent.

Two siblings have an account with your broker/dealer registered as joint tenants with rights of survivorship. 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 deceased sibling's interest in the account will be divided in accordance with the community property laws of that state. B) The entire account will be liquidated and 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 joint tenants with rights of survivorship account registration.

D) The deceased sibling's interest in the account will pass to the surviving sibling in accordance with the joint tenants with rights of survivorship account registration.

A gift given to a minor under UTMA may be revoked under which of the following circumstances? A) If the minor dies before reaching the age of majority. B) At any time before the minor reaches the age of majority. C) If the custodian dies before the minor reaches the age of majority. D) Under no circumstances.

D) Under no circumstances.

A person wishing to grant a registered representative the right to make investment decisions for his account does so by: A) providing a letter from an attorney. B) calling the representative each time he wants to place an order. C) providing a full power of attorney to someone other than the registered representative who will then instruct the representative as to investment decisions. D) providing a limited power of attorney giving discretionary powers.

D) providing a limited power of attorney giving discretionary powers.

According to the U.S.A PATRIOT Act, account identification and verification procedures should be applied to which of the following? I. New individual accounts. II. New business accounts. III. Existing individual accounts. IV. Existing business accounts.

I and II

Which of the following statements regarding a death in a tenants in common account are TRUE? I. The decedent's interest in the account goes to his estate. II. The decedent's interest in the account goes to the remaining tenant. III. The member firm must freeze both the account and acceptance of orders until the required documents are presented. IV. The member may immediately accept orders from the remaining tenant.

I and III

Which of the following statements regarding joint accounts/tenants in common are TRUE? I. Each party specifies a percentage of interest in the account. II. Each party has an equal interest in the account. III. The interest of a deceased tenant passes to the estate of the decedent. IV. The interest of a deceased tenant passes to the co-tenant.

I and III

Your broker/dealer acts as a prime broker for ABC fund. In this arrangement, your broker/dealer is likely to be providing which of the following services? I. Execution of all transactions for the fund portfolio II. Clearing services III. Lending for trades done on margin IV. Ensuring that all exchange-trading rules are complied by

II and III

According to FINRA rules, duplicate confirmations of transactions must be sent to an account owner's employer if requested to do so by the employer, whenever establishing a margin account for I. a bank officer II. an employee of another broker/dealer III. an independent insurance agent IV. an officer of another broker/dealer

II and IV

A power of attorney is not required for a registered representative to choose which of the following order instructions? I. Security to be bought or sold II. Number of shares to be bought or sold III. Time of execution IV. Price of execution.

III and IV

If a registered representative of a FINRA member firm wants to open an account with another member firm, which of the following statements are TRUE? I. The account may only be opened if the registered representative (RR) is also a principal of his employing BD. II. The account may be opened, but the registered representative may not engage in securities transactions that he could do through his own firm. III. The member firm opening the account must send duplicate confirmations to the employing member firm if the employing member firm has requested them to do so. IV. The employing broker/dealer must receive prior written notice in order for the account to be opened but need not grant prior approval.

III and IV

Which of the following are considered joint accounts? I. UTMA account. II. Guardianship account. III. Tenants in common. IV. Tenants with right of survivorship.

III and IV

A client of your member firm dies. In correct order, you should I. freeze the account. II. accept orders from the executor. III. obtain the death certificate and other legal documents. IV. cancel all open orders.

IV, I, III, II

Which of the following individuals could open an account at another member firm without his employer's knowledge? I. A registered representative of a member. II. A government security trader employed by a member. III. A purchases and sales clerk of a member. IV. An insurance agent who sells variable annuities.

None of these