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Series 99 > Accounting Opening & Maintenance > Flashcards

Accounting Opening & Maintenance Flashcards

1
Q

Examples of self-regulatory organizations

A
  • The New York Stock Exchange
  • Chicago Board of Trade
  • American Council of Life Insurers
  • Financial Industry Regulatory Authority, Inc
  • Fixed Income Clearing Corporation
  • Options Clearing Corporation
  • American Institute of Certified Public Accounts
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2
Q

Types of customer accounts

A

Retail
Institutional
Prime Brokerage Customer

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3
Q

Retail Account

A

There are two options for individual investors to gain access to the markets:

  1. Individual trading accounts
  2. Through managed, pooled accounts such as a mutual fund or a hedge fund
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4
Q

Institutional Account

A

Any account opened by a bank, savings and loan, insurance company, or registered investment company; an investment advisor registered either with the SEC or with a state; or any corporation, trust, natural person, et cetera, with total assets of at least $50 million

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5
Q

Examples of Institutional Investors

A 
Insurance companies 
Pension funds
Endowments
Venture capital firms
Private equity firms 
Employee stock option plans
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6
Q

Prime brokerage account

A

An account where a customer selects a member firm (the prime broker) to provide custody and other services, while other firms (the executing brokers) handle all trades placed by the customer

Under SEC rules, must maintain a minimum of $500,000 in equity in the account

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7
Q

Transfer on Death (TOD)

A

A type of individual (or JTWROS) account registration where the account holder designates a specific beneficiary or beneficiaries to receive the assets in the account upon the holder’s death. No special legal documentation is necessary and the assets pass without going through probate

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8
Q

Tenants in Common (TIC)

A

A form of joint ownership of an account whereby a deceased tenant’s fractional interest in the account is retained by his estate

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9
Q

Joint tenants with right of survivorship (JTWROS)

A

A form of joint ownership of an account whereby a deceased tenant’s fractional interest in the account passes to the surviving tenant(s)

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10
Q

Joint Accounts

A

Two or more adults are named on the account as co-owners.
In addition to the new account form, a joint account agreement must be signed, and the account must be designated as either TIC or JTWROS

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11
Q

Corporate Account

A

An account held in a corporation’s name specifying which officers are authorized to trade in the account. A corporation must provide a copy of its charter and bylaws authorizing a margin account

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12
Q

A registered representative who opens a corporate account must establish:

A
  1. The business’s legal right to open an investment account
  2. An indication of any limitations that the owners, the stockholders, a court, or any other entity has placed on the securities in which the business can invest and
  3. Who will represent the business in transactions I’m loving the account
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13
Q

Partnership Account

A

Empowers individual members to act on behalf of the partnership as a whole

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14
Q

Fiduciary

A

A person authorized, in good faith, to hold assets for another person and manage those assets for the benefit of that person

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15
Q

Custodial Account

A

An account in which a custodian enters trades on behalf of the beneficial owner, who is often a minor. A custodian cannot delegate away fiduciary responsibility but can grant trading authority and investment decisions to a qualified third party

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16
Q

Custodian

A

An institution or person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another.

For example, mutual funds have custodians responsible for safeguarding certificates and performing clerical duties

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17
Q

Power of Attorney

A

A written authorization to represent or act on another’s behalf

Two types: Full and Limited

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18
Q

Full POA

A

A full power of attorney allows someone who is not the account owner to

  • deposit or withdraw cash or securities, and
  • Make investment decisions for the account owner
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19
Q

Limited POA

A

Allows the entering of buy and sell orders but no withdrawal of assets

20
Q

Discretionary Account

A

An account in which the principal (beneficial owner) has given the registered representative authority to enter transactions at the representative’s discretion.

The registered representative may, if so directed by the customer, use the discretion about price (buy or sell), time, and choice of securities (bought or sold)

21
Q

Discretionary Order

A

An order entered by a registered representative for a discretionary account allowing use of the representative’s judgment on the customer’s behalf, with respect to the choice of security, quantity of security, and/or whether the transaction should be a purchase or sale

22
Q

Regulation of discretionary accounts

A
  • each discretionary order must be identified on the order ticket
  • an officer or a partner of the brokerage house must approve each order promptly
  • a record must be kept of all transactions
  • no excessive trading, or churning, may occur in the account relative to the size of the account and the customer’s investment objectives
  • to safeguard against the possibility of churning, a designated supervisor or manager must review all trading activity frequently and systematically
23
Q

Non conventional investments

A 
Alternative investments that do not fit a common category
Examples:
- Hedge funds
- Distressed debt
- Equity-linked Notes
24
Q

Identifying a discretionary order

A

An order is discretionary if any one of the three A’s is missing:

  • Activity (whether to buy or sell)
  • Amount (number of shares to buy or sell)
  • Asset (the security to buy or sell)
25
Q

Required information on Nee Account Form

A

Full name of account holders
Date of Birth
Address and Phone Number
Social security number or tax identification number
Occupation, employer, and type of business
Citizenship
Whether the customer is of legal age
Annual income and net worth
Investment objectives
Bank and brokerage references
Whether customer is an employee of another BD
Now the account was acquired
Signatures of the representative opening the account and a principal or branch manager accepting the account

26
Q

Standing settlement instructions (SSIs)

A

Customers may select any of the following delivery instructions

  • Transfer and ship
  • Transfer and hold in safekeeping
  • Hold in street name
  • Delivery versus payment
27
Q

Suitability

A

A determination made by a registered representative as to whether a particular security matches a customer’s objectives and financial capability. The representative must have enough information about each customer to make a reasonable judgment

28
Q

Suitable Transaction

A

A transaction that meets or takes into account the investment needs of the customer. All solicited transactions must be suitable

29
Q

Suitability Obligation

FINRA Rule 2111 - 3 obligations when making a recommendation

A
  • reasonable basis suitability
  • customer specific suitability
  • Quantitative suitability
30
Q

5 types of personal information clients should provide when opening a brokerage account

A
  1. social security or tax identification number
  2. Drivers license or passport
  3. Employment status and financial information
  4. Client’s investment profile
  5. Name of a trusted contact person
31
Q

Qualified Retirement Plan

A

A corporate retirement plan that meets the standards set by the Employee Retirement Income Security Act of 1974.

Contributions to a qualified plan are tax deductible

32
Q

Non qualified Retirement Plan

A

A corporation retirement plan that does not meet the standards set by the Employee Retirement Income Security Act of 1974

33
Q

Employee Retirement Income Security Act (ERISA)

Guidelines

A
  • Participation
  • Funding
  • Vesting
  • Communication
  • Nondiscrimination
  • Party-in-interest
34
Q

Defined contribution plan

A

A qualified retirement plan that specifies the amount of money that the employer will contribute annually to the plan

35
Q

Payroll deduction plan

A

An employer’s withholding of money for certain purposes, such as benefits and taxes, or for retirement plans, such as a payroll deduction IRA. These plans are not qualified under ERISA

36
Q

Deferred compensation plan

A

A nonqualified retirement plan whereby the employee defers receiving current compensation in favor of a larger payout at retirement (or in the case of disability or death)

37
Q

Individual retirement account (IRA)

A

A retirement investing tool for employed individuals that allows an annual contribution of 100% of earned income up to an index dollar maximum

38
Q

IRA rollover

A

The reinvestment of assets that an individual receives as a distribution from a qualified tax deferred retirement plan into an individual retirement account

39
Q

IRA transfer

A

The direct reinvestment of retirement assets from one qualified tax deferred retirement plan to another, or to an individual retirement, without ever passing through the investor’s hands

40
Q

Roth 401(k) Plan

A

A retirement plan that combines the characteristics of a Roth IRA with a corporate 401(k) plan

41
Q

Roth IRA

A

Allows taxpayers - subject to certain income limits - to save money for use in retirement while allowing the savings to grow tax deferred, with qualifying distributions being tax free

42
Q

FINRA Rule 2231

A

Requires each general securities member firm to send account statements to customers at least quarterly

43
Q

Escheatment

A

The process of identifying customer’s deposit accounts that are considered abandoned.

Abandoned funds are remitted to the appropriate state

44
Q

Documents necessary to release the assets of a decedent

A
  • a certified copy of the death certificate
  • inheritance tax waivers
  • letters testamentary
45
Q

Regulation T

A

The Federal Reserve Board regulation that governs customer cash accounts and the amount of credit that brokerage firms and dealers may extend to customers for the purchase of securities

46
Q

Regular way settlement

A

The time when standard securities transactions are settled

Series 99 (2 decks)

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