Chapter 4 - Documentation Flashcards
True or False: Clients need not sign the account form for a cash account.
True, but signature would be required for an option or a margin account
True or False: Only one person must provide information to open a joint account.
False.
Each owner must provide information to option a joint account.
Who may enter orders in a joint account?
Any owner named 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True or False: Money may be withdrawn from a joint account in one owner’s name.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.
Any checks should be in both parties’ names
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 join account with right of survivorship?
Her portion passes to the survivor
Only ______ custodian is allowed per minor’s account.
Only one custodian is allowed per minor’s account.
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, securities must be fully paid.
Custodians have a ________ duty to do what is best for the minor.
Custodians have a fiduciary duty to do what is best for the minor.
May a custodian make speculative investements in a minor’s account.
Yes, provided they are suitable based on the 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.
Both the Corporate Resolution and the Corporate Charter are required for a corporation to open an options or margin account.
What is needed to exercise discretion over a client’s account?
Written Power of Attorney
What three items must be specified on a not held order?
- Action (buy/sell)
- Amount (quantity)
- Asset (security)
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.
A Partnership Agreement is required to open an account for a partnership.
May a wife enter trades in a husband’s account?
Yes, with written third-party authorization.
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.
Securities Investor Protection Corporation (SIPC) protects customers from BD bankruptcy.
Does SIPC protect separate customers or separate accounts?
Separate customers. A customer with both a cash and margin account with a BD would be covered once.
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.
Customers become general creditors if their cash or securities positions exceed SIPC coverage.
If a broker-dealer 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 Broker-Dealer bankruptcy?
The trustee handling the liquidation
True or False: SIPC provides coverage for both commodities and futures accounts.
False
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 _______.
Account statements must be sent to customers at least quarterly.
For active accounts, account statements must be sent ________.
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. Discretionary power of attorney is not required.
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.
Regulation S-P requires clients be provided with a Privacy Notice detailing how BDs handle personal client information.
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
The supervising principal must sign the account form.
(clients are not requried to sign)
Based on written request, what is the maximum period that a BD may hold customer correspondence?
Three months.
To exceed three months, the customer must provide the B/D with a valid reason for the request.
Based on written instructions, a B/D may hold customer correspondence for __ months
Based on written instructions, a B/D may hold customer correspondence for three months
Describe a wrap account.
An account that charges the client a single fee that covers transaction execution and account management.
Is discretionary authorization required to enter a not held order?
No, since descrestion is limited to time and/or price for not held orders
For how long may a not held order be maintained?
A not held order is considered a day order.
