Which TWO of the following statements are TRUE when opening new customer accounts?
I. a P.O. box may be shown as the customers address on the new account form
II. a street address must be reflected on the new account form
III. customer correspondence may
C. II and III
A customer must list a legal street address on a new account form. However, a broker-dealer is allowed to mail correspondence, including account statements, to a P.O. box at the customers request
Which of the following transactions may not be accomplished in a cash account?
a. covered call or put writing
b. the sale of preferred stock
c. selling short
d. the purchase of options
C. Selling short
Selling short may take place in a margin account.
The Securities Investor Protection Corporation (SIPC) does not insure a:
a. margin account
b. joint account
c. commodities account
d. custodian account
C. Commodities account
Commodities are not securities and are therefore not covered by the SIPC
If a clients account is inactive, how often does a statement need to be mailed?
a. weekly
b. monthly
c. quarterly
d. prior to the completion of the next transaction
C. Quarterly
If an account is inactive, statements are mailed quarterly, clients with active accounts normally receive statements monthly.
An investor has taken the following gains and losses during the tax year: a $19,000 gain, and a $24,000 loss. What amount of ordinary income may the investor offset this year?
a. $0
b. $2,000
c. $3,000
d. $5,000
C. $3,000
The maximum capital loss an investor may write off against ordinary income in one tax year is $3,000. The balance of the $2,000 capital loss must be carried forward to the next year.
A husband and wife have a joint account. If the husband instructed his RR to sell securities and send a check, the check could be made payable to:
a. the husband only
b. the wife only
c. either the husband or the wife
d. the husband and wife jointly
D. The husband and wife jointly
An order may be accepted from either party of the joint account, but the payment check may only be drawn in joint names (as the account is titled).
What information can be found on a customers confirmation?
I. Whether the firm acted as principal
II. Whether the firm acted as the customers agent
III. Whether the firm acted for a third party
IV. Whether the firm is a bona fide market maker in the secur
D. I, II, III, IV
All of the items listed would be found on a customers confirmation
A brokerage firm is holding $850,000 in securities for a customer. The securities are registered in the name of the customer. If the firm was being liquidated by SIPC, the customer would:
a. be insured for $250,000 of securities
b. receive $500,000 of sec
C. Receive the entire value of the securities
Securities registered in the names of customers are not part of SIPC coverage and are returned to the appropriate individuals regardless of the amount.
A brokerage firm is holding $600,000 in securities for a customer. The securities are registered in the name of the customer. If the firm is being liquidated by the SIPC, the customer would.
a. be insured for $500,000 of securities
b. receive the entire $
B. Receive the entire $600,000 of securities
Securities registered in the names of customers are returned to the appropriate individuals in full
The number of custodians allowed for each minor under the Uniform Gift to Minors Act may not be more than:
a. one
b. two
c. four
d. five
A. one
Only one custodian is allowed under the Uniform Gift to Minors Act
Which of the following choices is a benefit of an account that is designated Transfer On Death (TOD):
a. the ability for joint owners to each trade the account
b. the avoidance of estate taxes
c. the avoidance of probate costs
d. the opportunity for propo
C. The avoidance of probate costs
Transfer on Death is not a designation for a joint account, but is rather the instruction to transfer ownership of an account to a beneficiary upon the death of the account holder. Although such a designation would avoid
When is the Regulatory Element of Continuing Education required to be completed by the registered representative?
I. on the second anniversary of initial registration
II. on the third anniversary of initial registration
III. every two years thereafter
IV.
B. I and IV only
Registered representatives are required to participate in Regulatory Element training on the second anniversary of their initial registration and every three years thereafter
A registered representative purchased two tickets to a concert for which he paid $175 per ticket. If the face value of the tickets is $95 per ticket, the RR may:
a. give both tickets to a customer
b. give one ticket to a customer
c. not give any tickets t
Member firm personnel may not give, or permit to be given, a gift of material value exceeding $100 per recipient per year to personnel employed by another firm. The gifts should be valued at higher of cost or market value. If tickets to a concert have a f
Which of the following statements is NOT TRUE of discretionary accounts?
a. accounts must be approved by a principal
b. orders must be reviewed on the day they are entered
c. written power of attorney must be signed by the customer and kept on file by the
D. Orders must be confirmed by the customer before being entered
A registered representative holding limited discretionary power over a customer account may:
a. buy or sell securities in the account without consulting the customer
b. withdraw money from the account
c. receive a fee for using his discretion in the tradi
A. buy or sell securities in the account without consulting the customer
Only full discretionary account allows a RR to withdraw money from the account. A registered representative may not receive a fee for using his discretion in the trading account. A R
Which of the following statements is true regarding numbered accounts?
a. an account may never be identified by a number
b. only a cash account may be identified by a number, provided the customers name is on file
c. only a margin account may be identifie
D. Any type of account may be identified by a number, provided the customers name is on file
A senior investor with a brokerage account at the firm appears disoriented and is showing signs of diminished capacity. Which TWO of the following choices are the BEST courses of action for the RR to take?
I. discuss this situation with a supervisor
II. e
A. I and III
Discuss the situation with a supervisor
Ask the client to bring a relative to a meeting at the firm
Which of the following statements is NOT TRUE regarding discretionary accounts?
a. all discretionary accounts must be marked discretionary
b. a written power of attorney must be updated every three years
c. orders may not be verbally approved by the custo
B. a written power of attorney must be updated every three years
When transacting business for a discretionary account the registered representative must have a written power of attorney (POA) authorizing him to act for the customer. It does not need to b
Which of the following statements is TRUE concerning custodian accounts?
a. a donor may give gifts of cash only
b. a donor may give gifts of securities only
c. a donor may give gifts of cash or securities
d. an individual may not be both the custodian and
C. a donor may give gifts of cash or securities
The correct order for transfer to account from one firm to another is:
I. the carrying firm validates the transfer instructions
II. the customer is informed of any nontransferable securities
III. the carrying firm sends the customers securities to the rec
A. IV, I, II, III
First: the customer provides a written transfer request to the receiving firm
Second: the carrying firm validates the transfer instructions
Third: the customer is informed of any nontransferable securities
Last: the carrying firm sends t
Which two of the following organizations are not SRO's:
I. The MSRB
II. SIPC
III. FINRA
IV. The SEC
a. I and III
b. I and IV
c. II and III
d. II and IV
D. II and IV
SRO's have been formed by the industry to promote fair trade. Examples of SRO's include FINRA, CBOE, Chicago Stock Exchange, and the MSRB
All rules and regulations established by SROs must be approved by the SEC
Duplicate account statements would be required under which TWO of the following circumstances?
I. the customer is an employee of FINRA
II. the customer is an insider of an SEC reporting company
III. the customer is an employee of another broker-dealer
IV.
A. I and III
A member firm is required to send duplicate account statements to FINRA when the customer is an employee of FINRA. In addition, upon written request of the employing member firm, duplicate account statements must be sent if an employee of a m
A Suspicious Activity Report (SAR) should be filed:
a. only in the event that the firm has knowledge that the client is actually laundering money
b. if a transaction exceeds $5,000 and the firm suspects illegal activity
c. only for transactions of more th
B. if a transaction exceeds $5,000 and the firm suspects illegal activity
A firm must file an SAR if the transaction exceeds $5,000 and the firm suspects any of the following:
(1) the client is violating federal criminal laws
(2) the transactions involve
A customer gives his registered representative the following instructions: Buy 100 shares of General Motors whenever you think the price is right. Under current regulations, the order:
a. may be accepted and may be executed anytime that day
b. must be mar
A. May be accepted and may be executed anytime that day
The order may be accepted and is not a discretionary order requiring the written power of attorney. The order does not need to be executed immediately, but must be executed sometime during the day it
Which of the following employees of a broker-dealer must provide written notification to her employer in order to open a securities account at another firm?
I. a registered representative
II. a principal
III. a secretary
IV. a janitor
a. I and II only
b.
D. I, II, III, and IV
Any employee of a broker-dealer must provide written notification to her employer in order to open an account at another firm.