11

Three people are listed as owners of a brokerage account that is titled JTWROS. If one of the three dies and the account is then liquidated, how much will be distributed to each of the survivors?

1/2 of total If two people own a JTWROS account and one dies, the survivor inherits 100% of the account. If three people own a JTWROS account and one dies, the survivors will each retain a 50% stake in the account.

minimum maintenance requirement for a short margin account

30%. The requirement is 25% for a long account.

A customer wants to open a new margin account and purchase $80,000 worth of stocks. Assuming all stocks are marginable, the required cash deposit will be

40K On an opening purchase in a margin account, the required deposit is the greater of $2,000 or 50% of the purchase price. In this case, it is 50% of $80,000.

What is the maximum amount of stocks a customer can buy when opening a new margin account with a cash deposit of $25,000?

50k A customer can buy double the amount of cash deposited to open the account (with a minimum deposit of $2,000). In other words, cash must be worth at least 50% of the securities purchase price.

A customer does not meet the Reg T call in a cash account. The broker-dealer has sold out securities in the account, and must freeze the account for

90 days

In a cash account, if a customer has not met a Reg T call for $1,000, the broker-dealer

A payment shortage of $1,000 or less may be disregarded at the discretion of the broker-dealer.

An investor has $200,000 of cash in a brokerage account with a broker-dealer that goes bankrupt and SIPC reimburses all of it. What is the maximum additional value of lost securities for which SIPC will reimburse the same investor in his account with the same broker-dealer?

After replacing securities, SIPC covers any remaining claims up to a maximum of $500,000, including not more than $250,000 in cash. If SIPC covers $200,000 in cash it then can cover up to $300,000 per investor in lost securities up to the $500,000 total limit.

full responsibility for protecting customer private information held by the broker-dealer

All employees of the firm are equally responsible

A customer who has an individual IRA account calls his broker-dealer to request that the account statements be held by the firm while the family is vacationing in Europe. The firm will take which two of the following actions?

Ask the customer to put request in writing Hold the mail for a maximum of three months

Funding for the Securities Investor Protection Corp. (SIPC) comes mostly from what source?

Assessments against broker-dealers' gross revenues from their securities business

FDIC insurance covers losses in each of the following types of products

CDs Checking accounts Interest-bearing savings accounts NOT money market mutual funds

CUSIP

Committee on Uniform Security Identification Procedures, a convention created in 1964. A nine-digit code identifies all North American securities for clearing and settlement purposes. name of the unique identification number assigned to identify each security

Margin Agreement

Credit Agreement Hypothecation Agreement Loan consent form NOT Truth in Lending

How often should a client notify his representative of any changes to his account information?

Customers are asked to report any changes to account information immediately. When a change is reported, the broker-dealer must send verification of the new information within 30 days.

A customer wishes to open a margin account and purchase 300 shares of XYZ stock, which is trading at $30 per share. The customer must deposit

For the first purchase in a long margin account, the customer must pay $2,000 or meet the Reg T requirement, whichever is greater. The total purchase amount is $9,000 (300 shares at $30/share). The Reg T requirement is 50% of $9,000, or $4,500.

A broker-dealer has frozen a cash account because the customer has not paid for a securities purchase. When must the broker-dealer sell out the securities?

If no extension is received, the position must be sold out on the morning of the fifth business day after the trade was made, and the account must be frozen for 90 days.

What usually is SIPC's first priority for protecting investors in the event of a brokerage firm's failure?

Locate and replace lost securities

confirmation of purchase of equity securities be sent to the customer?

No later than the date of settlement

collateral in a margin account

Securities held in the account serve as the collateral.

The initial privacy notice that is provided to a new customer must include

The type of private information that will be collected How information that is collected is safeguarded from breaches How confidential customer information will be used by the firm NOT The location of backup customer files and the name of the company responsible for providing the service

corporation indicate who is authorized to trade for a corporate brokerage account

Through a resolution of the board of directors

why a broker-dealer may impose a 10- business day hold on disbursements from a customer's account?

To investigate potential financial exploitation of a specified adult, the firm may place an initial 15-business day hold on disbursements, followed by an additional 10-business day hold as it deems necessary.

Federal Deposit Insurance Corporation (FDIC)

U.S. Government corporation that insures the deposit accounts of member banks, up to limits. The FDIC increases confidence in the banking system by putting a U.S. Government guarantee behind all insured deposit accounts, including CDs, up to limits prescribed by law.

UGMA account

UGMA or UTMA custodial account does not require parental approval. In UGMA or UTMA accounts there must be one adult custodian and one minor only, and the account must be registered under the Social Security number of the minor.

corporate resolution.

When a corporate account is opened, a copy of the corporate resolution is required to identify the person(s) authorized to trade on the corporation's behalf.

Customer background and financial information must be sent to an options customer for verification

Within 15 days after the customer account has been approved for options trading

broker-dealer that fills a customer purchase order from its inventory

acted as principal in the transaction and must disclose the markup that was charged.

Interest charges in a margin account

based on the broker call rate, which is assessed by individual banks.

Claims for SIPC coverage

based on the market value of the eligible securities held with the firm as of the date of the bankruptcy court filing.

debit balance.

broker-dealer acts as lender, charging a competitive rate of interest on the amount borrowed - the "debit balance."

re-hypothecate margined securities

broker-dealer is re-pledging the customer's securities as collateral for the broker-dealer's own borrowing. The broker-dealer can then re-loan those funds to customers for making purchases on margin.

customer has purchased securities in a cash account and does not pay for them on time,

broker-dealer may either ask the SRO for an extension for additional time on behalf of the customer, or sell the securities out and freeze the account for 90 days.

revocable trust

can be altered or modified as the trustor wishes. Beneficiary consent not required in this instance.

Reg T req

can be changed by Fed Board payment within 4 business days of trade

Corporate account

can run a debit balance.

drawback of using a UGMA or UTMA account to plan for college expenses

child gains access and control over all UGMA or UTMA assets at majority age and can use them for any purpose he/she chooses, whether or not they are college-related.

NOT specify a beneficiary

corporation have unlmtd life

Gramm Leach Bliley

customer may opt out of sharing information with nonaffiliated third parties of the broker-dealer.

margin accounts

customers borrow cash or securities from their broker-dealers. All loans are secured by securities held in the customer's own margin account. broker-dealers engage in the lending business and earn interest on loans of cash or securities to their customers?

municipal securities representative's suitability obligation

does not apply if the customer initiates a trade without a recommendation. In this situation, the best course of action is to follow the customer's instructions, making sure to mark the order ticket unsolicited.

bond trades with a dollar price, the confirmation must include

dollar price and the yield to worst, which is the lower of the yield to call or yield to maturity.

For existing customer accounts, how often do broker-dealers required to send a written notice to the customer for verification of account information?

every 3 years.

customer confirmation

firm is required to include its capacity in the transaction on a customer confirmation. If the firm acted as agent, it is compensated by a commission that must be disclosed. If it acted as principal, the mark up or mark down must be disclosed.

inactive accounts,

firms must send statements to customers on a quarterly basis.

Investment Club

formed by a group of people who share investment ideas and pool their money to make common investments. They often are formed as partnerships. However, broker-dealers may require that they open a special investment club account.

A customer has opened a cash account and purchased 100 shares of stock. If the transaction is subject to regular way settlement, payment for the stock must be made

four business days after the trade. According to Reg T, a stock purchase settled regular way must be paid for by T+4, or 4 business days after the trade date. Regular way settlement for stocks is T+2, and payment is required two business days after settlement, T+4.

margin department

handles all credit transactions for a client

When customers sign and return an options agreement they confirm that they

have read and understand the options disclosure document.

equity trade, which of the following is not included on a customer confirmation

includes the trade date, amount and price. It does not include the customer's bid or ask price on a limit order.

A well- known individual would like to open a securities account at Broker-dealer A. Is there a way for this person to open this account but remain anonymous on the firm's records to protect their privacy?

individual may open a "numbered" account for the purpose of remaining anonymous. They would be required to provide a written statement of their identity and ownership of the account.

In a cash account, a customer purchases a security and sells the same security without first paying for the original purchase. This transaction

is a violation of Reg T and FINRA freeriding rules, and will cause the account to be frozen, and the broker-dealer will hold the sale proceeds until the original transaction has been paid for.

When completing a new account form, a customer did not provide information regarding her net worth and annual income. This account

may be opened, but no recommendation may be made. Only unsolicited orders may be accepted for this account.

joint account

may not be opened between a parent and a minor child.

Irrevocable trust

may only be altered or terminated with the consent of the trust beneficiary.

When opening a minor's account, the social security number to be used is that of the

minor

active accounts.

monthly statements

Fee-based accounts

most appropriate for customers who will be trading frequently. For customers trading less often, a commission schedule may be more suitable

Options Disclosure Document

must be delivered to each options customer (retail or institutional) at or prior to account approval. used by all firms that trade options.

customer confirmations

must be given or sent to the client at or prior to the completion of the trade (settlement).

Special Statement for Uncovered Option Writers

must be provided only to those customers who are approved for uncovered options trading.

A broker-dealer plans to discontinue mailing hard copies of annual statements and instead will distribute the statements electronically. In order to begin electronic delivery of annual statements, the broker-dealer

must confirm customer acceptance of this delivery method electronically, and continue mailing hard copy statements to those who do not wish to accept electronic delivery.

principal's approval of a new opened account

must give written approval for new accounts. By approving the account, the principal has confirmed that the account is appropriate based on the information gathered in during the account opening process. The principal who is approving the account does not confirm the accuracy of the information.

FINRA requires that all of the following are included on a customer confirmation for a purchase of debt securities

need not include the name of the registered representative. It must include detailed information about the security and potential conflicts of interest like control relationships, and it typically includes the name of the broker-dealer.

Partnership agreement

new account form and partnership agreement are required to open a partnership account. The partnership agreement identifies the persons authorized to trade on behalf of the partnership.

SIPC

non-profit corporation that is funded and supported by broker dealers. It is not a government agency, although it is subject to SEC oversight. protect investors from the financial failure or bankruptcy of broker-dealers.

customer confirmation

not required to disclose the identity of the SROs that regulate the firm. It must, however, disclose potential conflicts of interest, such as whether the firm makes market in the security, receives payment for order flow, or is in a control relationship with the issuer.

hypothecation agreement.

open margin accounts must sign a hypothecation agreement to pledge their securities as collateral for loans from the broker-dealer for margin account purchases. The broker-dealer may then rehypothecate the securities to the bank, meaning that they are pledged to the bank as collateral for loans to the broker-dealer for lending to customers.

separate risk disclosure statement is required when all of the following types of accounts are opened for non-institutional investors

options accounts, margin accounts and day trading accounts. Custodial accounts require additional documentation but not additional disclosur

A registered representative located in California makes a 7:30pm cold call to a potential customer in New Jersey. This is

prohibited because cold calls can only be made between 8am and 9pm in the potential customer's time zone.

In a short account, if the equity position in the account falls below 30%, a call for additional funds will be issued and must be satisfied

promptly

Custodian

provides the custodial services that a broker-dealer may offer.

FTC's do-not-call registry

putting his name on the do-not-call registry of the Federal Trade Commission (FTC), he legally prevents firms with which he does not have a relationship from cold-calling, for any reason. If they do call, they can be subject to fines. However, the registry does not block firms with which he already has a relationship from calling. He will have to make a do-not-call request to each of these firms also

"not held order"

registered rep is selecting;price and/or time only. The customer has provided all of the other instructions for the trade.

ules of settlement that apply to corporate securities in a cash account

regular way settlement of T + 2 and payment is required two business days later (T + 4). Failure to pay by T + 4 results in the firm selling out the customer's securities and freezing the account.

discretionary

rep to be able to select the action, asset, OR quantity, written discretion must be granted by the customer.

margin account disclosure document

required at or prior to account approval and annually thereafter. These disclosures must include the following: • You can lose more funds than you deposit in the margin account. • The firm can force the sale of securities or other assets in your account(s). • The firm can sell your securities or other assets without contacting you. • You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold to meet a margin call. • The firm can increase its "house" maintenance margin requirements at any time and is not required to provide you advance written notice. • You are not entitled to an extension of time on a margin call.

MSRB's telemarketing rule

requires the caller to disclose the reason for the call, the name of the caller and the firm with whom the caller is associated and the telephone number and the address at which the caller can be contacted. The source of the lead and contact information is not required disclosure.

marked down

stock is sold to the broker-dealer's inventory

trade confirmation

timely defense against unauthorized trading. The confirm must be delivered on at or before completion of each transaction. This gives the client a chance to cancel any scam trades before they are completed (settled). If the broker also has been scammed, the broker may not know to alert the client to the sham trade.

maximum amount of cash most broker-dealers allow customers to maintain in a cash account?

unlmtd broker-dealers pay money market interest rates on cash balances

maximum amount of cash loss that SIPC will cover

up to $250,000 for customer's cash claims

Mr. Smith and Mr. Jones have a joint business account. The address of their company has changed, and Mr. Smith phones his representative with this information. The broker-dealer must

update the permanent record with this information and send a written notice requesting verification to both of the account owners. When a change is made to joint account information, the firm must send a written request for verification to all owners, and request any changes within 30 days.

trades made in a cash account usually settle

usually settle regular way T+2 (the second day after trade day). However, most brokers require customers to pay for securities purchased prior to settlement. In cash accounts, payment must be made in full.

The mother of a ten-year-old girl is the custodian on her daughter's UGMA. The mother would be permitted to make a cash contribution as a donor to her daughter's account

with no limitations. same person may act as both the custodian and a donor in an account established under the UGMA/UTMA.