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Customer Accounts > Account Basics > Flashcards

Account Basics Flashcards

1
Q

What 4 basic pieces of information do you need to open a customer account?

A

Name
Address
SSN or Tax ID
DOB

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2
Q

If a firm requires it, what separate document must customers sign within 30 days of opening an account?

A

Arbitration Agreement

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3
Q

How often must a customer be sent their account profile for review?

A

Every 36 months

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4
Q

Are the customer or the registered representative required to sign the new account form?

A

Representative - Yes

Customer - No

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5
Q

How many days does a new customer have to verify their new account profile?

A

30

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6
Q

What are the 3 components of suitability according to FINRA?

A

Reasonable-Basis Suitability
Customer-Specific Suitability
Quantitative Suitability

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7
Q

Reasonable-Basis Suitability

A

Requires the registered representative to fully understand the various benefits, risks, and features of every product they offer so that they can accurately assess their value to a customer.

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8
Q

Customer-Specific Suitability

A

Analyzing how a specific investment product’s might work for an individual customer’s investment profile

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9
Q

Quantitative Suitability

A

Analyzing the investment product and all other investment activity of the customer to ensure that the account is not being overextended

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10
Q

Customer’s Personal Balance Sheet

A

Part of the suitability determination must include a personal balance sheet of the customer in order to determine liquid net worth

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11
Q

Liquid net worth

A

maximum amount of immediate funds a customer can commit to an investment

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12
Q

What three categories do suitability rules not apply to?

A

Institutional Investors
Unsolicited (customer requested) Trades
Investment Analysis Tools (ie Retirement Calculator)

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13
Q

What two stages are there to determining if a customer is suitable for a structured product investment?

A

Reasonable Basis - analyze product

Customer Specific Basis - analyze how product would work for customer

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14
Q

Pattern Day Trader Definition

A

4 or more trades in 5 business days or less

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15
Q

How long does a customer have to returned a signed options agreement after opening an options account?

A

15 days

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16
Q

Under MSRP rules, if a customer refuses to disclose financial information, can a recommendation still be made?

A

No

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17
Q

What does a loan consent form allow a brokerage firm to do with the securities in a customers margin account?

A

Lend them out to other customers to cover short sales

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18
Q

What happens to a joint account owned under joint tenancy with rights of survivorship when one of the parties dies?

A

The other party is the sole owner of the accont

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19
Q

How does tenancy in common work if one of the parties dies?

A

Each party originally specified a percentage of interest in the account. If they die that percentage goes into their estate and can be passed on to anyone

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20
Q

Who is most likely to use Transfer on Death as a form of account registration?

A

Elderly people. Allows them to specify a beneficiary to inherit the account if they die. Also used in second marriages to provide for children from a first marriage

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21
Q

What is the benefit of a prime brokerage account for an institutional investor?

A

Allows all their assets to be consolidated into one main account that then names several different brokerage firms as being allowed to execute trades

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22
Q

Who usually uses prime brokerage accounts?

A

Hedge funds

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23
Q

What is the difference between durable and non-durable power of attorney

A

Durable power of attorney persists of the grantor becomes mentally incompetent, non-durable ceases

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24
Q

What is a fiduciary account?

A

An account where a third party is acting for and in the best interest of the owner of the account. Example would be a trust account

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25
Q

What is the legal list?

A

A list of securities that a state allows fiduciary accounts to purchase. Usually only debt rated in the top 4 categories

26
Q

For a discretionary account, when must a customer sign the trading authorization form?

A

before any trades take place

27
Q

What can be done with a limited trading authorization?

A

Orders to buy and sell, but funds cannot be withdrawn

28
Q

When is a trade considered discretionary?

A

When the broker chooses more than the price and the time of the execution

29
Q

What 4 items need to be known when performing a trade for a customer

A

Size of Trade
Security
Price of Execution
Time of Execution

30
Q

When must Market-Not Held orders be executed?

A

Same day

31
Q

Who must approve all trades at end of day on a discretionary account?

A

Principal

32
Q

UGMA

A

Uniform Gift to Minors Act - allows custodian accounts to be opened for minors

33
Q

How many minors can be on a UGMA account?

A

1

34
Q

Are UGMA accounts cash, margin, or both?

A

Only cash

35
Q

What is generally the only option strategy that is appropriate for custodian accounts?

A

Covered call writing

36
Q

UTMA

A

Uniform Transfer to Minors Act - newer version of UGMA

37
Q

Difference between UGMA and UTMA

A

UTMA allows any type of gift such as real estate, art, patents

UGMA sets transfer age at 18, UTMA allows customer to set a transfer age, up to maximum set by state

38
Q

Who would use an omnibus account?

A

Investment adviser - used to create a master account that will manage several clients

39
Q

How quickly must customers receive written confirmation of transactions on their account?

A

1 day after trade

40
Q

When would a customer receive a monthly statement as opposed to a quarterly statement?

A

Monthly statements if there is any trading activity, quarterly if there is not

41
Q

What 3 records must be kept on hand for all customers?

A

New Account Form information
Chronological record of trades
Current account statement

42
Q

what happens if there is an error in how a firm executed a customer’s order?

A

The firm is required to provide the customer with the order at the price it could have been executed at

43
Q

How long does a firm have to deliver any customer positions that are not physically at the firm if the customer transfers?

A

10 days

44
Q

What 4 things should a registered representative do if they learn that a customer has died?

A

Cancel all open orders
Freeze account
Note customer is deceased on account
Await instructions from estate

45
Q

What is a SAR and when is it used?

A

Suspicious Activity Report

Filed with law enforcement to report suspected money laundering activity

46
Q

Does verification of new account data need to happen at opening, or can it be verified later?

A

Can be verified a reasonable time later

47
Q

What information is required on the new account form?

A

type of account - cash or margin

country of citizenship

48
Q

Are fixed fee accounts considered advisory products or brokerage products?

A

Advisory

49
Q

Is an options agreement required at the opening of a new options account?

A

No, must be returned by customer within 15 days

50
Q

Can minors participate in any kind of joint account?

A

No

51
Q

Whose signature is required to open an account for a limited partnership?

A

general partner

52
Q

What are the 3 parties to a brokerage account?

A

1st - Brokerage Firm
2nd - Customer
3rd - Anyone Else

53
Q

If a third party has full power, can they withdraw checks in their name?

A

No, checks must be made to customers name

54
Q

What is the only type of account that requires a signed customer agreement to open?

A

Margin account

55
Q

How are custodian accounts taxed?

A

income reported to IRS annually and due that year, responsibility of the minor; if income exceeds 2100, taxed at parents rate

56
Q

Wrap Account

A

type of brokerage account where a customer is charged a single annual fee to cover all account services

57
Q

What must a customer do to have a numbered account?

A

Sign a statement attesting ownership

58
Q

How long can a customers mail be held?

A

3 months

59
Q

If a customer is transferring their account, when can they start trading at the new firm?

A

Once their old firm validates the account transfer form

60
Q

What agency should an SAR be filed to?

A

FinCEN - Financial Crimes Enforcement Network

61
Q

Regulation SP

A

Statement of Privacy - requires finanacial institutions to disclose privacy policies

Customer Accounts (8 decks)

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