Mr. Jack Smith has a margin account in his own name with BR Securities, Inc. He also has a joint tenancy account with his father, John Smith. Mrs. Smith, Jack's wife, calls Joe Johnson, the registered representative who is assigned to both accounts, and i
Your answer, Not execute the order until he receives written authority from Jack, which authorizes his wife to act with discretionary authority over his margin account., was correct!.
A registered representative may not execute a third-party order (one gi
Broker/dealers who reserve the right to disclose nonpublic private information about their customers to unaffiliated third parties must
provide notice to customers at the time of the account opening
provide notice to customers each time a transaction occu
Your answer, I and III, was correct!.
Regulation S-P requires that if a broker/dealer reserves the right to disclose nonpublic personal information to third nonaffiliated parties, it must notify the customer at the time of the account opening and annually
If a registered representative of a FINRA member firm wants to open an account with another member firm, which of the following statements are TRUE?
The account may only be opened if the registered representative (RR) is also a principal of his employing
Your answer, III and IV, was correct!.
The employing broker/dealer must be notified in writing but need not grant prior approval for the account to be opened. It must receive duplicate confirms and account statements if it has requested them.
Reference: 5
All of the following information must be obtained from new individual customers EXCEPT:
A) educational background.
B) Social Security number.
C) date of birth.
D) residence address.
Your answer, educational background., was correct!.
A customer's educational background is not required to open a new account. In the case of an account opened in the name of a business, the business address and tax identification number are required.
Ref
Which of the following allows investors to hold securities in either the name of the issuer or their transfer agent and facilitates the transfer of those securities from the issuer or their transfer agent to an investor's broker/dealer in a secure, effici
Your answer, The Committee on Uniform Securities Identification Procedures (CUSIP), was incorrect. The correct answer was: The Depository Trust Company through the Direct Registration System (DRS)
The Depository Trust Company (DTC) through the Direct Regi
Your client informs you that a signed discretionary account form is in the mail. Before receiving the form and unable to contact the client, you notice that one of his stocks is dropping sharply on adverse news. You:
A) can enter a discretionary order wit
Your answer, cannot enter a discretionary order., was correct!.
A discretionary order cannot be entered until the signed discretionary account form has been received.
Reference: 5.2.2.2 in the License Exam Manual.
Which of the following statements regarding UGMA accounts are NOT true?
Only one custodian may be appointed for an UGMA account in the name of a minor.
A gift under UGMA can be revoked.
A custodian is liable for imprudence.
Short sales are permitted in an
Your answer, II and IV., was correct!.
An UGMA account is allowed only one custodian and one minor. Short selling is prohibited in UGMA accounts. Once a gift is given, it is irrevocable. The custodian has fiduciary responsibility toward the minor to inves
All of the following are fiduciary accounts EXCEPT:
A) guardian accounts.
B) trust accounts.
C) TOD accounts.
D) estate accounts.
Your answer, TOD accounts., was correct!.
Transfer on Death Accounts (TOD) are individual accounts with a designated beneficiary to receive account assets upon the death of the account owner.
Reference: 5.2.1.4 in the License Exam Manual.
With a durable power of attorney the key feature that differentiates it from other power of attorneys is that it will:
A) cease to exist if the person who was given the POA dies.
B) survive a declaration of mental incompetence regarding the party who has
Your answer, survive a declaration of mental incompetence regarding the party who has granted the durable POA., was correct!.
The key feature of a durable POA is that it will survive the declaration of mental incompetence on the part of the grantor. They
If a customer wants to open an account in the name of her adult son and wants the account to be approved for uncovered option writing, her request should be refused because:
A) it is a trade through and nothing is currently known about the son's investmen
Your answer, the opening of accounts for third parties is prohibited., was correct!.
An adult cannot open an account and name another adult as the beneficial owner. The type of option trades and the third party's investment experience are not relevant.
Re
An employee of another broker/dealer would like to open an account with your firm. Under FINRA rules, all of the following statements regarding the employee and the account are true EXCEPT
A) the broker/dealer holding the account must approve each transac
FINRA rules do not require prior approval of individual transactions by the broker/dealer (at which the account has been opened). The rules do require that the employing broker/dealer be notified before the account is opened in writing and that duplicate
In administering a joint account, a member firm's responsibilities concerning suitability determination and information disclosure apply to:
A) the person with trading authority for the account.
B) the person whose Social Security number is on the account
Your answer, all persons who jointly own the account., was correct!.
Suitability rules apply to all owners in a joint account.
Reference: 5.2.1.2 in the License Exam Manual.
All of the following are fiduciary accounts EXCEPT:
A) estate accounts.
B) trust accounts.
C) transfer on death (TOD) accounts.
D) guardian accounts.
Your answer, transfer on death (TOD) accounts., was correct!.
A TOD account is an individual account in which, on the death of the account owner, the assets pass to a designated beneficiary.
Reference: 5.2.1.4 in the License Exam Manual.
Question 14 of 25ID: 25271
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A power of attorney is not required for a registered representative to choose which of the following order instructions?
Security to be bought or s
Your answer, III and IV., was correct!.
If a registered representative chooses price or timing of an order only, that order is not a discretionary order and a power of attorney is not required. The order is a not-held order. To be discretionary, the repre
Which of the following is required to be maintained by financial institutions such as banks and broker/dealers (BDs) by the USA PATRIOT Act to prevent the financing of terrorist operations and money laundering?
A) Specially Designated Nationals list
B) Do
Your answer, Specially Designated Nationals list, was incorrect. The correct answer was: Customer identification programs (CIPs)
The USA PATRIOT Act requires financial institutions to maintain customer identification programs (CIPs) to protect against fin
Which of the following are governed by the prudent investor rule?
Trustee.
Executor.
Custodian.
Registered representative who has been granted discretionary authority.
Your answer, I, II, III and IV., was correct!.
The prudent investor rule applies to fiduciary accounts, or accounts in which someone is acting on someone else's behalf. In these accounts, the fiduciary must act prudently. A registered representative who h
An employee of a FINRA member firm wishes to open an account at another member firm. The employee opening the account must
Your answer, give prior written notice to the employing broker/dealer before the account can be opened, was correct!.
Persons associated with one FINRA member firm may open securities accounts at other member firms as long as prior written notice was made
How must stock subscription rights be handled in a custodial account for a minor?
A) The custodian cannot exercise or sell rights for the custodial account.
B) The rights may be exercised or sold only if the stock is held in street name.
C) The rights may
Your answer, The custodian can exercise or sell rights as he deems prudent., was correct!.
The custodian must either buy the securities or sell the rights; he cannot let the rights expire because this would not be in the best interest of the minor. The sa
Which of the following may NOT normally assign authorization to a third party?
A) A corporation.
B) An individual.
C) A custodian.
D) A joint account.
Your answer, A joint account., was incorrect. The correct answer was: A custodian.
Assigning authorization to a third party is giving discretionary authority to someone else. The custodian of an account is the person with discretionary authority over the
An unmarried couple wants to open a new account registered as joint tenants with rights of survivorship (JTWROS). Which of the following should occur?
The registered representative should discuss the resulting consequences of opening an account registered
Your answer, I and IV., was correct!.
In an account registered JTWROS, if one party to the account dies, the deceased party's ownership interest in the account passes to the surviving tenant, rather than to the deceased party's estate. There are no rules
A joint account could be opened for any of the following EXCEPT:
A) 3 business associates.
B) a corporation.
C) a parent and minor child.
D) 2 partners in a limited partnership.
Your answer, a parent and minor child., was correct!.
Minor children cannot be a party to any account except an UGMA or UTMA.
Reference: 5.2.1.2 in the License Exam Manual.
A customer asks his registered representative to exercise discretion over her account. To do so, the representative must:
obtain written authorization from the customer.
obtain evidence of written acceptance of the account by a registered principal of the
Your answer, I, II, III and IV., was correct!.
The requirements for a discretionary account include a written authorization from the customer, a written acceptance by the firm, and close supervision of each transaction to ensure suitable transactions in l
If a customer wants his account designated by number, not by name, the registered representative:
A) can open this account with a written statement of ownership and approval from the FINRA.
B) cannot open the account in this manner.
C) can open this accou
Your answer, can open the account with a written statement of ownership from the customer., was correct!.
For numbered accounts, the customer must sign a document attesting to ownership.
Reference: 5.1.4.1 in the License Exam Manual.
When a customer opens an account with a financial institution, the institution is required to give a clear and conspicuous disclosure to the new customer regarding its policies and procedures for customer privacy. How often must the customer receive an up
Your answer, At least on an annual basis., was correct!.
The institution is required to give a clear and conspicuous disclosure to the new customer regarding its policies and procedures for customer privacy. The customer must receive the information upon
Under the U.S.A PATRIOT Act, which of the following is CORRECT?
A) Sharing information among financial institutions regarding suspected terrorist acts or money laundering activities is encouraged, except when such sharing violates the Gramm-Leach-Bliley A
Your answer, Financial institutions are encouraged to share information regarding suspected terrorist acts or money laundering activity., was correct!.
Under the U.S.A PATRIOT Act, financial institutions, as well as regulatory and law enforcement authorit