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Series 10 - Self Study 2021 > Chapter 2 - Customer Accounts > Flashcards

Chapter 2 - Customer Accounts Flashcards

1
Q

CIP 4 critical pieces of info

A

Customer Name
Address
SSN or TIN
DOB

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2
Q

Arbitration Agreement, if signed, must be provided within ___ days of signing.

A

30 days

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3
Q

Provided at account opening

A

Firm’s privacy statement and business continuity plan

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4
Q

FINRA Rule 2090

A

KYC rule

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5
Q

SEC Rule 17a-3

A 
Covers necessary client info.
Client Name
TIN
Address
DOB
Telephone
Occupation and employer
Annual income
Net worth
Investment obj
Signature of rep
Signature of customer - with discretionary account
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6
Q

Client can refuse _______ and _________ information

A

Annual income and net worth. Firm can still open the account. All other info must be provided.

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7
Q

FINRA Rule 2111

A

Reasonable basis for suitability of recommendation based on investment profile.

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8
Q

3 components to suitability

A

Reasonable basis
Customer Specific
Quantitative

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9
Q

Reasonable basis suitability

A

Makes sense for the right investor - general rule for suitability

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10
Q

Customer Specific Suitability

A

After reasonable basis, does the recommendation match the investor profile

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11
Q

Quantitative suitability

A

Makes sense in terms of quantity of traded sec or frequency of trading

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12
Q

Reverse Convertible Note

A

Investor gets coupon yield before maturity. At maturity, if underlying is at knock-in price, investor gets par value. If not at knock-in, investor gets shares of stock.

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13
Q

PIPE

A

Private Investment in Public Equity

Reg D offering of restricted stock. Rule 415 shelf registration. Investor can sell shares in market within 3 years as registered shares.

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14
Q

Registered Rep signature on new account form if…

A

Suitability determination is completed; otherwise no longer required

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15
Q

Customer provided copy of account profile within:

A

30 days

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16
Q

Flat fee accounts - NMFBA - only offered by

A

Investment advisers - Series 65 or 66

Not Brokers

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17
Q

Senior citizen red flags; “No-no” recommendations:

A

Recommendation to:

  • buy variable annuities, equity indexed annuity, and Real estate LPs
  • variable life settlements
  • structured products such as CDO
  • mortgage residence to get money to invest
  • using retirement funds for risky investments
18
Q

“Free lunch” seminars

A

Highly discouraged

19
Q

OATS

A 
“Order Audit Trail System”
Records:
Name and any of security
Terms of the order
Time transmitted
Time when execution report was received
20
Q

FINRA Rule 4515

A

Permits Investment Advisers to allocate trades to clients accounts without the knowledge of BD executing.

*Trades must be allocated no later than 12:00pm on next business day.

21
Q

Customer complaints retained for ___ years; FINRA rule

A

4 years - modified from 3 years to coincide with BD inspection cycle

22
Q

Options positions exempt from freeze rule during transfer

A

Expiring in 7 days

23
Q

ACATs remain active for residuals ____ months after initiation

A

6 months

24
Q

Broker Protocol rules

A

Rep must:

  • Give written notice of resignation to branch manager, detailing client information rep is taking
  • information can be client name, address, telephone, email, account title
  • Cannot contact clients until fully employed at new firm
  • Cannot have anyone else contact clients from “old” firm
25
Q

FINRA Rule 2273

A

Client must be provided educational brochure when solicited move by rep to new firm

26
Q

Brochure under Rule 2273 must be provided within ___ business days

A

3 days

27
Q

Retention of records in the event of client death

A

Account opening docs retained for 3 years, statements retained for 6

28
Q

SDNs

A

“Specially Designated Nationals” - restricted states by US OFAC. Iran, N.Korea, terrorist orgs…

29
Q

High Risk Customers under FINRA and PATRIOT Act rules

A
  • Home country is not a member of FAFT
  • Reside in country with bank secrecy laws
  • Operate cash intensive business
30
Q

SAR

A

“Suspicious Activity Report”

Filed with FinCEN within 30 days, event exceeding $5,000

31
Q

FINRA Rule 3310

A

Governs AML policies

32
Q

Regulation U

A

Prohibits brokerage from rehypothecating shares in excess of what was loaned to customer

33
Q

Regulation T

A

Sets policies and practices around Margin accounts

Only applies to non-exempt securities

34
Q

Customer Fails to deliver shares selling short in margin:

A

Must be purchased within 10 days after settlement

35
Q

Minimum equity to open a long or short account

A

$2,000

36
Q

“Cheap Stock Rule”

A

Shorting stocks under $10

  • $10-5 minimum margin is $5/sh
  • $5-0 minimum margin is $100% but never less than 2.50
37
Q

Formula for SMA

A

SMA = 50% of Market value - Debit

38
Q

Excess Equity SMA generated when…

A

Value of margined security exceeds initial margin of 50%.

39
Q

MV increases SMA by

A

$1 MV increase = $0.50 SMA

50%

40
Q

Maintenance call happens:

A

< 25% equity, 30% short

41
Q

Value of security entering maintenance call

A

Debit / 0.75 = minimum LMV for call

Series 10 - Self Study 2021 (2 decks)

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