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Series 7 > Chapter 4 > Flashcards

Chapter 4 Flashcards

1
Q

True or False: Clients need not sign the account form for a cash account.

A

True; required for margin or option account

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2
Q

True or False: Only one person must provide information to open a joint account.

A

False

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3
Q

Who may enter orders in a joint account?

A

Any owner on the account

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4
Q

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

A

one

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5
Q

What is a TOD account?

A

Transfer on Death; An account in one person’s name that allows a beneficiary to gain control upon the account holder’s death.

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6
Q

True or False: Money may be withdrawn from a joint account in one owner’s name.

A

False; has to have both names on it

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7
Q

What happens to the deceased’s portion in a joint account with tenants-in-common?

A

The deceased’s portion goes to his estate for tax purposes.

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8
Q

What happens to the deceased’s portion in a joint account with right of survivorship?

A

Her portion passes to the survivor.

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9
Q

Only ______ custodian is allowed per minor’s account.

A

one

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10
Q

True or False: Custodial accounts are solely carried in the name of the minor.

A

False. The account is in the custodian’s name for the benefit of the minor.

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11
Q

The _________ is responsible for taxes on income in a custodial account.

A

The minor is responsible for taxes on income in a custodial account.

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12
Q

When do gifts become the property of the minor in a custodial account?

A

When gifted

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13
Q

True or False: Gifts made to minors are irrevocable.

A

True

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14
Q

Is margin permitted in a minor’s account?

A

No

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15
Q

Custodians have a ____________ duty to do what is best for the minor.

A

fiduciary

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16
Q

May a custodian make speculative investments in a minor’s account?

A

Yes, provided they are suitable based on objectives

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17
Q

What age must be attained for the minor to gain control over his account?

A

Age of majority

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18
Q

RRs must examine what document to open any corporate account?

A

Corporate Resolution

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19
Q

True or False: All corporate officers may effect transactions for the corporation.

A

False, only those named in the Corporate Resolution

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20
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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21
Q

What is needed to exercise discretion over a client’s account?

A

Written Power of Attorney

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22
Q

Is discretionary authorization required to enter a not held order?

A

No since note held orders only give RR discretion on to time and price.

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23
Q

What three items must be specified on a not held order?

A

Action (buy/sell), Amount (quantity), and Asset (security)

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24
Q

For how long may a not held order be maintained?

A

1 day

25
Q

True or False: Principals must approve discretionary orders prior to entry.

A

False. The orders must be approved promptly afterward.

26
Q

What may an RR do with full discretion, but not with limited discretion?

A

Withdraw money from the account

27
Q

A ___________________ is required to open an account for a partnership.

A

Partnership Agreement

28
Q

May a wife enter trades in a husband’s account?

A

Yes, with written third party authorization

29
Q

Describe a wrap account.

A

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

30
Q

Name some of the different items found on a customer confirmation.

A

Description, amount, purchase/sale, execution price, trade/settlement date, BD capacity, commission (on agency)

31
Q

_____________________________ protects customers from BD bankruptcy.

A

SIPC

32
Q

Does SIPC protect separate customers or separate accounts?

A

Customers

33
Q

True or False: Jim’s joint account with his wife is considered a separate customer by SIPC.

A

True. E.g. Jim’s cash and margin account are combined for coverage, but Jim’s joint account with his spouse is separate.

34
Q

Customers become ___________________ if their cash or securities positions exceed SIPC coverage.

A

General Creditors

35
Q

If a BD goes bankrupt, what happens to securities registered in the customer’s name?

A

They are returned to the customer without regard to SIPC limitations.

36
Q

Who notifies customers of BD bankruptcy?

A

The trustee handling the liquidation

37
Q

True or False: SIPC provides coverage for both commodities and futures accounts.

A

False, Just futures

38
Q

What steps are taken if a customer dies?

A

Mark the account “deceased,” cancel open orders, and await instructions.

39
Q

Account statements must be sent to customers at least ____________.

A

quarterly

40
Q

For active accounts, account statements must be sent ____________.

A

monthly

41
Q

What triggers a BD’s filing of a Currency Transaction Report (CTR)?

A

Any cash transaction executed by a customer during one day that exceeds $10,000

42
Q

What triggers a BD’s filing of a Suspicious Activity Report (SAR)?

A

Any suspicious transactions of $5,000 or more

43
Q

What triggers a BD’s filing of a Currency and Monetary Instrument Report (CMIR)?

A

When anyone physically transports or receives cash (or equivalents) exceeding $10,000 into, or out of, the U.S.

44
Q

What items are acceptable as proof of identity under the Customer Identification Program (CIP)?

A

Passport or driver’s license (both have a picture)

45
Q

What steps should be taken when an RR executes a trade but uses the wrong account number?

A

Do a cancel and re-bill. Transfer the trade to the correct account number with permission of a supervising principal.

46
Q

Custodial accounts are opened under whose Social Security number?

A

The minor’s

47
Q

True or False: Not held orders may only be executed in a discretionary account.

A

False

48
Q

What program must be established by BDs to verify the identity of each customer opening an account?

A

Customer Identification Program (CIP)

49
Q

What list must be checked to identify suspected terrorists and criminals?

A

OFAC List (Treasury Department’s Office of Foreign Assets Control)

50
Q

True or False: Names appearing on the OFAC List are customers who had a previous business relationship with the firm.

A

False. The list shows the names of suspected terrorists and criminals.

51
Q

What regulation protects the non-public personal information of customers?

A

Regulation S-P

52
Q

Regulation S-P requires clients be provided with a ______________ detailing how BDs handle personal client information.

A

Privacy Notice

53
Q

For clients traveling within the U.S., how long may a firm hold their correspondence?

A

2 months

54
Q

For clients traveling overseas, how long may a firm hold their correspondence?

A

3 months

55
Q

What will SIPC cover in a customer’s margin account?

A

Only the customer’s equity (securities clear of any outstanding loan)

56
Q

Identify the acronym: CTR

A

Currency Transaction Report

57
Q

SIPC provides coverage of $_________ of which no more than $_________ can be cash.

A

SIPC provides coverage of $500,000 of which no more than $250,000 can be cash.

58
Q

The ___________________ must sign the account form.

A

Principal Supervisor

Series 7 (25 decks)

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