chapter 1

For what type of account does a clearing firm establish a separate account for each customer?

A fully disclosed account

What are some of the investments that are not suitable for IRA contributions

Collectibles, insurance, and metals ( except U.S. gold and silver coins.)

is an account with a TOD designation considered a joint account?

No. The account is in the name of the owner. A beneficiary would have no rights until the owner's death

is an UGMA account considered a joint account?

No. The assets are the property of the child.

A report may need to be filed with the Financial Crimes Enforcement Network (FinCEN) in which of the following circumstances?

A customer deposits cash and uses the funds to buy securities.

The maximum annual contribution a customer is permitted to make to a traditional IRA is: (old 2018 rule)

$5,500

A contribution of $ ______ may be made to a spousal IRA for a non working spouse.

$6,000

a contribution of $ ________ can be made to a spousal IRA for a non working spouse

$6,000

he maximum annual contribution a customer is permitted to make to a Roth IRA is:

$6,000

The maximum contribution to an IRA is the lesser of $ ____ or ____ % of earned income.

$6,000 or 100% of earned income

options communication must include procedures for obtaining a copy of the ______

(ODD) options Disclosure Document

annuity withdrawals pior to age 59 1/2 will be subject to a ____% IRS penalty plus ______ of earnings

-10% IRS penalty -federal taxation of earnings

to determine suitability, what information must be obtained to complete an investors profile

-age -current investments -tax rate -objectives -investment experience -time horizon -liquidity -needs -risk tolerance

in an IRA, an early withdrawal without penalty is allowed for what reasons?

-death -disability -qualified higher education expenses -first time home buyer (10,000 limit)

What are some of the possibilities for avoiding premature distribution penalties in IRAs

-death or disability of the owner -education expenses -first time home buyer -annuitization of distributions

When granting registration, FINRA considers a person's _____,_________, and _______, but not education history

-experience -knowledge -training

Normally an employee of a member firm who wishes to open an account at another member firm must notify both firms in writing prior to opening a securities account. An exception is made if the employee effects transactions only in what 3 things?

-mutual funds -unit investment trusts -variable annuities

what is some of the important information to obtain when opening a new clients account?

-name -address -age -occupation -SSN -citizenship -income -net worth -objectives -risk tolerance -investment experience

prior to age 59 1/2, penalty free withdrawals from an IRA may be taken for ________ expenses.

-qualified educational expenses

give some examples of people who act in a fiduciary capacity?

-trustee -executor -custodian -investment advisory

what is the maximum annual IRA contribution for a 58 year old whose only income is investment income?

0 since the individual has no earned income

a client had given durable power of attorney to his son. if the client dies, what authority does the son have?

None, the power of attorney is no longer valid

Premature withdrawals from a traditional IRA are subject to a penalty of:

10%

There is a ____% penalty for early withdrawals from an IRA.

10%

The maximum contribution to an IRA is ____ % of earned income up to $_______

100% up to $6,000

When a client opens a new account, a copy of the account form must be sent to her within ______ days

30

A Suspicious Activity Report (SAR) must be filed within:

30 days

customer account information must be updated every ______ months

36 months

a form ___ must be filled within ____ days of becoming a insider

3;10

a form ___ must be filed within ___ business days of the date on which an insider changes his ownership account.

4;2

A BD is exempt from penny stock disclosure rules if less than _____ % of its commissions come from such transactions

5%

what is the late withdrawal penalty?

50% of the amount that should have been taken ( an actuarial amount)

A customer has a traditional IRA. He is 75 years old, but has not withdrawn funds from the plan. What is the penalty that the individual will be subject to for not withdrawing funds from the plan?

50% penalty on the actuarial amount

when an individual reaches age ____, they may begin withdrawing from an IRA without penalty

59 1/2

when an individual reaches age _____, he may begin withdrawing from an IRA without penalty

59 1/2

What is the penalty for making excess contributions to an IRA?

6% of the excess

A rollover of qualified plan money from one account to another must be completed within _____ days of withdrawal

60

IRA rollovers must be completed within ____ days

60

The appointment of guardian/conservator and certificate of incumbency must not be older than _____ days

60

a certificate of incumbency is invalid if it is older than ____ days when initially presented.

60

how many days prior to presentation must evidence of incumbency be dated?

60 days

registered representative (RR) sells a customer two mutual funds, with the same investment objective, from two different investment companies. The RR's motivation is to receive a higher sales charge. This prohibited practice is known as:

A breakpoint sale

Which of the following descriptions BEST defines the term prime broker?

A broker-dealer that provides both trade execution and clearing services to a hedge fund

What is a wrap fee?

A comprehensive fee inclusive of administrative and management fees along with commissions

When the carrying firm receives an Automated Customer Account Transfer Service (ACATS) transfer request, it does NOT submit the:

ACATS transfer transaction report

What age must be attained for the minor to gain control over his account?

Age of majority

Which of the following choices is NOT a self-regulatory organization (SRO)?

The Securities Investor Protection Corporation (SIPC)

identify the acronym: AML

Anti-Money Laundering

Which of the following persons is considered an insider?

Any member of a reporting company's board of directors

John turns age 70 1/2 in December. when must he begin the RMD from his IRA?

April 1 of the following year

Mr. Grey just phoned to notify you that his nephew Rodney has died in an accident. Mr. Grey is custodian for the Uniform Transfers to Minors Act (UTMA) account that he set up for Rodney, to which he gifted $20,000 two years ago. Mr. Grey asks you to transfer the assets from Rodney's account to a UTMA account he has set up for his daughter Azure. Which of the following statements is TRUE about moving the assets?

Assets may be transferred from Rodney's UTMA account to an estate account opened for Rodney, once the broker-dealer receives the required documents and a letter of authorization with transfer instructions signed by the custodian

Which of the following entities may validate a stock certificate?

Both the issuer and transfer agent may validate a certificate

When must IRA withdrawals begin in order to avoid the late withdrawal penalty?

By April 1st of the year after an individual turns age 70 1/2

How soon should a firm's check register be updated after writing a check?

By the following business day

A Suspicious Activity Report (SAR) filing requirement is triggered if a client opens an account with:

Cash of $11,000 and then he attempts to discourage the brokerage firm's cashier from filing a BCTR with a $1,000 cash payment

Which of the following documents is required before opening a guardianship account?

Certificate of appointment issued by a court

From what do Self Regulatory Organisation (SROs) derive their power?

The Securities and Exchange Commission (SEC)

RR's must examine what document to open any corporate account?

Corporate Resolution

Which of the following systems is used for transferring securities to broker-dealers that are held in book-entry form at a transfer agent or custodian?

DRS or DWAC

The 5% Markup Policy applies when a member is acting as a(n):

Dealer when selling a security from inventory

The process of a customer instructing his bank to deliver cash when securities are received from the clearing firm, is referred to as:

Delivery versus Payment (DVP)

An individual has made pretax and post-tax contributions to an IRA. What are the tax consequences of withdrawals made by the participant after age 59 1/2?

Earnings and pretax contributions are taxable; the post-tax contributions are a return of capital.

All of the following information should be obtained by a registered representative when opening a new account for a customer, EXCEPT the:

Education

which federal law governs the registration of RRs and their firms?

The securities Exchange Act of 1934

An account is opened for an employee of another member firm. The employee must notify the:

Employing and executing broker-dealers

True or False : all corporate officers may effect transactions for the corporation

False, only those named in the Corporate Resolution

True or False: Money may be withdrawn from a joint account in one owners name

False. Any checks should be in both parties names

True or False: The term escheatment represents a BD cheating a customer out of her stock

False. Escheatment is the abandonment of an account

True or False: Regardless of income level, a contribution is always permitted in any type of IRA

False. High income individuals may lose the ability to contribute to Roth IRAs, but may contribute to Traditional IRAs

true or false: For an abandoned account, a customer will be able to file a claim to get his sharers back from the BD.

False. Once abandoned and the account is taken by the state, only the cash value will be returned to the customer.

True or False: for discretionary trades, principal approval is required prior to entry

False. Principal approval is typically provided by the end of the day, but not in advance

True or False: Prior to any penny stock soliciatation, a BD must provide an oral or written quote.

False. Prior to any penny stock transaction ( not solicitation), an oral or written quote must be provided.

True or False: an account with a TOD designation avoids oth estate taxes and the probate process.

False. TOD accounts avoid probate , but not estate taxes

True or False: Custodial accounts are soley carried in the name of the minor.

False. The account is in the custodian's name for the benefit of the minor.

True or false: A transfer on Death (TOD) designation creates a joint account?

False. The beneficiary has no control over the assets in the account.

True or False: Names appearing on the OFAC list are customers who had a previous business relationship with the firm.

False. The list shows the names of suspected terrorist and criminals

True or False: An investor may roll a non-qualified annuity into an IRA without being taxed.

False. Withdrawing from a non qualified annuity is taxable. A 1035 exchange does no apply to non qualified plans.

true or false: A client employing a buy-and-hold strategy is most suitable for a wrap account?

False. Wrap accounts are suitable for clients who execute several trades a week.

A firm believes that they are in possession of a check that has been altered because the routing number of the financial institution appears to be inaccurate. What should the firm do?

File a suspicious activity report (SAR)

The _________ is the SRO for the OTC market.

Financial Industry Regulatory Authority ( FINRA)

A registered person of a broker-dealer has an existing account at another firm and has followed the proper procedures to open the account. The current responsibility of the registered person is to

Follow her employing firm's guidelines when trading securities

What is the typical fee range assessed by BDs in a wrap account?

From 1% to 3% of assets under management

Under which federal law are firms, RRs, and exchanges registered?

The securities and Exchange Act of 1934

A customer who is leaving her employer would like to receive a distribution from her qualified pension plan. If the customer's objective is to avoid withholding tax, which of the following actions should the Operations Professional take?

Instruct the customer to have the check made payable to the IRA trustee (A withholding tax of 20% may apply when a person moves funds from one retirement account into another. Withholding tax can be avoided when funds are transferred from one retirement account to another. There are two methods of transfer, one in which the funds are sent directly between custodians (trustee-to-trustee) and the other when the check is made payable to the new trustee. If the check is made payable to the plan participant, it is defined as a rollover and a withholding tax may apply. Funds from a retirement plan may not be transferred directly to the employee's personal bank account. )

A brokerage firm offers a 401(k) plan to its employees. One of the firm's employees who has been contributing to the plan is leaving the firm and requests a distribution of his interest in the plan. The firm:

Is permitted to distribute only 80% of the amount to the employee

An employee in the operations department has approached an Operations Professional asking about the procedures required to open a brokerage account at another member firm. The Operations Professional's BEST response in this situation is to tell the employee that he:

Is required to notify the firm in writing prior to opening an account at another member firm

A customer is employed at a company that does not offer a qualified retirement plan for its employees. Which of the following statements is TRUE regarding her traditional IRA contribution?

It is fully deductible

Relative to the 5% Markup Policy, which of the following statements is TRUE?

It serves as a guideline when determining a broker-dealer's percentage markup.

What is the role of an SRO?

Maintain fair and orderly securities markets and establish rules and regulations for protecting investors

If a financial institution has a customer's personal property that remains unclaimed, which of the following choices is the FIRST action the Operations Professional should take?

Make a diligent effort to locate the account owner. It is required to notify the state, but the FIRST action is to make a diligent effort to locate the account owner

A husband and wife have a joint account with right of survivorship. If one of the parties places an order, the RR:

May accept the order

An employee of a brokerage firm has decided to open an account with an investment company to purchase various mutual funds under the company's complex of funds. The employee:

May open the account without notifying either firm

since the ______ is responsible for any tax liability, custodial accounts use the tax ID of the _____

Minor

The head of the operations department at a member firm wishes to open an account at another member firm. The firm opening the account:

Must give notice to the employee's member firm and must inform the employee that his employer will be notified

An employee of a brokerage firm had opened an account at another brokerage firm before being employed. The employee

Must provide written notice and receive written consent from her employing firm to keep the account

A registered representative (RR) at your firm decides to open an account with another member firm. In doing so, the RR:

Must provide written notice to both her firm and the firm opening the account

An Operations Professional is notified that a registered representative (RR) is opening an account with another member firm and instructs the firm to send duplicate confirmations for all trades made in the account. The other firm:

Must send duplicate confirmations to the RR's broker-dealer

A customer has a DVP (Delivery versus Payment) account at your firm. The registered representative (RR) has asked the Operations Professional why this customer has not received an account statement. Which of the following statements describes the BEST action for the Operations Professional to take?

No action needs to be taken since DVP accounts are not required to receive account statements

An investor had granted power of attorney to his son. If the client dies, is the power of attorney still valid.

No, Power of attorney is cancelled at the time of the owners death

Must the custodian in a UGMA account be a parent?

No, any adult may be a custodian

Is margin permitted in a minor's account?

No, securities must be fully paid.

is there an exception to notifying the employing BD when one of its employees opens an account with another BD?

No. If an employee (registered or clerical) opens an account with another BD, notification is required.

An account is opened for an associated person of another member firm. All of the following choices are obligations of the executing broker-dealer, EXCEPT to: a. Notify the employing broker-dealer prior to executing the first transaction B. Notify the customer that all transactions in a margin account are prohibited C. Ask the employing broker-dealer if duplicate confirmations and statements should be sent to their firm d. Notify the customer that you will be sending a notice to the employing firm

Notify the customer that all transactions in a margin account are prohibited

What list must be checked to identify suspected terrorists and criminals?

OFAC List (treasury Departments Office of Foreign Assets Control)

The spouse of a brokerage firm employee wants to open a brokerage account in order to invest in bonds. If this account is opened at a firm that does not employ her spouse, the employee of the firm is required to:

Obtain the prior written consent of the firm in order to open the account

identify the acronym: OFAC

Office of Foreighn Assets Control List (U.S. Treasury Departments list of suspected terrorists and criminals)

If a customer has signed a discretionary account authorization for options, a registered representative may execute an uncovered sale of a call option:

Only if the account agreement specifically authorizes the sale of uncovered options

Which of the following instructions given by a registered representative (RR) to an Operations Professional is a potential red flag?

Open a joint account for me and my son who is a minor

identify the acronym: ODD

Options Disclosure Document

What items are acceptable as proof of identity under the customer identification program ( CIP)?

Passport or driver's license (both have a picture)

the primary purpose of a self-regulatory organization (SRO) is to

Promote fair and equitable trading practices

Which of the following terms is associated with the process of a customer instructing his bank to deliver securities against payment by the clearing firm?

Receipt versus Payment (RVP)

Which of the following has a fiduciary duty to its clients, a registered investment advisor or a broker dealer?

Registered investment advisers (RIAs)

To approve a customer's account for transactions in a penny stock, the broker-dealer must take all of the following actions, EXCEPT:

Require a cash balance in the account before trades are executed

___________________________ protects customers from BD bankruptcy

Securities Investor Protection Corporation (SIPC) protects customers from BD bankruptcy

what is SIPC?

Securities Investor Protection Corporation. SIPC protects separate customers in the event of a BD bankruptcy

Which of the following statements BEST describes street name registration?

Securities are registered in a broker-dealer's name and the client is the beneficial owner.

if a client refuses to provide certain information, may the account still be opened?

Yes, although name and address are required

Which of the following statements is TRUE regarding a custodian account?

Taxes are a liability of the minor.

Which of the following DTCC subsidiaries provides settlement services for repurchase agreements (i.e., repos)?

The (FICC) The Fixed Income Clearing Corporation

Jim instructs his PR to use the BD's research and buy $10,000 worth of a stock of the firms choosing. What is required?

The BD must have first obtained a written power of attorney from JIM

The Customer identification program (CIP) requires inquiry into the identity of which of the following persons, businesses, and institutions?

The CIP rules apply to all clients, regardless of the type of person/client.

What organization is responsible for the clearing and settlement of trades among its members?

The Depository Trust and Clearing Corporation (DTCC)

what federal law requires employers to provide a high degree of fiduciary responsibility to group plan participants?

The Employee Retirement Income Security Act (ERISA)

Which of the following entities is NOT defined as a self-regulatory organization (SRO)?

The Federal Reserve Board (FRB)

What is the SRO for corporate securities?

The Financial Industry Regulatory Authority ( FINRA)

A registered representative will be soliciting customers to purchase low-priced equity securities. A special disclosure document must be provided to customers if the securities are quoted on:

The OTC Pink Market

What is the OFAC List?

The Office of Foreign Assets Control of the U.S. Treasury List; it identifies suspected terrorists and criminals

How is a Roth IRA contribution different from a Traditional IRA contribution?

The Roth IRA contribution is always made on an after-tax basis

which federal law governs the registration of new issues?

The Securities Act of 1933

which federal law created the SEC?

The Securities Exchange Act of 1934

A registered representative (RR) is filling out a new account application with a customer. There is a question that asks whether the customer is employed by another member firm. The RR later asks the Operations Professional why the broker-dealer needs to know this information. What is the BEST response to this question?

The broker-dealer is required to inform the customer's employer of any account that it is opening for an employee of that firm.

Which of the following is NOT considered a don't know (DK) trade?

The buyer is suspicious of insider trading

how may a client avoid the 10% tax penalty on premature distributions from an IRA?

The client may begin to receive a series of identical distributions ( often called annuitizing an IRA)

What does it mean for a client to use a prime brokerage account?

The client trades through multiple BDs, but has its trades cleared and settled with one prime BD

A customer would like to open an individual account and would like his confirmations sent to a P.O. Box. What other information is needed to comply with the client's request?

The client's primary residential address

What must be examined to determine who has authority to execute trades in a corporate account?

The corporate resolution

when a child reaches legal age, what action is taken in the custodial account?

The custodian must transfer the assets to the owner

A broker-dealer is clearing its trades through another broker-dealer but is not disclosing specific information regarding its clients. Who is responsible for maintaining the account records?

The introducing broker-dealer.

When determining whether a recommended transaction is suitable, which of the following factors is LEAST important?

The level of education the customer achieved

A person, age 53, may contribute what amount annually to her traditional IRA?( using old 2018 rule on maximum contributions)

The maximum annual contribution a customer is permitted to make to a traditional or Roth IRA is $5,500. For anyone 50 or older, an additional $1,000 is allowed, making the maximum contribution $6,500.

Custodial accounts are opened under whose Social Security number?

The minors

what is the SRO for municipal securities?

The municipal Securites Rulemaking board (MSRB)

When selling a stock, which of the following statements is TRUE?

The name on the stock power and the certificate must be identical.

taining best execution includes all the following factors, EXCEPT:

The number of research analysts recommending the security

In what form must IRA contributions be made?

in cash

hank is a 71 year old who has a roth IRA. what penalty is assessed if Hank has failed to begin taking distributions?

There is no penalty since Roth IRAs do not have RMDs

Hank, age 71, has a Roth IRA. What penalty is assessed for his failure to begin distributions?

There is no penalty since Roth IRAs do not have required minimum distribution

a child with UGMA account dies at age 11 without a will. To whom do the assets revert?

To whomever state law dictates

Which of the following transactions are NOT exempt from the penny stock disclosure rules?

Transactions with established customers

True or False: During the pre-filing period, certain issuers may be prohibited from communicating with the public

True

true or false: Using a P.O Box as an address is not acceptable to open an account

True, An actual address is required; however mail may be sent to a P.O. box

true or false: securities offered through a Reg D private placement are considered unregistered.

True. The unregistered (restricted) stock may be sold publicly only if registered or sold under a suitable exemption.

True or False: transfer and hold is an alternative to holding client securities in street name

True. Transfer and hold indicates the securities are registered in the clients name, but held at the brokerage firm

One hundred shares of DPM are bought on Nasdaq on Tuesday, July 3 for cash. When does the trade settle?

Tuesday, July 3 (Since the trade was executed on a cash basis, it settles on the trade date. If the transaction were executed on a regular-way settlement, it would settle on Friday, July 6, after incorporating the July 4th holiday.)

A negotiable check is best described as a(n):

Unconditional promise to pay a specific amount

Broker-Dealers A and B have executed a transaction which requires Broker-Dealer A to report the transaction within 10 seconds. Is Broker-Dealer B permitted to report the trade on behalf of Broker-Dealer A?

Yes, if the two firms have a give-up agreement

if a client wants her son to handle her financial affairs in the case of illness or disability, what is needed?

a durable power of attorney

what two entities can validate a stock certificate

a issuer and a transfer agent

define wrap account

a managed account that charges clients an annual fee to cover trading, research, and advisory services

An Operations Professional would NOT need to notify her employer if she were to open an account to invest in:

a mutual fund

Which of the following statements is TRUE regarding a prime broker? A.A prime broker may execute but not clear transactions. B.A prime broker may not execute but may clear transactions. c. A prime broker may execute and clear transactions. d. A prime broker may execute and clear transactions, but may not provide securities lending services.

a prime broker may execute and clear transactions

For each penny stock transaction, a broker-dealer must provide the customer with all of the following items, EXCEPT:

a risk disclosure document on penny stocks

explain a prime brokerage arrangement

a situation in which multiple BDs execute a clients trades and report them to one independent BD for settlement

whose approval is required before changing or updating customer account information?

a supervisory principal

The automated transfer of funds from a non-interest-bearing transaction account to an interest-bearing deposit account is known as:

a sweep

What is an IRA rollover?

a tax free distribution to an IRA owner that is then contributed to a different IRA retirement plan

what must be provided to a client before he agrees to buy or sell a penny stock and agian after the trade?

a written confirmation of the current bid and offer , price quote

after what age may traditional IRA plan contributions no longer be made?

after age 70 1/2

when may an individual withdraw money from an IRA without penalty?

after he turns 59 1/2

Broker-dealers have a suitability obligation to:

all customers

What are the general characteristics of a corporate account?

an account opened and owned by a business entity that has a valid corporate resolution

Describe a wrap account

an account that charges the client a single fee that covers transaction execution and account management

if a company has never issued securities before what offering would it conduct to raise capital publicly?

an initial public offering ( IPO)

Who usually manages a wrap account?

an investment advisor

A change in which of the following account record information from a customer account, does NOT require the broker-dealer to send a notice to the customer?

annual income

Who may enter orders in a joint account?

any owner named on the account

whne must a firm provide a copy of the options disclosure document (ODD) to a clients?

at or prior to account approval

When must an options disclosure document ( ODD) be delivered to a client?

at or prior to the time the account is approved for options trading

Describe durable power of attorney

authorization that gives a person the ability to manage the grantors finances if he/she becomes incapacitated

when rolling over a distribution from a qualified plan, when must the participant complete the transfer?

within 60 days from the receipt of the funds from the old plan

If John turn 70 1/2 in December, when must he begin IRA required minimum distributions?

by April 1st of the upcoming year

Clients with a ____ account are required to pay for each transaction in full ( No extension of credit is permitted)

cash

IRA contributions must be made in what form

cash

list three reasons that would warrant updating a customer account form.

changes to the customers name, address, or occupation

An Operations Professional discovers that one of the firm's clients is on the Office of Foreign Assets Control (OFAC) list. The BEST action for the Operations Professional to take is:

contact compliance who should notify the federal law enforcement authorities immediately

All of the following statements are TRUE regarding a Roth IRA, EXCEPT: a. Contributions are tax-deductible. B. Higher income individuals may not contribute. C. Qualified withdrawals are tax-free. D. There is no withdrawal requirement.

contributions are tax deductible

what program must established by BD's to verify the identity of each customer opening an account?

customer identification program (CIP)

A disclosure document is NOT required for a(n): A. Margin account b. Discretionary account C. Options account D. Day trading account

discretionary account

How must a clients authorization be obtained to enter discretionary orders, orally or in writing?

discretionary authorization must be in written form

what must be included in the monthly statement sent to clients with penny stocks in their accounts?

each penny stock owned, the number of shares, and the stocks estimated market value

Anyone with __________ income may contribute to an IRA.

earned

anyone with _____ income may contribute to an IRA

earned

An account record does NOT need to be updated for a change in the customer's:

education status

who is eligible for a 457 plan?

employees of state and local governments

What is ERISA

employment retirement income security Act

at death,assets held in a minors account become a part of her_____.

estate

A college student is attempting to open a brokerage account and refuses to provide information regarding his age. If the registered representative (RR) asks the Operations Professional (OP) for advice, the OP should:

explain that proof of age is required

True or False : if an employee of a BD opens an account at another BD, each trade must be preapproved by the employer

false

True or False: When a client grants third-party authorization to another person, the account becomes a joint account

false

true or false : discretionary orders must be confirmed with the client before being entered

false

True or False: Client signature is required when opening either a cash or margin account.

false. Clients signature is required when opening a margin account, but not a cash account

True or False : Only one person must provide information to open a joint account

false. Each owner must provide information to open a joint account

true or false: when determining if churning has occurred in an account, profit or loss is a key consideration

false. Profit or loss is never consideration when examining the excursiveness of trading

True or False: An account with a TOD designation is considered a joint account.

false. TOD accounts allow for the transfer of assets to a named beneficiary at the account owners death.

True or False: the earnings generated in a qualified retirement plan are tax-free

false. The earnings are tax deferred

Custodians have a ____________ duty to do what is best for the minor.

fiduciary

for how long must a clients account remain dormant before the firm notifies the state government?

for a period determined by the state

in general, a 401 (k) plan is available to individuals who work for ___________ corporation

for-profit

Wrap accounts benefit clients who trade _________.

frequently

A prime brokerage account would MOST likely be established for a(n):

hedge fund

What happens to the deceased's portion in a joint account with right of survivor ship?

her portion passes to the survivor

What are three different methods of handling customer assets?

holding in street name, transfer and hold, and transfer and ship

As it relates to IRAs, what is the difference between a roll over and a trustee to trustee transfer?

in a rollover, the proceeds are directed to the owner, but in a transfer, the proceeds are directed to another institution

identify the acronym: IRA

individual Retirement Account

An investor who has granted power of attorney to his son dies. The power of attorney:

is cancelled on the death of the principal in the account

An individual transferring an IRA from one trustee to another:

is not subject to taxes or penalties

what is the use of a Transfer on Death (TOD) designation?

it allows the owner to name one or more beneficiaries for his account in the event of his death

What are the general characteristics of a Joint Tenants in Common (JTIC) account?

it has multiple owners and each has trading rights. If on owner dies, his account value passes to his estate

what are the general characteristics of a Joint Tenants With Right of Survivorship (JTWROS) accounts?

it has multiple owners and each has trading rights. If one owner dies,her account value passes to the other owners.

what are the general characteristics of an individual account?

it has only one owner of record and that one owner has sole trading rights

what are the general characteristics of a 529 account?

it is a tax-advantaged college savings plan sponsored by a state or educational institution

what are the general characteristics of a traditional IRA account?

it is an individual retirement account in which the money grows tax deferred

what are general characteristics of a Roth IRA account?

it is an individual retirement account in which the money grows tax free if certain conditions are met

what is required if the evidence of appointment of incumbency is dated more than 60 days prior to presentation?

it must be re certified

457 plans are used by ____ government employers

local

how often are BDs required to send statements to clients regarding penny stocks in their accounts?

monthly

an account is opened for an employee of another member firm. Does the employee have to notify FINRA?

no

under the customer identification program, may accounts be opened for clients refusing to provide required information?

no

A customer has a traditional IRA. She is 68 years old, but has not withdrawn funds from the plan. What is the penalty that the individual will be subject to for not withdrawing funds from the plan?

no penalty will be levied since she is over 59 1/2

403 (B) plans are used by ___-profit employers

non-profit

Define an insider

officers, directors, partners, greater than 10% owners, and immediate family members of all listed

How often must a BD provide penny stock investors with a price quote summary of owned stocks?

on a monthly basis. The statment must show an estimated value of her penny stocks

in a custodial account, when does the minor own the assets?

on the trade date

for every rolling 12 months, how many times may a qualified plan be transferred via a rollover?

once

How often may an individual roll over an IRA?

once per rolling 12 months

For a joint account, how many account numbers and SSN's are used for tax reporting?

one

only ___ custodian is allowed per minor's account

one

distributions from a qualified plan are taxed at ______ rates.

ordinary income rates

distributions from a qualified plan are taxed at ________ rates

ordinary income rates

a _____ ______ is required to open an account for a partnership

partnership agreement

According to anti-money laundering (AML) procedures, a member firm, when opening a new account for a non-U.S. citizen, is required to obtain a:

passport number and country of issuance

A special disclosure document may be required for investing in:

penny stocks

Fee based brokerage and advisory account are charged a ____ fee.

wrap

A stock power is also known as a:

power of substitution

The new issue market is also known as the ________ market

primary

in general, what are the two types of securities markets?

primary and secondary

A hedge fund uses the services of a broker-dealer for cash management, securities lending, and margin. This broker-dealer is known as the:

prime broker

in the process of opening a new account, when must an RR obtain customer information?

prior to entering the first order

ERISA gave the U.S. Government jurisdiction over ________ plans

private pension plans

At the death of a client with a Transfer on Death designation, assets are transferred without going through ______.

probate

what is the primary purpose of the securities act of 1933?

provide investors with full and fair disclosure regarding new issues (prospectus)

if an IRA owner takes receipt of the assets for up to 60 days before reinvesting in a new plan, this is a _______

rollover

identify the acronym:SRO

self regulatory organization

What is an RR permitted to do if they have limited discretionary authority over a clients account?

she may buy or sell securities in the account without consulting the client

an existing client of a BD has just started a career as an RR with another BD. What is the client required to do?

she must promptly notify the executing firm of her new employment

What are some of the acceptable investments for IRA contributions?

stocks,bonds,mutual funds, and CDs

the _______ must sighn the account form.

supervising principal

When a firm is in possession of a check that has been forged or tampered with, it is required to file a with the U.S. Department of the Treasury's Financial Crimes Enforcement

suspicious activity report

at the federal level, with whom must securities be registered

the SEC

A registered representative is preparing to leave her firm. Her clients will be assigned to another representative at the same firm. To accomplish this:

the account records must be amended to reflect the change

Which of the following choices is a benefit of an account that is designated Transfer on Death (TOD)?

the avoidance of probate costs

What happens to the deceased's portion in a joint account with tenants-in-common?

the deceased's portion goes to his estate for tax purposes

if a client refuses to disclose her age when opening an account, what should the BD explain to her?

the firm should explain that without proof of age, an account may not be opened

what is the primary market?

the market on which new securities are offered

Whose Social Security number is listed on a custodial account?

the minors

In an IRA rollover, to whom are the funds directed?

the owner

What is waived for a first time home buyer in the event of an IRA distribution?

the penalty is waived however taxes are still levied

who must review and approve all discretionary trades effected in a clients account?

the principal/supervisor of the BD

If an account has been abandoned who must potentially pay the money to a customer?

the state government

in a Roth IRA, when must withdraws begin in order to avoid a late withdraw penalty?

there is no withdrawal requirement for Roth IRA's

What is the tax treatment of the distributions made by qualified retirement plans?

they are entirely taxed at ordinary income rates

Are transactions executed in a delivery versus payment (DVP) account typically subject to the standard Regulation T margin requirement?

they are since DVP trades have the same settlement parameters as trades paid for directly by the customer

________ authorization is required for a client's wife to effect trades in his account

third party authorization is required for a client's wife to effect trades in his account

explain the concept of holding securities in a street name

this is when client securities are held by and registered in the name of the BD

A Suspicious Activity Report is filed by a financial institution if a transaction involves at least $5,000 and the member firm knows, or has reason to believe, that the funds are derived from an illegal activity, if the transaction seems designed to evade existing filing requirements, or if the transaction has no legitimate, lawful purpose (true of false)

true

A Suspicious Activity Report is filed by a financial institution if a transaction involves at least $5,000, and the member firm knows, or has reason to believe, the funds are derived from an illegal activity, or if the transaction seems designed to evade existing filing requirements, or if the transaction has no legitimate, lawful purpose. It must be filed no later than the 30th day after the member firm discovers the activity. The firm, however, is not permitted to notify the person who entered into the transaction for which the report is being filed( true or false)

true

A check or securities deposited in an account would not require a financial institution to file a report with FinCEN ( true or false)

true

A member may, by agreement, permit another member to report and lock in trades on its behalf. This arrangement requires written documentation and is commonly known as a give-up agreement. Both firms may still be held responsible if the trade is not properly reported. (true or false)

true

An individual leaving her employer is permitted to take a distribution from the firm's retirement plan. If the distribution is made prior to retirement age, it will be taxable unless rolled into a qualified vehicle (e.g., an IRA). Should the employee decide to have the distribution made directly to her, the firm is required to withhold 20% of the distribution. Should the client instruct the firm to transfer the distribution directly to the IRA, the firm is NOT required to withhold anything and will transfer 100% of the distribution to the receiving plan ( true or false)

true

What are the requirements for a BD to open an account for an employee of another BD?

written notification to the clients BD, send the BD duplicate confirms ( on request), and notify client of these steps

As a general rule, all customers of a broker-dealer must receive an account statement at least quarterly. These statements are not required to be sent to any customer that has a DVP account at your firm. This type of account is designed for institutional customers such as mutual funds. The account records will be provided by the custodian bank where the customer has an account. The bank will hold the customers securities and make payments to the broker-dealer when securities purchased are delivered to the bank.( true or false)

true

In a custodian account, the tax liability on interest and dividends received is paid by the minor. (true or false)

true

Industry rules require, that member firms opening accounts for associates of other member firms provide duplicate confirmations for all trades, if requested by the associate's firm. Written permission from the RR is not required. ( true or false)

true

New account procedures require a primary residential address, such as a single family home, apartment number, condominium or other permanent address. Once this is obtained, communications may be sent to a post office box. ( true or false)

true

Reports are required to be filed with FinCEN whenever a cash transaction exceeding a certain amount is deposited in or withdrawn from a financial institution. ( true or False)

true

Street name securities are registered in the carrying broker-dealer's name. The customer is the beneficial owner of the securities.( true or false)

true

The Depository Trust and Clearing Corporation (DTCC) is a securities depository and a national clearinghouse for the settlement of transactions in stocks, bonds, and over-the-counter derivatives. The DTCC's main objective is to automate and centralize clearing and settlement of trades among its members ( true or false)

true

The Direct Registration System (DRS) and Deposit Withdrawal at Custodian (DWAC) programs are used to transfer securities that are held in book entry-form. The DRS is completely paperless, while the DWAC requires Medallion Guarantee Stamps when depositing securities. (true or false)

true

True or False: A hedge fund is an example of a client that may benefit from a prime brokerage arrangement.

true

True or False: A significant goal of the Securities Act of 1933 is to prevent fraud in the sale of new issues

true

True or False: Contributions made to qualified retirement plans are tax deductible

true

True or False: Gifts made to minors are irrevocable.

true

True or False: IRA trustee to trustee transfers are tax free

true

True or False: Reviewing account statements allows clients to identify problems or deficiencies in their account

true

When a firm clears trades for another firm but is not given specific information regarding the introducing firm's clients, the account is said to be an omnibus account. Introducing firms are required to establish and maintain records for omnibus accounts (true or false)

true

Written notification is not required when opening an account with another member firm if the transactions will be limited to redeemable investment company shares, variable contracts, or unit investment trusts.( true or false)

true

a joint account may not be opened to a minor ( true or false)

true

for non-U.S. citizens, the firm must obtain the client's name, address, date of birth, and one of the following: passport and country of issuance, taxpayer identification number, or any other government-issued document with a photograph ( true or false)

true

true or false: To avoid a late withdrawal penalty, IRAs have required minimum distribution ( RMD ) provision

true

true or false: a penny stock disclosure document must be sighned by a client prior to his first penny stock transaction

true

true or false: the owner of an account with a transfer on death (TOD) designation may change her named benificiary

true

True or False: Clients need not sign the account form for a cash account

true, but signature would be required for an option or margin account

explain a BD's obligations reguarding its customers identification procedures ( CIP)

under CIP , firms are required to obtain and verify certian customers information opening accounts

when is a guardianship account used?

usually when a person has mental incapacity

when do gifts become the property of the minor in a custodial account

when gifted

when do don't know (DK) trades occur

when the contrabrokers disagree or have conflicting details of a trade.

what should an agent consider when determining suitability for an institutional client?

whether the client is acting independently and has the capability to understand the risks

How are withdrawals from Roth IRA's treated for tax purposes?

withdrawals are tax-free if the account is open for at least five years and is not considered an early withdrawal.

a form 3 must be filed?

within 10 days of becoming a director

An institutional equity salesperson at your firm executes an order for 150,000 shares of a stock listed on Nasdaq during regular market hours. As the Operations Professional, you are required to report the transaction:

within 10 seconds

when a customer form is updated, within how many days must a BD send a copy to a customer?

within 30 days

When must IRA rollovers be completed?

within 60 days

Employees of broker-dealers who intend to open outside accounts for the purpose of executing securities transactions are required to obtain the prior written consent of their firm. This rule also applies to accounts being opened for the spouse of dependent children of member firm employees.( yes or no)

yes

Guardianship accounts are often established for persons who can no longer manage their affairs. A guardian must be appointed by a court and must provide proof of his authority when a guardianship account is opened. ( yes or no )

yes

If a financial institution has a customer's personal property that has been unclaimed for longer than a specified period (in many states, five years), it is required to notify the state in which the account is located. However, before the firm reports the unclaimed or abandoned funds or securities to the state, it is required to make a diligent effort to locate the account owner. The Securities Information Center maintains a database of missing, lost, and stolen securities (yes or no)

yes

May a cash account be opened without customer's signature?

yes

may a client use a numbered account instead of her name

yes provided the clients identity is known to the firm

May a custodian remove fund from a custodial account?

yes, but only for the benefit of the minor

May an 85 year old continue to contribute to a Roth IRA?

yes, provided she has earned income

may a custodian make speculative investments in a minors account?

yes, provided they are suitable based on the objectives