SIE: Customer Accounts - Practice Questions
New account report forms must be signed by the A) branch office manager (BOM). B) registered representative. C) customer. D) an officer of the member firm.
A) branch office manager (BOM). Customers and RR are not required to sign a new account report form. The branch office manager (BOM) is required to sign. The BOM may be an officer of the firm but it is not a regulatory requirement for an officer to sign the form.
Which of the following is NOT required on a new account form? A) Investment objective B) Education C) Customer Tax ID Number D) Citizenship
B) Education The customer's education does not have to be noted on the new account form.
To be deemed a "Pattern Dat Trader" an individual must execute A) three trades per day for three weeks. B) four day trades in five business days. C) five day trades in three business days. D) five or more day trades in five weeks.
B) four day trades in five business days. Pattern Day Traders are defined as traders who execute four day trades in five business days.
An investor buys several corporate bonds for $50,000. The following week, the bond market falls and the bonds' value at the end of the trading day is $45,000. The investor places a sell order for the next trading day to liquidate the entire position. Assuming the bonds are sold at the opening for $45,000 on the following day, the investors would have a(n) A) unrealized loss of $5,000. B) realized loss of $5,000. C) unrealized loss of $45,000. D) realized loss of $50,000.
B) realized loss of $5,000. If the bonds are sold, then the investor realizes a loss. That loss would be from the original purchase cost of $50,000 (B- $50,000) to the sale price of $45,000 (S+ $45,000), for a realized loss of $5,000. If the investor had not yet sold the bonds, then the loss would be unrealized.
ABC broker-dealer has failed and a customer of the failed firm files a claim with SIPC for $500,000 in securities and $100,000 in cash. How much of this claim will be covered by SPIC? A) $100,000 B) $300,000 C) $500,000 D) $600,000
C) $500,000 SPIC will prove coverage up to a total of $500,000, per customer for losses of cash and securities combined. The maximum coverage for a cash claim is $250,000. (formerly $100,000.)
An RR receives a request by a customer who has a joint account at the firm. The customer wants to transfer the account to another member firm and continue to conduct covered call writing at that firm. Given this scenario, which of the following documents would NOT be expected for this account? A) ACAT form B) Joint account agreement C) Margin agreement D) Options agreement
C) Margin agreement A margin agreement would not be required in this situation, as this is not a margin account. An ACAT form is used when transferring a customer account from one member firm to another member firm. The options agreement and the joint account agreement are also needed because the customer is opening an options account at the other member firm.
In a Uniform Gifts to Minor's Account, income received from investments and capital gains is the tax responsibility of the: A) Custodian. B) Donor C) Minor
C) Minor Income received from investment and capital gains are the tax responsibility of the Minor.
All of the following orders can be accepted for a custodian account under the Uniform Gifts to Minor's Act EXCEPT: A) The purchase of a municipal bond B) The purchase of a warrant on common stock C) The short sale of a listed common stock D) The sale of preemptive stock rights held in the account
C) The short sale of a listed common stock In a custodian account securities may not be purchased on margin
Which security has the lowest degree of capital risk? A) Warrants B) Options C) Common stocks D) Corporate bonds
D) Corporate bonds Capital risk is the risk of getting or not getting back the principal you invested. Capital risk is lowest on Bonds because you will at least get back the par value of the bond when it reaches maturity.
A customer wants to open an account for his niece, who is a minor. The customer will make a gift of money and securities under the statues of the Gifts to Minors Act. Which can the custodian NOT do if stock subscription rights are in the niece's account? A) Sell the rights and use the proceeds to buy another security. B) Redeem the rights back to the issuing company for cash. C) Sell a different security in the account to get funds to exercise the rights. D) Sell the rights and hold the money in the account for a reasonable period of time awaiting reinvestment.
B) Redeem the rights back to the issuing company for cash. Rights are not redeemable back to the issuing company for cash. He can sell the rights to buy another security, sell the rights to hold the money in the account, or he can sell a different security to get cash to exercise the rights.
According to preservation of records rules, when a customer closes an account with a firm, the account records must be kept for a minimum of A) 2 years B) 3 years C) 6 years D) the life of the form.
C) 6 years Preservation of records rules require that the records for closed customer accounts be kept for no less than 6 years.
Written authorization would not be required for which of the following transactions? A) An investor decides to re0invest dividends and interest income in their account that previously was paid out to the customer. In doing so, the client allows the agent to decide which investments to buy with the dividend and interest income. B) An investor has $20,000 that they would like to invest in a balance fund and asks their agent to choose a fund with low expenses and moderate returns. C) An investor asks their agent to sell 200 shares of ABC Corp some time during the trading day. D) An investor would like to take a family vacation and asks their agent pick and sell $3,000 worth of securities for the trip.
C) An investor asks their agent to sell 200 shares of ABC Corp some time during the trading day. The only form of discretionary authority that does not require written authorization by the customer is in relation to purchases and sales where only time and price decisions are left to the agent over the course of a trading day. Here, the only example of time and price discretion is the answer where the agent is directed to sell a specific number of shares over the course of the day.
All of the following would be considered a "customer" subject to the FINRA Rule 2111 requirement of suitability for recommendations except: A) A person with a brokerage account at the broker-dealer firm B) A person who purchases a security through a broker-dealer where the security will be held by the issuer but the broker-dealer will be compensated for the sale. C) A potential customer who then becomes a customer D) An institutional customer
D) An institutional customer There is an institutional customer exemption in Rule 2111. Institutional accounts include organizations that trade large volumes of securities (e.g. banks, etc.) and any other person with at least $50 million in assets. Such institutions are exempt from rule if (1.) the broker-dealer has a reasonable basis to believe that the institution is capable of evaluating investment risks independently and (2.) the institution affirmatively indicates that it is exercising independent judgment. The other choices are all retail customers within the definition of a "customer".
A customer wants to open an account for his niece, who is a minor. The customer will make a gift of money and securities under the statutes of the Gifts to Minors Act. Which of the following can a custodian do if stock subscription rights are in the niece's account? I. Sell the rights and use the proceeds to buy another security. II. Donate the money to the account to exercise the rights. III. Sell a different security in the account to get funds to exercise the rights. IV. Sell the rights and hold the money in the account for a reasonable period of time awaiting reinvestment. A) I and II B) III and IV C) I,II, and III D) I,II,III and IV
D) I,II,III and IV The custodian can do all of the above.
A customer wants to open an account for his niece, who is a minor. The customer will make a gift of money and securities under the statutes of the Gift to Minors Act. When the niece reaches majority, what happens to the custodial property? A) The custodian can continue the account as before with written permission of the niece. B) The niece can decide to continue the account as before provided the niece takes custody of the securities. C) The proper must be turned over to the niece and the niece must receive custodian property equal to the highest market value the account reached at any one time. D) The custodian must turn over to the niece all custodial property in the account that has not been expended.
D) The custodian must turn over to the niece all custodial property in the account that has not been expended. The custodian must turn over all custodial property to the minor when the minor reaches majority
All of the following are considered to be "custodial property" that can be given by a donor to a minor under the Uniform Gifts to Minors Act or the newer Uniform Transfer to Minors Act except: A) Bearer bonds B) a life insurance policy C) an annuity contract D) a futures contract
D) a futures contract The original UGMA only provided for gifts of cash or securities. The newer UTMA expanded the definition of "custodial property" to any type of asset including real estate and intangible personal property. However, futures contracts are specifically excluded from coverage in most states.
When member firms execute customer securities transactions, the member firms must disclose all of the following on the customer confirmation EXCEPT that they A) acted as a customer's agent. B) acted as an agent for another person. C) are a market maker in the security. D) are subject to FINRA inquiry.
D) are subject to FINRA inquiry. All choices must appear on the customer confirmation except that the member firm is currently under investigation by FINRA. Another item that must appear on the customer confirmation: if the member firm executed the transaction as principal.
All of the following information is required from an individual customer when completing a new account report form EXCEPT A) the customer's residential street address. B) the customer's employer's name and address. C) verification of the identity of the customer. D) the source of funds the customer deposits when opening the account.
D) the source of funds the customer deposits when opening the account. The source of funds used to open the account is not required. The other information is required.
