The customer relationship summary (Form CRS) is an integral part of Regulation Best Interest. For an existing cash account customer who received the initial Form CRS in early July 2020, a new Form CRS must be delivered no later than
A)
a change to the ben
C
Existing customers received their initial Form CRS no later than July 30, 2020. They must also be sent a revised copy at or before the opening of a new account that is different from the retail investor's existing account. An example of this would be th
In a discretionary account where the investment objective is preservation of capital with moderate income, all of the following practices are unsuitable except
A)
frequent and profitable short-term trading in volatile stocks.
B)
marking order tickets soli
C
In some test questions, the best way to select the correct choice is when three of the four options are clearly wrong. This is an example of that case. Preservation of capital is certainly not a high-risk objective and does not call for frequent trading
FINRA Rule 2111 places three obligations on members when determining if a specific recommendation to a customer is suitable. FINRA's suitability rules would likely find a registered representative is not in violation of complying with those three if
A)
th
A
This question refers to the three specific obligations under Rule 2111. Those three are reasonable-basis suitability, customer-specific suitability, and quantitative suitability. Complying with the first of the three means the registered representative
If an agent is assigned to an account previously handled by an agent who has since left the firm, which of the following actions should the agent take first?
A)
Suggest the customer buy one of the stocks the firm is currently recommending.
B)
Liquidate th
C
The agent must verify and update client information before recommending trades. Without knowledge of the client's needs and financial profile, the agent cannot make suitable recommendations.
Regulation BI established a new standard of conduct under the Securities Exchange Act of 1934 for broker-dealers and associated persons of a broker-dealer when making a recommendation of any securities transaction or investment strategy involving securiti
B
Account recommendations include recommendations of securities account types generally (e.g., to open an IRA or margin account), as well as recommendations to roll over or transfer assets from one type of account to another (e.g., a workplace retirement
Which of the following are governed by the prudent investor rule?
Trustee
Executor
Custodian
Registered representative who has been granted discretionary authority
A)
II and III
B)
I and II
C)
III and IV
D)
I, II, III, and IV
D
The prudent investor rule applies to fiduciary accounts, or accounts in which someone is acting on someone else's behalf. With these accounts, the fiduciary must act prudently. A registered representative who has been granted discretionary authority is
Which of the following circumstances would not cause a registered representative to be identified as a fiduciary?
A)
A registered representative names one of his customers the executor of his estate
B)
A registered representative receives discretionary au
A
Executors of an estate are included in the definition of a fiduciary. However, in this choice, the customer is the executor, not the registered representative. That customer has a fiduciary responsibility to the representative's heirs (when that time co
One of your customers would like to begin an investment program calling for regular monthly contributions of $200. Which of the following would be the best source for determining if this plan is reasonable?
A)
The investor's income statement
B)
The invest
A
When it comes to the ability to make ongoing contributions to an investment program, the income statement is usually going to be the most reliable tool for verification. It is from the income statement that discretionary income (the amount left over aft
Tamika is a registered representative with Financial Engineers, LLC, a FINRA member broker-dealer. The firm uses an investment policy statement (IPS) to help design financial plans for their clients. One of Tamika's current clients plans to purchase a new
B
Investment constraints are obstacles or restrictions that must be met in order to meet goals. In this case, we are dealing with a liquidity constraint�in seven months, cash will be necessary to make the purchase.
A customer wishing to open a numbered account must be informed that
A)
he must supply proof of U.S. citizenship and reside permanently in the United States.
B)
the account may only be opened with prior permission from the SEC.
C)
he must supply a written
C
Numbered�or symbol�accounts require that a written statement, which is signed by the client and acknowledges ownership, be kept on file.
One of the most important roles played by registered representatives is making suitable recommendations to their customers. Doing that requires gathering as much information about the customers as possible. Which of the following factors would likely be t
C
Although saving for retirement is the single most common investment objective, determining an expected retirement age for a couple this young is unrealistic�it is just too far away to make an accurate determination. Meeting the children's educational ne
A customer asks her registered representative to exercise discretion over her account. To do so, the representative must do each of the following except
A)
obtain evidence of written acceptance of the account by a registered principal of the firm.
B)
obta
B
The requirements for a discretionary account include a written authorization from the customer, a written acceptance by a principal of the firm, and close supervision of each transaction to ensure suitable transactions in light of the customer's objecti
When discussing a client's finances, which of the following would be of least importance when planning to make a lump-sum investment?
A)
Expected inheritance
B)
Year-end bonus
C)
Current salary
D)
Winning the lottery
C
Salary enables the registered representative to determine the funds available for periodic investment. A lump-sum investment could be made with money from an inheritance, a year-end bonus, or lottery winnings.
Opening a margin account involves a number of different documents. The document describing how the interest on the margin debt is calculated is generally known as
A)
the loan consent agreement.
B)
the credit agreement.
C)
the hypothecation agreement.
D)
t
B
It is the credit agreement, sometimes referred to as the margin agreement, that describes the creditor-debtor relationship. This includes the method of computing interest on the debit balance (the amount owed). The hypothecation agreement allows the bro