Account Features Flashcards
For cash accs what’s the settlement expectation
regular way t+2
What are the payment expectations for cash accs
by 2 days after settlement (4 days after purchase)
What accs can only be cash accs
accs with contribution limits like IRAs/retirement accounts and cust accs
What is the most common source of stock for someones margin acc
another customers margin acc
What is hypothecation
pledging your secs as collateral for margin trading
Where does the BD get the money for margin trades
loan from a bank where they rehypothecate the secs the customer pledged
What Reg oversees rehypothecation
Fed Reserve Reg U
What can a BD do and not do with customer secs in margin accs
cannot commingle customer secs with BD secs
can commingle two customers secs if they have signed a hypothecation agreement
If a partnerships/corps documents dont mention margin then
its okay
If the trust or other fiduciary docs are silent on margin then
its NOT allowed
What are the two forms needed for margin accounts
credit agreemnet
hypothecation
What is an optional form for margin accs
loan agreement
Whats required from the BD to the cust on margin accounts
risk disclosure yearly
What are the risks with margin accounts
cannot choose what secs get sold if maintennace call is not met
can lose more money than deposited
not entitled to an extension of time to meet a margin call
firms can increase margin requirements without advance notice
What Reg oversees what Secs can be pruchased with margin and which can be used as collateral
Reg T
What secs can be purchased with margin AND used for collateral
exchanged listed stocks and bonds
NASDAQ stocks
Approved OTC issues
warrants
What secs cannot be purchased with margin BUT can be used as collateral
mutual funds
New issues if they meet the normal Reg T reqs
Whats an additional requirement for using mut funds or new issues for collateral
must be held for 30 days
What secs cannot be purchased with margin AND cannot be used as collateral
options
rights
non-listed secs
insurance contracts
What secs are exempt from Reg T margin reqs
any kind of gov secs
What does marginable mean
secs that can be used as collateral
What is the current Reg T req on initial deposits in margin accounst
50% val of the purchase
What is the current FINRA req on initial deposits in margin accounts
2k or 100% whichever is less
Do you need to follow the Reg T or Finra reqs for initial deposit
whichever is greater
What is a maintenance call
if a customers equity in their margin accs drops below 25% of the acc val, asked to deposit to bring back to 25%
Normal time frame for maintenance calls
by end of the day
Whats FINRAs maintenance %
30%
When would you recommend a fee based account and why
freq traders bec set monthly fee regardless of amount of trades
Long term buy and hold investor should have what payment structure and why
commission based bec little trades so less transactions to be charged
What is a solicited trade
something that a BD or RR did led to the customer buying
What is reqd for solicited trades
marked as solicited
When the RR has a POA to make trades without the preauth from the customers its a
discretionary trade
What are the three A’s of discretion
the action
the amount
the asset
For a trade to not be discretionary, what is needed
cust needs to OBJECTIVELY provide all A’s
do time and price need a discretionary auth
no
Whats needed for a discretionary trade to be entered
auth for discretionary trading in writing
principal of the firm approves the discre auth in writing
principal of the firm promptly approves trades after entry
Discretionary auth can be given to
the representative not the BD
What happens to dis auth when the RR leaves the BD
ends
How can a customer revoke dis auth
in writing
What are wrap accs
mult services provided for a single fee
like asset allocation, portfolio man
Wrap accs are usu
investment advisory accs
Investment advisory accs have a
fiduciary resp
What is a disclosure req for investment advisory accs
client may be able to get all our services for less if all on a separate basis
