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Series 6 > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

Who is responsible for supervising the securities related activities of their representatives?

A

Broker-dealers

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2
Q

Where must the firms supervisory system be documented?

A

Written supervisory procedures (WSP)

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3
Q

How often must the WSP be reviewed?

A

At least annually

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4
Q

What is the name of an office of a broker dealer where the following activities occur? order execution, approval of new accounts, approval of retail communications, review of customer orders.

A

Office of supervisory jurisdiction (OSJ)

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5
Q

How often must an OSJ be audited?

A

At least annually

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6
Q

How often must a branch office have an internal audit By FINRA?

A

At least once every three years

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7
Q

What is short swing trading?

A

Selling stock that was acquired within the previous six months at a profit or repurchasing stock at a lower price within six months of its sale.

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8
Q

What is a shorting against the box?

A

Executing a short sale on a stock that the investor owns.

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9
Q

What is it called when persons are legally forced to give up their profits?

A

Disgorgement

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10
Q

What is the purpose of CIP? (Customer identification program)

A

To enable the broker dealer to form reasonable belief that the individual is who they claim to be.

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11
Q

How long must the customers identification information be retained?

A

Five years after the record was made. Identifying information specifically must be retained for five years after the account closed.

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12
Q

What does regulation S-p Pertain to?

A

Requires financial regulators including the SEC to implement policies and procedures that restricted financial institutions ability to disclose non-public personal information about their customers and consumers.

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13
Q

How often must customers be provided with privacy policies?

A

At least annually and at the initial time the relationship is established.

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14
Q

True or false. A community property account is like a joint tenants with rights of survivorship account but can only be held by a married couple.

A

True.

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15
Q

What is a corporate charter?

A

the legal document stipulating that the corporation is a legal entity. The corporate charter will detail what types of securities transactions a corporation can participate in to finance growth

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16
Q

What is the corporate resolution?

A

A form that specifies which individuals are authorized by the Board of Directors to enter orders in the account an act on behalf of the company

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17
Q

When is a corporate charter required?

A

When a company wants to borrow money from their broker or engage in certain risky trading strategies

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18
Q

When is a corporate resolution required?

A

To open a corporate account.

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19
Q

Corporate account that is owned by one person.

A

Sole proprietorship

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20
Q

When a business is co-owned by more than one person with all partners sharing the workload and management of the company is known as:

A

General partnership

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21
Q

What type of partnership has general managers who manage the business used limited partners who simply make monetary investments in the business?

A

Limited partnership

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22
Q

Do you call groups of two or more people that join for a common purpose?

A

Unincorporated association

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23
Q

What is the purpose of a fiduciary account?

A

They are established to manage the assets for the benefit of a third-party, the beneficiary.

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24
Q

What are two types of fiduciary accounts?

A

Trust accounts and estate accounts

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25
Q

Form required to open the account and names both trustee and the beneficiary.

A

Trust agreement

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26
Q

What is it called when a person dies without a legal will?

A

Intestate

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27
Q

Documentation to open partnership account

A

Partnership agreement

28
Q

Document to open corporate account

A

Corporate resolution

29
Q

Document to open an unincorporated association

A

Articles of association

30
Q

Document to open trust account

A

Trust agreement

31
Q

Additional documentation for deceased account

A

Death certificate and letters of appointment

32
Q

Dates established under regulation T

A

Declaration date, trade date, pay date

33
Q

Who regulates margin accounts and the extension of credit from banks to broker dealers and their customers?

A

SEC empowers the federal reserve board

34
Q

Documentation to open a margin account

A

Margin agreement

35
Q

Documentation that authorizes the firm to lend the clients securities to others

A

Loan consent agreement

36
Q

Document that must be given to customer explaining all the details on how the loans work and how interest is charged

A

Credit disclosure document

37
Q

Document that permits the broker dealer to use some of the customer securities as collateral for a bank loan to finance the customers Margin account debt or to lend it to other customers

A

Hypothecation agreement

38
Q

When must the hypothecation agreement be signed

A

Prior to opening a margin account

39
Q

Document given to customer at or before the opening of a margin account

A

Margin risk disclosure document

40
Q

Charge an annual fee based on a percentage of assets under management or an annual flat dollar amount for investment advice

A

Fee-based account

41
Q

Charge a commission for each investment transaction

A

Commission based accounts

42
Q

Account established by investment advisory firms not broker dealer. The client does not pay commissions or sales charges but is assessed a fee that covers all investment advisory fees administrative fees and trades processed through a broker dealer

A

Wrap account

43
Q

Account that is usually established by institutions such as hedge funds or high net worth individuals

A

Prime brokerage account

44
Q

Allows a third-party to place trades but not remove any assets from the account

A

Limited power of attorney

45
Q

Allows third-party to place trades and remove assets

A

Full power of attorney

46
Q

Power of attorney that remains legally enforceable if the client becomes mentally incompetent

A

Durable power of attorney

47
Q

A power of attorney that Ceases if the client is declared mentally incompetent

A

Non-durable power of attorney

48
Q

What type of account gets and RR or broker-dealer trading authority on an account

A

Discretionary account

49
Q

Exception of a discretionary account

A

Price or time

50
Q

In order to exercise discretionary account what is required

A

Prior written authorization

51
Q

When was the trade and a discretionary account be approved by the broker dealer

A

Immediately after trade is done

52
Q

The obligation that broker-dealer must make a reasonable effort to determine the best market and which to execute a customer order so the customer receives the best possible price

A

Best execution

53
Q

Systems that automatically checked several markets simultaneously and deliver the best possible price available

A

Automated execution systems

54
Q

What is required with a transaction of a penny stock

A

Disclosure in writing to the customer the amount of any compensation received in connection with the transaction

55
Q

What is the written record of any changes to an executed order ticket called?

A

Cancel and re-bill

56
Q

A trade that contains an obvious error and price size or security identification

A

Clearly Erroneous trade

57
Q

What is the timeline to submit a written complaint of any transaction that is believed to be clearly erroneous to FINRA or NASDAQ

A

30 minutes of the trade execution time

58
Q

Who can declare a transaction Noll and void

A

FINRA or NASDAQ

59
Q

Records of erroneous trades must be kept on file for how long

A

Three years

60
Q

How long will a customers account be frozen they do not pay by the deadline

A

90 days

61
Q

Broker-dealers must send account statements to customers how often?

A

Add a minimum quarterly

62
Q

In an account where there is activity how often should you send a statement?

A

At least monthly

63
Q

The name of the system for transferring accounts between member broker-dealers

A

Automated customer account transfer service (ACATS)

64
Q

Name of document submitted by customer to transfer account request

A

Transfer initiation form

65
Q

Retention time of customer account records

A

Six years after the account is closed

Series 6 (10 decks)

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