Customer Accounts
Under Regulation T securities transactions can be effected in all of the following types of accounts EXCEPT: A Cash account B Margin account C Non-securities credit account D Arbitrage account
C
A new customer wishes to open an options account with your firm. All of the following procedures are required prior to the first trade EXCEPT the: A customer must complete an Options Agreement B Registered Options Principal must approve the account before the first trade C customer must be sent an Options Disclosure Document D new account form must be completed
A
All of the following are types of fiduciary accounts EXCEPT: A Trust Account B Custodial Account C Executor of Estate Account D Partnership Account
D
All of the following information is needed to open a new cash account EXCEPT: A Customer name B Customer birthdate C Customer citizenship D A list of external brokerage account holding
D
Interest income in a custodial account is reported on the tax return of the: A minor B custodian C parent(s) D grantor
A
The "convenience signer" in a "Convenience Account" has the right to: A draw checks from the account for any purpose B draw checks from the account only for the benefit of the account owner C account assets upon the owner's death D trade the account on behalf of the owner
B
A copy of the member firm's Business Continuity Plan must be provided to each customer: A at account opening B on each trade confirmation C on each account statement D every 36 months
A
A corporation is making a combined primary offering of newly issued shares and secondary offering of shares held by officers, where both issues are offered through a single prospectus. Which statement is TRUE about margin rules on this offering? A Neither the primary nor secondary offering can be purchased on margin B Only the primary offering can be purchased on margin C Only the secondary offering can be purchased on margin D Both primary and secondary offerings can be purchased on margin
A
A customer buys 1,000 shares of XYZ at $60 in a margin account, regular way settlement. Two days after the trade, XYZ has dropped to $40. The minimum maintenance margin requirement is: A $10,000 B $12,000 C $15,000 D $18,000
A
A customer places an order to buy 100 shares of ABC at $60 in a cash account. The stock rises to $80 the next day and the customer sells. A check for the purchase is not received by the 4th business day after the purchase date. Which statement is TRUE? A The account must be frozen for 90 days if no extension request was made B All remaining positions in the account must be liquidated and the account closed C Because the position was closed out at a profit, no action will be taken. D The customer is reported to FINRA and is prohibited from opening an account at any brokerage firm for 90 days
A
A customer that discovers an error on his or her account statement must report the error: A promptly to the member firm B before the next account statement is generated C to the representative servicing the account D to FINRA
A
All of the following are allowable joint accounts EXCEPT: A father and 12-year old son B father and 25-year old son C husband and wife D two partners in a business
A
All of the following documents are unique to margin accounts EXCEPT the: A new account form B margin agreement C loan consent agreement D credit disclosure statement
A
At what age does a natural person possess the complete legal capacity to be held liable for the duties he or she contractually agrees to undertake? A 18 B 21 C 59 1/2 D 65
A
Credit on securities extended by brokers to customers is controlled by: A Regulation T B Regulation U C Regulation Q D Regulation G
A
For an employee of another firm to open an options account, which statement is TRUE? A Prior written approval must be obtained from the employing firm to open the account B Prior written approval must be obtained from the CBOE to open the account C Prior written approval of the employer is required before executing each trade D Prior verbal notification to the employer is required before executing each trade
A
Jack Jones, age 82, has an individual account at your firm. He gives a full written trading authorization to his son, Jack Jones Jr. under a non-durable power of attorney. Upon the death of Jack Jones, the power of attorney: A is void B continues because it was given to an immediate family member C continues because it is a "full" power of attorney D continues until the executor over the Jack Jones estate is appointed
A
Regulation T applies to transactions in all of the following securities EXCEPT: A U.S. Government Bonds B American Depositary Receipts C Warrants D Convertible Corporate Bonds
A
SEC Regulation SP covers: A notification to customers of a member firm's privacy policies and practices B selective disclosure of material non-public information by issuers C standardization of disclosure of financial and non-financial information by issuers D registration filings with the SEC by small business issuers
A
Short positions in margin accounts are marked to market: A daily B weekly C monthly D at year end
A
The minimum maintenance margin requirement for long stock positions is: A 25% B 30% C 50% D 100%
A
The principal reason for an institutional investor to open a prime brokerage account is: A consolidation of account positions with one broker B lower commission costs on trade executions C direct access to execution venues D simplified reporting for tax purposes
A
The social security number(s) that is (are) used for Internal Revenue Service reporting in a custodial account is (are) the: A minor's social security number B custodian's social security number C account has the choice of using either the minor's social security number or the custodian's social security number D parent's social security number
A
To open a new account for a trust, which statement is TRUE? A The tax identification number of the trust must be obtained B The tax identification number of the trustee must be obtained C The tax identification of the trust beneficiary must be obtained D There is no requirement to obtain a tax identification number when opening a trust account
A
Two unrelated women are interested in opening a brokerage account. Each one wants to be able to enter trades in the account, but one of the women does not intend to make an investment in the account and is concerned about tax implications if her name is on the account. The BEST recommendation would be for the account to be opened as a(n): A individual account in the name of the woman making the investment with that person signing a third party trading authorization naming the other woman B joint account, held as Joint Tenants with Rights of Survivorship, with the social security number of the woman making the investment used on the account C joint account, held as Tenants in Common, with the social security number of the woman making the investment used on the account D trust account, with both women named as co-trustees
A
Under FINRA rules, a registered representative must obtain and retain all of the following information relating to the customer's account EXCEPT: A Whether the customer is an administrative manager of a publicly traded company B The customer's country of citizenship C Whether the customer is employed by another FINRA member firm D Customer's financial status
A
Under FINRA rules, order tickets must be prepared: A prior to entry of the order B by the close of business on the day the order was entered C by the close of business on the last day of that week that the order was entered D by the date that the transaction settles
A
Under FINRA rules, when opening a new account for the customer, the: A name of the representative servicing the account must be recorded in the account file B CRD number of the representative servicing the account must be recorded in the account file C name of the branch manager supervising the account must be recorded in the account file D CRD number of the branch manager supervising the account must be recorded in the account file
A
Under Regulation T, an extension request that is granted by FINRA typically gives a customer how many additional business days to pay for a securities purchase? A 2 days B 4 days C 7 days D 10 days
A
Under the rules of the Options Exchanges, if a customer's financial condition changes materially, then which of the following will be amended? A New Account Form and Options Agreement only B New Account Form only C Options Disclosure Document only D New Account Form and Margin Agreement only
A
What type of account can be opened as a margin account? A Investment Adviser account B Custodial account C Guardian account D Executor for an Estate account
A
When opening a new account, a customer requests that duplicate confirmations and statements be sent to her attorney. What action should the representative take? A The representative should note the request on the new account form, along with the contact information for the customer's attorney B The representative should send the request to the firm's P & S Department to process the necessary paperwork C The representative must have the customer sign a power of attorney naming the attorney as authorized to receive the duplicate statements D The representative must get approval of the branch manager in order to request duplicate confirmations and statements
A
When opening an account over the phone to trade stocks and options, all of the following signatures are needed on the new account form(s) EXCEPT: A customer signature B registered representative signature C general principal signature D registered options principal signature
A
Which statement is FALSE? A The customer's signature is required on a new account form to open a cash account B The registered representative's signature is required on a new account form to open a cash or margin account for a customer who gives the information verbally C The manager's or principal's signature is required on new account form to open a cash or margin account for a customer who gives the information verbally D The customer's signature is required on a margin agreement to open a margin account
A
Which statement is TRUE about a minor in a custodial account under UGMA (Uniform Gifts To Minors Act) reaching legal age? A The account must be transferred into the name of the new adult B The account is transferred into the name of the new adult when requested by the custodian C The account is transferred into the name of the new adult when requested by the parents D The account must be liquidated and the proceeds paid to the new adult
A
Which statement is TRUE about the sending of customer account statements and confirmations? A Customer mailings are sent by physical paper mail unless the customer requests that e-mail be used B Customer mailings are sent by e-mail unless the customer requests that physical paper mail be used C Customer mailings can only be sent by physical paper mail D Customer mailings can only be sent by e-mail
A
Which statement is TRUE if a customer signs a durable power of attorney? A The power of attorney continues in effect if the grantor becomes mentally incompetent B The power of attorney ceases if the grantor becomes mentally incompetent C The power of attorney continues in effect if the grantor dies D The power of attorney is perpetual and irrevocable
A
Which statement is TRUE regarding joint accounts? A Orders can be given severally B Orders must be entered jointly C Accounts must be owned 50/50 D Checks can only be drawn severally
A
You have an elderly client who telephones you at the office, telling you the following: "I have been notified by certified mail that I have just won $100,000 in the Nigerian Government National Lottery, and in order to claim my prize, I need to wire $1,000 from my account to the Nigerian Lottery Overseas Bank." This client has a small individual account with your firm, where her adult daughter is named as the beneficiary. The action that you should take is: A escalate the request to a supervisor in the firm's compliance department B contact the daughter to see if the transfer should be made C refer the matter to the firm's AML officer D follow the customer's instructions
A
If there is trading activity in a customer's account, a statement must be mailed: A that month B that quarter C semi-annually D annually
A If there is no activity in a customer's account, statements are mailed quarterly. However, if activity takes place, a statement must be sent for that month.
A customer buys 100 shares of XYZ at $60 in a margin account regular way settlement. Two days after the trade, XYZ has risen to $70. The customer will receive a margin call for: A $2,000 B $3,000 C $3,500 D $6,000
B
A customer buys stock in an existing margin account, and fails to meet the Regulation T call within the specified maximum 4 business day limit. The action that may be taken is: A the broker-dealer can request an extension for payment from the FRB B the broker-dealer can sell securities from the account in an amount to satisfy the call C the customer can sell "short against the box" enough securities held in the account to meet the Regulation T call D the entire account must be liquidated
B
A customer has an existing cash account that holds many different positions in blue chip stocks. The customer has an investment objective of moderate growth and income. The customer contacts his representative, stating that "I think the market will be flat for a while, but I don't want to see my portfolio return drop." The registered representative recommends that the customer sell covered calls against some of the stocks held in the customer account. The representative: A can do so without any additional documentation as long as options positions taken do not exceed 15% of account value B cannot do so unless the account is qualified to trade options C cannot do so unless the stock positions are transferred to a margin account and the customer signs a margin agreement D can do so without restriction because covered call writing is a conservative strategy that is permitted in a cash account
B
A customer is short 1,000 shares of ABC stock at $60 in a margin account. The minimum maintenance margin requirement is: A $15,000 B $18,000 C $30,000 D $60,000
B
A customer places an order to buy 100 shares of ABC at the market. The execution report shows the trade occurring at $45.63. The firm sends out a confirmation which states that the trade occurred at $45.38. Which statement is TRUE? A The customer will pay $4,538 plus any applicable commissions B The customer will pay $4,563 plus any applicable commissions C The customer can DK the trade D The customer will pay $4,538 and can submit a claim to arbitration for an additional $25.00.
B
A customer places an order to sell 100 shares of ABC at the market. The initial execution report shows the trade occurring at $75.50. The firm later discovers that the trade occurred at $75.13. Which statement is TRUE? A The customer will receive $7,550 less any applicable commissions B The customer will receive $7,513 less any applicable commissions C The customer can DK the trade Incorrect answer D. You chose this answer. D The customer will receive $7,513 and can submit a claim to arbitration for an additional $37
B
A customer sends a text to his registered representative with an order to buy 500 shares of ABCD at the market. Which statement is TRUE about accepting this order from the customer? A The order cannot be accepted because all customer orders must be placed by telephone B The order cannot be accepted because the firm cannot verify that it was the customer who actually sent the order C The order cannot be accepted because FINRA requires that all customer orders be sent using an app that is encrypted D The order can be accepted as given
B
A husband and wife wish to open an account that allows either party to trade or draw checks; and that becomes the property of the surviving spouse if one should die. The proper ownership form is: A Tenants in Common B Joint Tenants with Rights of Survivorship C Separate Individual accounts D Joint Partnership account
B
A mother and father of twin girls (Girl "A" and Girl "B") want to open UTMA accounts to save for their college education. Who can be the custodian on the account(s)? A Both the mother and the father on a joint account for both Girl "A" and Girl "B" B The mother on an account for Girl "A' and the mother on an account for Girl "B" C The mother on an account for Girl "A" and both the mother and father on an account for Girl "B" D Both the mother and the father on an account for Girl "A" and both the mother and father on an account for Girl "B
B
A new customer has come into your firm to open an account. He tells you that he has recently inherited some money that he wants to invest. When completing the new account profile with the client, when you ask him for his address, he tells you that he was recently evicted, is staying at a hotel, and has no current address until he locates a new apartment. Which statement is BEST about this situation? A The address to be used for Customer Identification purposes is the client's last known residence address B The address to be used for Customer Identification purposes is the address of a close relative C The address to be used for Customer Identification purposes is a P.O. Box D The address to be used for Customer Identification purposes is the address of the hotel
B
A registered representative enters an order for a customer, and later notices that the wrong account number has been entered on the order ticket. The proper procedure is the: A registered representative should cancel the order and enter a new order with the proper account number B branch office manager must approve a change of account number on the existing order ticket C floor broker handling the order should be informed of the change prior to execution of the order D Purchase and Sales department must contact the customer and request reconfirmation before the order ticket can be changed
B
A registered representative is notified by a previously single customer that she has just come back from her honeymoon. What should the registered representative do? A Notify the branch manager immediately B Update the customer's account file C Add the spouse of the customer to the account D Close the account
B
A registered representative takes an order from a customer to buy 100 shares of EFFE stock at $40 and writes the order ticket for processing. The registered representative fails to include the customer account number on the ticket. Which statement is TRUE? A The order will be processed for the firm's proprietary trading account B The order will be returned to the representative for entry of the account number C The order will be referred to the member firm's compliance department for resolution D The order will be canceled without any further action taken
B
All of the following actions by a custodian in an account opened under the Uniform Gifts to Minors Act are permitted EXCEPT: A donating funds to the account to make additional investments B withdrawing funds from the account for the custodian's use C managing the investments in the account with the objective of generating enough income for college tuition D selling securities in the account to generate proceeds for other investments
B
All of the following are types of joint accounts EXCEPT: A Tenants by Entireties B Custodian for a minor C Tenants in Common D Joint Tenants with Rights of Survivorship
B
All of the following statements are true regarding discretionary accounts EXCEPT: A the account must be approved by a general principal or branch office manager B an account can be opened once a customer has guaranteed that a written power of attorney has been placed in the mail C each order ticket must be marked "discretionary" D every order ticket must be approved promptly by a general principal or branch office manager
B
An elderly customer normally comes into your branch office each week on Monday to discuss his account and place trades. This week, he comes in on Wednesday, looking confused and disoriented. However, the trade that he wishes to place conforms to his normal investment practice. The representative should: A place the trade for the customer, since it conforms with his normal investment practice B contact the firm's compliance department for guidance on how to handle the situation C contact the customer's next of kin to discuss the situation D refuse the order from the customer
B
Call loans made by banks to broker-dealers are secured by: A fully paid securities held in margin accounts for customers of the broker-dealer B partially paid securities held in margin accounts for customers of the broker-dealer C fully paid securities held in cash accounts for customers of the broker-dealer D any security position held in the broker-dealer's inventory or held in a customer account
B
If a customer wishes to open an account for a minor without additional documentation, the account must be opened as a: A guardian account B cash account C margin account D conservator account
B
In order to open a new account for a customer, the customer's name, date of birth, address and tax identification number must be: A obtained and independently verified prior to account opening B obtained prior to account opening and independently verified within a reasonable time before or after account opening C obtained within a reasonable time before or after account opening and independently verified prior to account opening D obtained and independently verified within a reasonable time before or after account opening
B
OFAC: A receives Suspicious Activity Reports filed by financial institutions B creates the Specially Designated Nationals list that must be checked when opening an account for a non-U.S. citizen C monitors foreign currency inflows into the U.S. markets D enforces the provisions of the Bank Secrecy Act
B
Regulation T sets the initial margin to purchase a marginable stock position at: A 25% of the purchase amount B 50% of the purchase amount C 75% of the purchase amount D 100% of the purchase amount
B
The Broker Loan Rate is best described as the rate at which: A brokers loan money to banks which then purchase securities B brokers borrow from banks using customer securities as collateral C customers charge brokers for borrowing their securities for stock loans D the Federal Reserve charges member banks for overnight loans
B
The best way to ensure that a brokerage firm has an effective AML program is to: A perform a credit check on each customer B have strong KYC procedures C make sure that all new accounts are approved by a manager or principal D file an SAR report on each new customer
B
The regulator that has primary responsibility for enforcing anti-money laundering laws is: A SEC B FinCEN C FINRA D FDIC
B
The requirement for independent verification of a customer's identity when opening an account can be satisfied by examining a copy of the customer's: A birth certificate B driver's license C employer ID D latest federal tax return
B
Under FINRA rules, a written power of attorney is NOT required for a registered representative to choose which of the following order related items? A Security to be traded B Time of execution C Dollar amount of the order D Share Size of the order
B
Under MSRB rules, new accounts must be approved, in writing, by the: A Registered Representative B Municipal Securities Principal C Compliance Officer D Supervisory Analyst
B
Under Regulation T, an extension for payment may FIRST be requested, under extraordinary circumstances, on the: A 3rd business day after trade date B 4th business day after trade date C 3rd business day after settlement date D 4th business day after settlement date
B
What are the initial and minimum maintenance margins for stock positions in long accounts? A 50 / 50 B 50 / 25 C 50 / 30 D 25 / 30
B
What is an acceptable way to open a brokerage account for an Investment Adviser? A A partnership account, with the adviser being the general partner and the adviser's clients being the limited partners B Separate client accounts with a power of attorney given by each client to the broker dealer who will then oversee the investment adviser C Joint account with tenancy in common for all of the investment adviser's clients D Joint account with rights of survivorship for all of the investment adviser's clients
B
Which of the following BEST describes a guardianship account? A An account for an individual who is an employee of a financial institution B An account for an individual declared incompetent in a court proceeding C An account for an individual who works for a life insurance company D An account for the benefit of a minor
B
Which statement is TRUE about a numbered account? A A numbered account can only use the social security number of the client as the account identifier B A numbered account is only permitted if the client signs an attestation of ownership that is retained by the member firm C A numbered account can only be used if the client maintains another named account at the same member firm D A numbered account is not permitted to be maintained at a member firm
B
Which statement is TRUE about a registered representative who wants to be appointed as trustee for a trust account being established by a client for the client's children? A The registered representative can act as the trustee without restriction B The registered representative can act as the trustee only with approval of the firm's compliance department C The registered representative can act as trustee only if no trustee fee is accepted D The registered representative cannot act as trustee under any circumstances
B
Which statement is TRUE about making a recommendation to an elderly customer under the "Senior Citizen Rule?" A Recommendations of specific designated securities that lack liquidity or that have withdrawal penalties are prohibited B The customer must fully understand the benefits, risks and costs of the recommended product C The firm has an obligation to shield the customer from risks that the customer wishes to take D Recommendations to senior citizens are only permitted by registered representatives that qualify as "Certified Senior Advisers"
B
Which statement is TRUE? A Regulation T requires payment for purchases no later than 2 business days after trade date B Regulation T only applies to non-exempt securities C Regulation T only applies to listed securities D Regulation T sets both initial and maintenance margins
B
Your customer has been declared legally incompetent and his daughter has presented the proper legal papers appointing her as the guardian. Which statement is TRUE? A Trading instructions can be accepted only from the customer B Trading instructions can be accepted only from the daughter C Trading instructions can be accepted from either party D Trading instructions require joint approval of both the customer and the daughter
B
A customer buys stock in a margin account, but does not pay in the 4 business days required under Regulation T. The brokerage firm can take all of the following actions EXCEPT: A sell out the position and freeze the account for 90 days B request an extension from FINRA C sell short the position D use existing SMA (credit line) in the margin account to meet the requirement
C
A 79-year old widowed client telephones you, her representative, telling you the following: "I just received a phone call telling me that I have won the Mega Millions International Lottery, and that in order to release my winnings, I must wire $10,000 to pay for the international taxes due." She gives you the international wiring instructions and directs you to send out the wire. What action should you take? A Follow the customer's instructions B Do not follow the customer's instructions and freeze the account from all transactions or removal of assets C Notify the trusted contact person on the account, who is listed as the client's daughter, and place a hold on the requested wire transfer D Close the account and reopen a new account in the name of the trusted contact person, who is listed as the client's daughter
C
A client has an options account that is qualified to buy options and sell covered calls. The client calls his representative, telling him that he wants to sell naked calls in the account. In order to do this, all of the following procedures are required EXCEPT: A the registered representative must perform a new suitability determination to determine that naked options writing is appropriate for this client B The "Special Statement for Uncovered Options Writers" must be provided before executing the transaction C The "Options Disclosure Document" must be provided before executing the transaction D The Registered Options Principal must reapprove the account for naked options writing
C
A client has an options account that is qualified to buy options and sell covered calls. The client calls his representative, telling him that he wants to sell naked calls in the account. Which statement is FALSE about this? A The customer must be sent a new Options Agreement which must be signed and returned within 15 days B The Registered Options Principal must reapprove the account for naked options writing C The customer must cross-guarantee the account because of the increased risk level D The "Special Statement for Uncovered Options Writers" must be provided before executing the transaction
C
A custodial account is established under UTMA in a state with a transfer age of 21. Legal age in the state is 18. At age 19, the beneficiary leaves college to go into business setting up a software company. The beneficiary wishes to use the assets in the UTMA account as "seed money" for the business. Which statement is TRUE? A The beneficiary can use the account assets immediately without restriction B The beneficiary has no access to the account assets until he or she reaches age 21 C The beneficiary can use the account assets only with the approval of the custodian D The beneficiary can use the assets only with the approval of the state administrator
C
A customer buys 1,000 shares of XYZ at $60 in a margin account, regular way settlement. Two days after the trade, XYZ has risen to $80. The minimum maintenance margin requirement is: A $15,000 B $18,000 C $20,000 D $24,000
C
A customer gives her registered representative instructions to buy 100 shares of XYZ stock during the trading day, if it looks attractive. As of the end of the day, the trade is not executed and the customer wants to extend the instructions through the end of the week. Which statement is TRUE? A The registered representative can accept the verbal instructions because only price and time decisions are left to the representative B The registered representative can accept the verbal instructions only if the principal approves C The registered representative can do this only if the customer gives written instructions Incorrect answer D. You did not choose this answer. D The registered representative may not accept the customer's instructions under any circumstances
C
A customer has how many days after opening an options account to sign and return the options agreement? A 0 days B 5 days C 15 days D 30 days
C
A customer has opened a margin account and has signed both the hypothecation agreement and the loan consent agreement. The brokerage firm can do all of the following with the customer's securities EXCEPT: A Commingle the customer's securities with those of other customers B Lend the stock to another customer who wishes to effect a short sale C Commingle the customer's securities with securities owned by the brokerage firm D Pledge the customer's securities to a bank for a loan
C
A customer is traveling outside the United States and wishes to have his mail held by the broker-dealer. Which statement is TRUE about this? A The mail cannot be held by the firm B The mail can be held for up to 30 days C The mail can be held for up to 3 months D The mail can be held for any time period specified by the customer
C
A limited partnership account is being opened at your firm. The general partner has provided the partnership tax identification number and has signed the appropriate paperwork. What other documentation is needed to open the account? A Social security number of each limited partner B Signature of each limited partner C Certificate of limited partnership D Authorizing resolution
C
A married registered representative with 2 children has a client who is her father-in-law. The father-in-law wants to establish a Trust account for his son (the representative's husband) and his 2 grandchildren. The grandfather wants to appoint the representative as the trustee and pay her a trustee fee. Which statement is TRUE about this? A The registered representative cannot act as the trustee because she is an immediate family member B The registered representative cannot act as the trustee because she is being paid C The registered representative cannot act as the trustee because of the conflict of interest D The registered representative can act as the trustee without restriction
C
A type of brokerage account where the customer is charged a single annual fee for all account services, regardless of activity in the account, is known as a: A fiduciary account B active trader account C wrap account D omnibus account
C
All of the following paperwork is customarily needed to open a margin account EXCEPT: A Margin agreement B Loan consent agreement C Joint account agreement D Credit agreement
C
Under MSRB rules, a registered representative may perform a municipal securities transaction for a customer that he or she believes is unsuitable: A only with the approval of the MSRB B only with the approval of the principal C only at the specific direction of the customer D under no circumstances
C
An elderly client has a $400,000 portfolio that is conservatively invested in blue chip stocks and government bonds. He calls his representative and tells him that he wants to liquidate the entire portfolio and buy growth stocks. His son also has an account serviced by the same representative, so the representative calls the son to ask him about how his father is doing, to which the son responds: "Dad has not been himself lately." What step should the representative take? A The representative should follow the customer's instructions, liquidate the portfolio, and buy growth stocks B The representative should refuse to follow the customer's instructions C The representative should contact the client and explain the risks inherent in the customer's strategy D The representative should contact compliance and ask them to file a SAR
C
An indicator of potential money laundering by a customer would be: A purchases of STRIPs in the customer's account B purchases of ADRs in the customer's account C wire transfers of $5,000 amounts out of the customer's account D junk bond purchases of $5,000 amounts in the customer's account
C
As an initial transaction in a new margin account, a customer buys 100 shares of ABC at $35. The customer must deposit: A $1,500 B $1,750 C $2,000 D $3,500
C
Brothers Joe and John have a joint account with tenants in common. Which statement is TRUE regarding the activities in the account? A Checks drawn on the account may be made out to Joe only or John only B The account must be owned 50/50 C Orders may be entered into the account by Joe only or John only D Orders must be entered into the account by Joe and John jointly
C
Call loans made by banks to broker-dealers are secured by: A cash deposits made by the broker-dealer B proprietary security positions of the broker-dealer held in the firm's trading account C customer security positions in margin accounts held by the firm D customer security positions in cash accounts held by the firm
C
Earlier this year, a client of yours wrote a letter to the firm, requesting that his mail be held for 2 months, which your firm did. Later in the year, the customer writes another letter, asking that the mail be held for another 2 months. Which statement is TRUE about this? A You can follow the customer's written instructions and hold the mail for an additional 3 months B You can follow the customer's written instructions and hold the mail for an additional 3 months only if the branch manager approves C You can follow the customer's written instructions and hold the mail for an additional 3 months if the letter included an acceptable reason for holding the mail D You cannot hold the mail for any additional length of time
C
FINRA defines a "customer complaint" as one that is received by the member firm: A verbally over the telephone B verbally by the client's attorney C in writing by mail D verbally by the client
C
If an execution report shows that an erroneous execution has occurred, the responsibility for the trade rests with the: A customer B registered representative C brokerage firm executing the transaction D stock exchange on which the trade occurred
C
In an existing margin account, a customer sells short 100 shares of ABC at $45. At the end of the day, the stock is valued at $35 per share. What is the margin requirement? A $2,000 B $1,250 C $2,250 D $4,500
C
TOD account registration stands for: A Transfer on Date specified by customer B Transfer on Disability of customer C Transfer on Death of customer D Transfer on Direction of customer
C
The FINRA suitability rule requires a progression of suitability determinations. Which factor should be examined first? A Quantitative suitability B Customer specific suitability C Reasonable basis suitability D Profitability
C
The Regulation T initial margin requirement for short stock positions is: A 25% B 30% C 50% D 100%
C
The approval to open a new margin account is given by the: A customer B registered representative C general principal D margin department of the firm
C
The minimum maintenance margin requirement for short stock positions is: A 30% of the price of the transaction B 50% of the price of the transaction C 30% of the closing price of the security that day D 50% of the closing price of the security that day
C
The purchase of what type of investment company security is marginable? A Unit investment trust B Open end management company C Closed end management company D Common stock IPO (Initial Public Offering)
C
The purpose of OFAC (Office of Foreign Assets Control) is to: A set higher margin requirements for foreign nationals that wish to invest in the United States B monitor the activities of foreign investors in the U.S. markets C impose economic sanctions against hostile foreign countries and groups D monitor foreign currency inflows into the U.S. markets
C
Three brothers wish to open an account at your broker-dealer with a minimum of paperwork. Two of the brothers have $10,000 each to contribute and one has $20,000 to contribute. They want to open the account with a total of $40,000 deposited and want to make sure that if one dies, that individual's share goes to his heir(s). What type of account should be opened? A Partnership account B Joint Account - Tenants With Rights of Survivorship C Joint Account - Tenants in Common D Joint Accounts - Tenants by Entireties
C
Three individuals wish to open a joint account as "tenants in common." If one of the individuals dies, which statement is TRUE? A The account is liquidated and the proceeds divided into 3 equal parts, shared among the 2 survivors and the decedent's estate B Trading must be halted in the account until the executor is named as the replacement for the decedent C The 2 survivors continue as co-tenants in the account, along with the estate of the decedent D The 2 survivors remain as joint tenants in the account; with the estate opening a separate account representing its interest
C
To make a suitable recommendation, the registered representative must have sufficient knowledge of the customer's financial background. Regarding recommendations to a customer, which statement is TRUE under MSRB rules? A If the customer refuses to disclose sufficient financial information, recommendations are allowed if the recommended security is investment grade B If the customer refuses to disclose sufficient financial information, only recommendations being made to other customers are permitted C If the customer refuses to disclose sufficient financial information, recommendations are not permitted D If the customer insists upon performing a trade that is deemed to be unsuitable, the registered representative must refuse the trade
C
To open an options account, the customer must be sent the Options Disclosure Document: A 15 days prior to opening the account B 5 days prior to opening the account C at or prior to opening the account D 15 days after opening the account
C
To send a confirmation to a person holding a power of attorney designated by the customer, which statement is TRUE? A The person holding the power attorney must request the sending of the duplicate confirmation in writing B The registered representative must believe that the action is prudent C The customer must request the sending of the duplicate confirmation in writing D The manager must approve of the action in writing
C
Under the Know Your Customer (KYC) Rule, in order to open and maintain a customer account, each registered representative must: A know "every" fact concerning the customer B know "every financial fact" concerning the customer C follow KYC procedures as part of an effective Anti-Money Laundering (AML) Program D follow KYC procedures as part of an effective Customer Privacy program
C
Under the requirements of the USA PATRIOT Act, if a member firm suspects that an account is engaging in money laundering, the firm is obligated to file a(n): A FOCUS B 10K C SAR D 13d
C
Under the requirements of the USA PATRIOT Act, to open an account for a non-resident alien, which information is NOT required from the customer? A Passport number B Tax identification number C Driver's license number D Telephone contact number
C
When comparing a cash account to a margin account: A cash account transactions must be settled faster in a cash account than in a margin account B cash account transactions are not subject to Regulation T while margin account transactions are C cash account transactions require full payment on settlement while margin account transactions do not D cash accounts do not permit options transactions while margin accounts do permit options transactions
C
When opening of a joint account for a husband and wife the firm should obtain the social security number of: A the husband B the wife C both owners D the owner with the higher tax bracket
C
Which of the following best describes "structuring"? A Depositing or withdrawing bond certificates to or from an account in amounts just below Federal reporting requirements B Depositing or withdrawing stock certificates to or from an account in amounts just below Federal reporting requirements C Depositing or withdrawing cash to or from an account in amounts just below Federal reporting requirements D Depositing or withdrawing bank checks to or from an account in amounts just below Federal reporting requirements
C
Which of the following can open a joint account without restriction? A Parent and minor B Guardian and custodian C 3 limited partners D Registered representative and client
C
Which of the following information is required on an individual new account form? A Tax bracket of the customer B Type of securities that can be traded in the account C Type of account - cash or margin D Proof of domicile of account holder
C
Which of the following securities CANNOT be purchased on margin? A Listed stocks B U.S Treasuries C Listed stock options D Municipal Debt
C
Which one of the following orders requires specific customer authorization? A "Buy 100 shares of ABC at the best price available" B "Sell 100 shares of ABC at the market" C "Buy 100 shares of any computer stock priced at under $40" D "Sell 100 shares of ABC at $40 if it gets to that level"
C
Which statement about SEC rules covering customer account information is FALSE? A The customer must be sent a copy of the collected information for verification within 30 days of account opening B Collected suitability information must be sent for verification, including income and net worth C CIP (Customer Identification Procedures) information must be sent for verification, including date of birth and social security number D The customer account profile must be resent to the customer every 36 months for reverification
C
Which statement is TRUE about initial and minimum maintenance margins for stock positions in a long margin account? A Initial margin and minimum margin is the same B FINRA sets initial margins at a lower percentage than minimum margin C The initial margin percentage is higher than the minimum set by FINRA D There is no relationship between the initial and minimum margin percentages
C
Which statement is TRUE about the percentage limit on rehypothecation of customer securities? A 70% of the debit balance is the maximum amount of customer securities that can be pledged to a bank by a broker B 70% of the debit balance is the maximum amount of customer securities that can be pledged to a broker by a customer C 140% of the debit balance is the maximum amount of customer securities that can be pledged to a bank by a broker D 140% of the debit balance is the maximum amount of customer securities that can be pledged to a broker by a customer
C
Which statement is TRUE regarding a customer account with a "limited power" third party trading authorization? A The third party cannot enter unsolicited orders in the account B The third party can draw checks on the account C Upon the death of the customer, the power of attorney is revoked D The third party must sign a limited partnership agreement with the customer
C
Which statement is TRUE regarding margin on new issues? A New issues can be margined before the effective date B New issues can be margined as soon as the issue comes public C New issues can be margined 30 days after issuance D New issues can be margined 60 days after issuance
C
Which statement is TRUE regarding trading authorization in a brokerage account? A A first party can give trading authorization to a third party B A first party can give trading authorization to a second party C A second party can give trading authorization to a third party D A third party can give trading authorization to a second party
C
Which transaction can only be performed in a margin account? A Long sale of stock B Purchase of stock C Sale of a naked call D Sale of a cash covered put
C
Who creates the list of SDNs that must be checked when opening an account for a foreigner or foreign entity? A FINRA B FDIC C OFAC D FinCEN
C
As the initial transaction in a new margin account, a customer sells short 100 shares of ABC stock at $28. How much must the customer deposit? A $840 B $1,400 C $2,000 D $2,800
C Even though Regulation T only requires that 50% of the sale amount be deposited ($1,400), because this is the initial transaction in the account, the customer must meet the $2,000 FINRA equity minimum required in a short account. Therefore, $2,000 must be deposited. The "trick" here is that this is the initial transaction in the account
A customer buys 100 shares of ABC at $17 as the initial transaction in a new margin account. The customer must deposit: A $850 B $1,000 C $1,700 D $2,000
C Even though minimum equity to open a long margin account is $2,000, this does not apply if the securities in the account are fully paid. A customer cannot be asked to deposit more than 100% when buying since this is the maximum potential loss. The customer wants to buy $1,700 of stock, so 100% or $1,700 must be deposited.
A customer buys 100 shares of ABC stock at $25 as an initial transaction in a new margin account. The customer must deposit: A $625 B $1,250 C $2,000 D $2,500
C Regulation T initial margin to buy stock is 50% of $2,500 = $1,250. However, since this is a new account, it must meet the minimum initial margin of $2,000 needed to open an account. Therefore, $2,000 must be deposited.
A customer is short 1,000 shares of ABC stock, valued at $5 per share. The minimum maintenance margin requirement is? A $1.50 per share B $2.50 per share C $5.00 per share D $7.50 per share
C a short stock position valued at $5 per share requires a minimum margin under FINRA rules of the greater of $5 per share; or 30% of $5 = $1.50 per share. $5 per share is greater than $1.50 per share, the minimum margin is $5. For stocks valued under $5, the minimum is the greater of 100% or $2.50 per share.
A customer makes a purchase of $22,100 of ACME Income Fund in her margin account. The customer must deposit: A $5,525 B $6,630 C $11,050 D $22,100
D
A customer placed an order to buy 500 ABC @ $50. The order is filled and the execution report shows 700 shares being purchased at $50. The registered representative should: A call the customer to see if he wants the extra 200 shares B place an order to sell the 200 extra shares from the client's account C cancel the trade and execute a new trade D report the situation to the branch manager for resolution
D
A customer wishes to give a gift of securities to her nephew under the Uniform Gifts To Minors Act. Which statement is TRUE? A The account cannot be opened because only parents are permitted to be custodians B The account can be opened only with the written permission of the minor C The securities can only be donated if they are included on that state's "legal list" D The account can be opened without further documentation
D
A registered representative is soliciting a customer to purchase a security that has just been placed on his firm's "recommended" list, and which the representative feels is suitable for that customer. After discussing the recommendation, the customer is still resisting making a purchase. Which action by the registered representative is appropriate? A The registered representative should have the branch manager contact the customer to discuss the recommendation B The registered representative should continue to attempt to overcome the customer's objections C The registered representative should discuss the recommendation with anyone else who has signing authority on the account D The registered representative should accede to the customer's wishes
D
A registered representative solicits an order from a customer to buy 200 shares of XYZZ at $50. The customer agrees and the registered representative completes the order ticket and enters the order for execution. Once the member firm processes the order, the ticket record must contain all of the following information EXCEPT the time of order: A receipt B entry C execution D confirmation
D
A social security number or tax identification number must be obtained to open which of the following accounts? A Partnership Account B Joint Account C Corporate Account D All of the above
D
After opening an options account, 15 days have passed and the customer has not returned the signed options agreement. The proper procedure is to: A refuse all further trades in the account B freeze the account for 90 days C only accept orders for opening transactions D only accept orders for closing transactions
D
All of the following information is required to open an account under FINRA rules EXCEPT: A the country of citizenship of the customer B whether the customer is employed by another financial services firm C the customer's birthdate D a letter of reference for the customer
D
All of the following information must be disclosed to a client on Form CRS when opening a new account at a broker-dealer EXCEPT: A whether the firm acts as a broker-dealer or an investment adviser in the relationship B whether the firm operates under a suitability standard or a fiduciary standard in the relationship C the type of fees charged by the firm in the relationship D the type of information collected by the firm about that customer and how it is used
D
All of the following should be considered when determining the suitability of a municipal bond recommendation EXCEPT the customer's: A state of permanent residence B tax bracket C financial background D formal education level
D
All of the following statements are true regarding a customer account with a "full power" third party trading authorization EXCEPT: A upon the death of the customer, the power of attorney is revoked B the customer can designate that confirmations be sent only to the third party C the third party can enter orders in the account D checks drawn on the account can be made out to the customer or to the third party
D
All of the following transactions are permitted in a custodial account EXCEPT the: A purchase of mutual fund shares B purchase of warrants C sale of pre-emptive rights D short sale of common stock
D
All of the following transactions can be performed in a Cash Account EXCEPT the: A sale of a covered call B sale of a cash covered put C sale of along position D sale "against the box"
D
An existing customer must be notified about SIPC and where SIPC can be contacted: A if the customer makes a written complaint to the broker-dealer B on each trade confirmation C on each statement D annually by the member firm
D
If a customer places an order with a registered representative and calls back 20 minutes later stating "Cancel the order!" If the trade has already been executed, it: A can be canceled without any further action needed B can only be canceled with approval from the branch manager C can only be canceled with approval from FINRA D cannot be canceled, but can be closed out
D
If an employee of a FINRA member firm wishes to open up an account with another FINRA member firm, all of the following statements are true EXCEPT: A The employee must get written consent of his or her employing member firm to open the account B The executing member firm must be notified, in writing, of the fact that the individual opening the account is associated with another member firm C Duplicate confirmations and/or statements must be sent to the employing member, if requested in writing by the employer Correct answer D. You chose this answer D Duplicate confirmations and/or statements must be sent to FINRA, if requested in writing
D
If an employee of another municipal securities firm wishes to open an account at your firm, which statement is TRUE? A Written notice of the opening of the account must be sent to the MSRB B A surety bond of $10,000 must be posted before the account can be opened C Duplicate confirmations must be sent to the MSRB Correct answer D. You chose this answer D Duplicate confirmations must be sent to the employer member
D
In order to open a discretionary margin account, which of the following is NOT required? A Completed Customer New Account Form B Signed Trading Authorization C Signed Customer's Agreement D Signature of Customer on New Account Form
D
In order to open a new account for an individual customer, all of the following information is required on the new account form EXCEPT: A Date of birth B Street address C Social security number D Telephone number
D
Julia and Jim are the parents of twins who are just turning 4 years old. They want to open a custodial account for each under the Uniform Transfers to Minors Act to start saving for their school expenses. Who can be the custodian in this type of account? A Only Julia and Jim as joint custodians B Only Julia or Jim as individual custodian C Any relative of each child as individual custodian D Any adult, related or unrelated, as individual custodian
D
Mr. Jones, a New York resident, is a widower with a 6 year old son. He opens an account for the son under the Uniform Gifts to Minors Act. Three years later, Mr. Jones remarries, and moves to California, a community property state. Under what conditions can Mrs. Jones enter orders into the UGMA account? A Only if a power of attorney is granted by the son B Only if a power of attorney is granted by Mr. Jones C Mrs. Jones can enter orders without restriction because California is a community property state D Mrs. Jones can not enter orders into the account under any circumstances
D
Recommendations by a registered representative to a customer about options strategies may still be suitable if the: A customer has not received the Options Disclosure Document B opening of the account has not been approved by the Registered Options Principal C representative is unsure about the client's ability to assume the risk associated with a specific options strategy D customer has not signed the Options Agreement
D
Regarding arbitration agreements between member firms and customers: A FINRA requires each customer to sign an arbitration agreement as part of the account opening process B each member firm requires customers to sign an arbitration agreement which holds the firm harmless if errors occur C each member firm must provide the customer with a separate copy of the arbitration agreement for signature and return within 10 days of account opening D each member firm must provide the customer with a separate copy of the arbitration agreement for signature and return within 30 days of account opening
D
Regulation U controls credit from: A broker to customer B Federal Reserve to customer C Federal Reserve to banks D bank to broker
D
The "convenience signer" in a "Convenience Account" has: A the right to draw checks from the account for any purpose B the right to draw checks from the account only for the benefit of the account owner or the owner's children C the right to account assets upon the owner's death D no claim on account assets upon the owner's death
D
The maximum amount of customer securities that can be rehypothecated by a broker is: A 50 % of the debit balance B 70 % of the debit balance C 100% of the debit balance D 140% of the debit balance
D
To determine the suitability of recommendations made to a customer, inquiry should be made about all of the following EXCEPT: A Investment objective B Investment experience C Financial situation D Educational background
D
To open a margin account for a partnership, all of the following documentation is required EXCEPT: A New account form B Customer's agreement C Partnership agreement D Joint account agreement
D
To open an options account, inquiry is NOT required regarding: A Investment objective B Investment experience C Financial situation D The name of other firms where the customer has accounts
D
Under FINRA rules, all of the following are necessary to open a corporate account EXCEPT: A Corporate Resolution B Corporate Seal C Corporate Charter D Corporate Minutes
D
Under FINRA rules, if a member suspects that a senior citizen is being financially exploited: A a freeze can be placed on all disbursements from the account for up to 10 business days B a freeze can be placed for up to 10 business days on suspicious disbursements from the account, but not on other non-suspicious disbursements C a freeze can be placed on all disbursements from the account for up to 15 business days D a freeze can be placed for up to 15 business days on suspicious disbursements from the account, but not on other non-suspicious disbursements
D
Under FINRA rules, to ascertain which investments are suitable for a customer, the registered representative would inquire about all of the following EXCEPT: A Investment objective B Financial status C Tax status D Health status
D
Under MSRB rules, inquiry should be made about all of the following in order to make suitable recommendations to customers EXCEPT: A Investment objective B Tax bracket C Investment Experience D Potential Inheritances
D
Under Regulation T, if no payment for a trade is received, the account is "frozen" for how many days? A 3 days B 5 days C 60 days D 90 days
D
Under Regulation T, the maximum time period to collect monies owed by a customer prior to an extension request is: A the same business day B the next business day C 2 business days D 4 business days
D
What is an acceptable method for opening an investment adviser account? A The adviser opens an Advisory UGMA account under each client's name B Each individual client of the adviser opens an account under the adviser's name C The adviser opens a Third Party account for each client D The adviser opens an Omnibus account holding all of his or her clients' funds and securities
D
Which following statement is FALSE regarding Trust Accounts? A A copy of the trust agreement must be obtained before any transactions are allowed B A new account form must be completed C The trust agreement will specify the transactions that the trustee is allowed to perform D Short selling is typically permitted
D
Which of the following accounts can be opened by a minor? A Custodial account B Joint tenants with rights of survivorship account C Uniform Gifts To Minors account D A minor cannot open an account
D
Which of the following individuals can legally grant a power of attorney over his or her account to a third party? A 14-year old child actor in a successful television series and who wishes to have his mother manage his finances B 78-year old who has been diagnosed with late-stage Altzeimer's disease and who has been adjudicated legally incompetent C 47-year old who has been having episodes of paranoid delusions and who is involuntarily committed D 56-year old with 2 adult children who gives a power of attorney to his son over the objections of his daughter
D
Which statement is TRUE regarding joint accounts? A If a party in a Joint Tenants With Rights of Survivorship account dies, that person's share is excluded from his or her taxable estate B If a party in a Joint Tenants With Rights of Survivorship account dies, that person's share passes tax free to the beneficiary C If a party in a Tenancy in Common account dies, that person's share is excluded from his or her taxable estate D If a party in a Tenancy in Common account dies, his or her share is included in his taxable estate
D
Which type of account is NOT required to follow the "Prudent Investor" rule? A Trust account B Custodial account C Pension fund D Joint account
D
A customer sells short 100 shares of ABC at $17 as the initial transaction in a new margin account. The customer must deposit: A $850 B $1,000 C $1,700 D $2,000
D A short account has unlimited risk potential. Because of this, minimum equity is $2,000. The customer is selling short 100 shares of ABC at $17 as the initial transaction. Regulation T only requires 50% or $850. But this is not enough to meet the industry minimum of $2,000 to open an account.
A customer sells short 1,000 shares of ABC stock at $1.50 per share in an initial transaction in a new margin account. The customer must deposit: A $750 B $1,500 C $2,000 D $2,500
D Under the "cheap stock rule," if a customer sells a stock short under $5.00 per share, he must put up the greater of 100% or $2.50 margin per share. 100% of $1.50 per share x 1,000 shares = $1,500. $2.50 x 1,000 shares = $2,500. The greater amount is $2,500. More money can be required than the sale amount because the loss potential is unlimited.