Chapter 14 - Customer Accounts Flashcards
Allows cash and securities to be withdrawn from a discretionary account.
Full trading authority
(True or False) If a customer specifies the security, the quantity, and whether to buy or sell, the broker can determine when to execute the trade on that day.
True
The Reg T margin requirement for short sales is ___%.
50%
What is the maximum annual IRA contribution for a 58-year-old who only has investment income?
$0 because he has no earned income
When must clients be given an Option Disclosure Document?
At or prior to account approval
Joan invests $15,000 in a qualified annuity. At age 64, she withdraws all $22,000. What’s Joan’s basis and what’s taxed?
Her basis is zero, since the annuity is qualified (funded pretax) and the entire $22,000 is taxed as ordinary income.
Document that allows a broker-dealer to lend customer securities to someone wishing to sell them short.
Loan Consent Agreement
Federal law that requires employers to provide a high degree of fiduciary responsibility to group plan participants.
The Employee Retirement Income Security Act (ERISA)
Describe the customer’s pledging of securities as collateral to the broker-dealer.
Hypothecation Agreement
Plan that uses pre-tax contributions and the growth of the account is tax-deferred.
A 401(K)
To enter discretionary orders, a client’s authorization must be obtained:
in writing
The right an employee gradually acquires by length of service at a company to receive employer-contributed benefits.
Vesting
A margin disclosure document must be provided to a client:
at the time the account is opened
A withdrawal of up to $____ may be taken without penalty from an IRA for a first-time purchase of a home.
$10,000
An individual retirement account in which the money grows tax-deferred.
Traditional IRA account
Account with multiple owners and each has trading rights. If one owner dies, the account value passes to the other owner(s).
Joint Tenants With Right of Survivorship (JTWROS)
An account opened and owned by a business entity that has a valid corporate resolution.
Corporate account
Tax-free distribution to an IRA owner that is then contributed to a different IRA or retirement plan.
IRA Rollover
While power of attorney does not need to be renewed, it is cancelled at the time of:
the owner’s death
An individual retirement account in which the money grows tax-free if certain conditions are met.
Roth IRA account
An agreement where someone other than the owner is authorized to determine the securities to be purchased or sold.
Investment discretion
Retirement plan that makes distributions based on a predetermined formula.
Defined benefit plan
Account with multiple owners and each has trading rights. If one owner dies, his account value passes to his estate.
Joint Tenants in Common account (JTIC)
The percentage a customer must deposit when purchasing securities or selling short.
Regulation T
(True or False) Regarding discretionary accounts, orders must be approved verbally by the customer prior to execution.
False
(True or False) Regarding discretionary accounts, orders must not be excessive in terms of size or frequency.
True
If a customer wishes to open an account to trade options, the account must be approved:
prior to the time an initial order is accepted
Document that allows a broker-dealer to lend a customer’s securities to other clients or broker-dealer’s.
Loan consent agreement
(True or False) Distributions from CESAs and 529 plans can be used for pre-college education expenses.
True
(True or False) Investments in CESAs and 529 plans are self directed.
False
To determine whether churning has occurred in a discretionary account, the primary concern is:
the frequency of trading
