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S7 > Ch. 2 S7 > Flashcards

Ch. 2 S7 Flashcards

1
Q

T/F: Names appearing on the OFAC List are customers who had a previous business relationship with the firm.

A

F; the list shows names of suspected criminals and terrorists

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2
Q

If an RR suspects that a client might be showing signs of dementia, what is the best course of action?

A

To request a meeting with both the client and a family member

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3
Q

What is ERISA?

A

Employee Retirement Income Security Act

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4
Q

What regulation protects the nonpublic personal information of customers?

A

Regulation SP

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5
Q

Churning is described as ___________ designed to __________.

A

Excessive trading ; generate commissions

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6
Q

A client executes three day trades over a five business day period. Is this client a pattern day trader?

A

No. A pattern day trader executed four or more day trades over a five day period

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7
Q

Regulation SP requires clients to be provided with a ___________ detailing how BDs handle personal client information.

A

Privacy Notice

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8
Q

Who is responsible for determining the suitability of orders placed in a discretionary account?

A

The individual placing the order

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9
Q

There is a _____% penalty for early withdrawals from an IRA.

A

10%

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10
Q

Define an insider.

A

Officers, directors, partners, greater than 10% owners, and immediate family members of all listed

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11
Q

For accounts opened for employees of another member firm, what is provided to the individuals employer upon request?

A

Duplicate confirmations and statements

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12
Q

Describe a wrap account.

A

An account that charges the client a single fee that covers transaction execution and account management

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13
Q

For a joint account, how many account numbers and SSNs are used for tax reporting?

A

One

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14
Q

Both the ________ and the __________ are required for a corporation to open an options or margin account.

A

Corporate resolution and corporate charter

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15
Q

What specialized service does a prime broker offer it’s clients?

A

Custody, security lending, margin financing, clearing, processing, research, customized reporting

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16
Q

List some retirement accounts that have required minimum distributions.

A

Traditional IRA, 401k, 457, and 403b

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17
Q

T/F: In a DVP transaction, payment is made by a clients agent when the securities are delivered and accepted.

A

T

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18
Q

T/F: Only one person must provide information to open a joint account.

A

F; need information for both

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19
Q

When must IRA withdrawals begin in order to avoid the late withdrawal penalty?

A

By April 1st of the year after an individual turns age 72

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20
Q

Who may enter orders in a joint account?

A

Any owner named on the account

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21
Q

RRs must examine what document to open any corporate account?

A

Corporate resolution

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22
Q

What does it mean for a client to use a prime brokerage account?

A

The client trades through multiple BDs, but it has its trades cleared and settled with one prime BD

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23
Q

Individuals must register with the SEC within ______ of becoming an insider.

A

10 days

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24
Q

T/F: Money may be withdrawn from a joint account in one owners name.

A

F; any checks should be in both parties names

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25
A client executes seven day trades over two business day period. Is this client a pattern day trader?
Yes, a pattern day trader executes four or more trades over a five day period
26
When an individual reaches age ________, they may begin withdrawing from an IRA without penalty.
59 1/2
27
T/F: Principals must approve discretionary orders prior to entry.
F; orders must be approved promptly after
28
What program must be established by BDs to verify the identity of each customer opening an account?
Customer Identification Program (CIP)
29
Explain a prime-brokerage arrangement.
A situation in which multiple BDs executes a clients trades and report them to one independent BD for settlement
30
Anyone with ___________ income may contribute to an IRA.
Earned
31
T/F: All corporate officers may effect transactions for the corporation.
F; only those named on the corporate resolution
32
What three items must be specified on a not held order?
Action (buy/sell), amount (quantity), and asset (security)
33
Identify the acronym: RMD
Required Minimum Distributions
34
T/F: Clients need not sign the account form for a cash account.
T; but signature would be required for an option or a margin account.
35
______________ protects customers from a BD bankruptcy.
SIPC
36
T/F: RRs are always prohibited from sharing in a customers account.
F; RRs may share in a customers account if they have permission and sharing is proportionate to their investment.
37
ERISA gave the US government jurisdiction over __________ plans.
Private pension
38
What happens to the deceaseds portion in a joint account with tenants in common?
The deceaseds portion goes to his estate for tax purposes.
39
A pattern day trader is someone who executes _____ or more day trades over ______ consecutive business days.
Four; five
40
Define vesting.
The right an employee gradually acquires by length of service at a company to receive employer contributed benefits
41
What happens to the deceaseds portion in a joint account with rights of survivorship?
Her portion passes to the survivor.
42
If a client refuses to provide certain information, may the account still be opened?
Yes, although the name and address are required
43
What are some of the acceptable investments for an IRA contribution?
Stocks, bonds, mutual funds, CDs
44
What list must be checked to identify suspected terrorists and criminals?
OFAC list
45
A _____________ is required to open an account for a partnership.
Partnership Agreement
46
The __________ is the person who has fiduciary control over a trust.
Trustee
47
T/F: RRs are typically not permitted to lend money to a client.
T; while exceptions existing, personal loans to clients are typically prohibited
48
What must be done by the carrying firm when opening an account for an employee of another FINRA member firm?
The carrying firm must receive written consent from the employer
49
What is needed to exercise discretion over a clients account?
Written POA
50
T/F: FINRA regulates accounts of member firm employees opened at another firm.
T; the rule also covers accounts for the employees spouse or dependent children.
51
For how long may a not held order be maintained?
A not held order is considered a day order
52
Is discretionary authorization required to enter a not held order?
No, since discretion is limited to time and/or price for not held orders.
53
The ___________ must sign the account form.
Supervising principal
54
What is the benefit of establishing a revocable trust?
It avoids probate.
55
What are the benefits of setting up an irrevocable trust?
It will reduce estate taxes and also avoid probate
56
Define churning.
Excessive trading solely for the purpose of generating commissions or fees
57
What items are acceptable as proof of identity under CIP?
Passport or drivers license (both have a picture)
58
How are withdrawals from Roth IRAs treated for tax purposes?
Withdrawals are tax free if the account is open for at least five years and is not considered an early withdrawal
59
What may an RR do with full discretion, but not with limited discretion?
Withdraw money from the account.
60
T/F: a prime broker provides centralized clearing and custodial services, as well as consolidation of reports.
T; for margin customers, it also allows for the consolidation of positions resulting in lower interest costs.
61
T/F: Not held order may only be executed in a discretionary account.
F; discretionary power of attorney is not required
62
List some of the information to be included on a municipal customer confirmation.
Description, price and yield (lower of YTM and YTC), BD capacity (commission for agency), trade and settlement dates
63
If a client seems confused and demands and unsuitable change of objective, what step should an RR take?
Confusion and/or dementia are concerns that may warrant an RR to request a meeting with the client and a family member
64
May a wife enter a trade in a husbands account?
Yes, with written third party authorization
65
T/F: Using a PO Box as an address is not acceptable to open an account.
T; an actual address is required to open an account; however, mail may be sent to a PO Box
66
Define a prime broker.
A BD that settles and clears trades effected by one or more executing brokers at the direction of the client
67
Define pattern day trading.
Executing four or more day trades over a five day period.
68
Based on written instructions, a BD may hold customer correspondence for __________ months.
Three
69
When must insiders report their transactions?
Within 2 business days of the trade
70
What is the difference between a revocable and irrevocable trust?
Revocable trusts can be changed after they are established, while irrevocable trusts cannot be changed.
71
When must customer confirmations be sent?
By the completion of the transaction (usually the settlement date)

S7 (18 decks)

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