Chapter 4 Flashcards
True or False: Clients need not sign the account form for a cash account.
True; required for margin or option account
True or False: Only one person must provide information to open a joint account.
False
Who may enter orders in a joint account?
Any owner on the account
For a joint account, how many account numbers and SSNs are used for tax reporting?
one
What is a TOD account?
Transfer on Death; An account in one person’s name that allows a beneficiary to gain control upon the account holder’s death.
True or False: Money may be withdrawn from a joint account in one owner’s name.
False; has to have both names on it
What happens to the deceased’s portion in a joint account with tenants-in-common?
The deceased’s portion goes to his estate for tax purposes.
What happens to the deceased’s portion in a joint account with right of survivorship?
Her portion passes to the survivor.
Only ______ custodian is allowed per minor’s account.
one
True or False: Custodial accounts are solely carried in the name of the minor.
False. The account is in the custodian’s name for the benefit of the minor.
The _________ is responsible for taxes on income in a custodial account.
The minor is responsible for taxes on income in a custodial account.
When do gifts become the property of the minor in a custodial account?
When gifted
True or False: Gifts made to minors are irrevocable.
True
Is margin permitted in a minor’s account?
No
Custodians have a ____________ duty to do what is best for the minor.
fiduciary
May a custodian make speculative investments in a minor’s account?
Yes, provided they are suitable based on objectives
What age must be attained for the minor to gain control over his account?
Age of majority
RRs must examine what document to open any corporate account?
Corporate Resolution
True or False: All corporate officers may effect transactions for the corporation.
False, only those named in the Corporate Resolution
Both the ____________ and the ____________ are required for a corporation to open an options or margin account.
Corporate Resolution AND Corporate Charter
What is needed to exercise discretion over a client’s account?
Written Power of Attorney
Is discretionary authorization required to enter a not held order?
No since note held orders only give RR discretion on to time and price.
What three items must be specified on a not held order?
Action (buy/sell), Amount (quantity), and Asset (security)
For how long may a not held order be maintained?
1 day
True or False: Principals must approve discretionary orders prior to entry.
False. The orders must be approved promptly afterward.
What may an RR do with full discretion, but not with limited discretion?
Withdraw money from the account
A ___________________ is required to open an account for a partnership.
Partnership Agreement
May a wife enter trades in a husband’s account?
Yes, with written third party authorization
Describe a wrap account.
An account that charges the client a single fee that covers transactions and management
Name some of the different items found on a customer confirmation.
Description, amount, purchase/sale, execution price, trade/settlement date, BD capacity, commission (on agency)
_____________________________ protects customers from BD bankruptcy.
SIPC
Does SIPC protect separate customers or separate accounts?
Customers
True or False: Jim’s joint account with his wife is considered a separate customer by SIPC.
True. E.g. Jim’s cash and margin account are combined for coverage, but Jim’s joint account with his spouse is separate.
Customers become ___________________ if their cash or securities positions exceed SIPC coverage.
General Creditors
If a BD goes bankrupt, what happens to securities registered in the customer’s name?
They are returned to the customer without regard to SIPC limitations.
Who notifies customers of BD bankruptcy?
The trustee handling the liquidation
True or False: SIPC provides coverage for both commodities and futures accounts.
False, Just futures
What steps are taken if a customer dies?
Mark the account “deceased,” cancel open orders, and await instructions.
Account statements must be sent to customers at least ____________.
quarterly
For active accounts, account statements must be sent ____________.
monthly
What triggers a BD’s filing of a Currency Transaction Report (CTR)?
Any cash transaction executed by a customer during one day that exceeds $10,000
What triggers a BD’s filing of a Suspicious Activity Report (SAR)?
Any suspicious transactions of $5,000 or more
What triggers a BD’s filing of a Currency and Monetary Instrument Report (CMIR)?
When anyone physically transports or receives cash (or equivalents) exceeding $10,000 into, or out of, the U.S.
What items are acceptable as proof of identity under the Customer Identification Program (CIP)?
Passport or driver’s license (both have a picture)
What steps should be taken when an RR executes a trade but uses the wrong account number?
Do a cancel and re-bill. Transfer the trade to the correct account number with permission of a supervising principal.
Custodial accounts are opened under whose Social Security number?
The minor’s
True or False: Not held orders may only be executed in a discretionary account.
False
What program must be established by BDs to verify the identity of each customer opening an account?
Customer Identification Program (CIP)
What list must be checked to identify suspected terrorists and criminals?
OFAC List (Treasury Department’s Office of Foreign Assets Control)
True or False: Names appearing on the OFAC List are customers who had a previous business relationship with the firm.
False. The list shows the names of suspected terrorists and criminals.
What regulation protects the non-public personal information of customers?
Regulation S-P
Regulation S-P requires clients be provided with a ______________ detailing how BDs handle personal client information.
Privacy Notice
For clients traveling within the U.S., how long may a firm hold their correspondence?
2 months
For clients traveling overseas, how long may a firm hold their correspondence?
3 months
What will SIPC cover in a customer’s margin account?
Only the customer’s equity (securities clear of any outstanding loan)
Identify the acronym: CTR
Currency Transaction Report
SIPC provides coverage of $_________ of which no more than $_________ can be cash.
SIPC provides coverage of $500,000 of which no more than $250,000 can be cash.
The ___________________ must sign the account form.
Principal Supervisor
