Chapter 5 - Customer Accounts Flashcards
What are some items on the NAF?
NAF is required to create new accounts, has Name, DOB, SSN, Address, Occupation, Income, Objectives…
T or F, Unmarked ticket orders are considered unsolicited.
F, They are considered solicited
If a customer calls in and updates their information how long does the firm have to notify the customer that it has been updated? How long after the initial contact?
30 days and the firm must give copy of the records to the customer of the changes.
Every 3 years or 36 months the firm will inquire of the customer if it needs updating.
If a new customer opens a new account with the firm, what must the firm give the customer?
Copy of the privacy policy when the account is opened and annually thereafter.
For authorization on customer accounts what is Discretionary, Custodial and Fiduciary?
Discretionary is the rep may make trading decisions.
Custodial is when an adult may act FBO a child.
Fiduciary is when a 3rd party is appointed over the account.
If a 17 year old asks to open an account at your firm what would you do?
Any competent person of age may open an account, if they are legally incompetent or not of age they may not.
If a customer and rep decide to setup the account to hold in street name, what does that mean? Are there other types of payment/delivery? What are they?
Hold in Street Name - Securities registered in B/D and held by them. B/D is nominal owner and customer is the beneficial owner.
Transfer & Hold - Registered in reps name but securities held by B/D.
Transfer & Ship - Securities registered in customers name and shipped to them.
List four types of accounts and some of their characteristics.
Cash - most basic and customer pays in full
Margin - may borrow money to buy securities
Corporate - for a business, need a corp. resolution and charter to create
Fee based - customer isn’t charged a commission but a % of their assets. Not a wrap account. Customer provided disclosures of fees.
A customer submits an account transfer, what is the process?
Current B/D will have 1 business day to validate or take exception. Current B/D will then attach securities the account is frozen and in 3 business days the transfer is completed.
A current employee of a B/D wants to open an outside account. Under NASD rules what are the requirements for opening/reporting of the account? NYSE? MSRB?
NASD - Margin and Cash accounts need notification to B/D. Upon request from B/D they can receive statements.
NYSE - Margin and Cash accounts need prior permission of B/D. Duplicate confirms are required.
MSRB - Margin and Cash accounts need notification to B/D. Duplicate confirms are required.
What is the difference between POA and limited POA?
Full POA is when someone may deposit or withdraw from the account and make complete decisions. Limited POA or limited trading authority is when they may buy and sell order but cannot withdraw from the account.
To be considered a discretionary action what are the 3 criteria?
What security
Number of Shares
Buy or Sell
If a customer were to pass away what are the 3 steps to be taken for their accounts?
Cancel any open orders in the account
Freeze the account
Await to hear from the Executor
A father creates a custodial account for his son. He donates $500 dollars every year into the account for 10 years. The father loses his job and needs money. How much may he take from the custodial account?
$0
Once money has been placed into the account for the benefit of the minor it may not be taken back and the minor can’t return it.
How many custodians or minors be on a custodial account? May custodians borrow money in the accounts?
1 custodian and 1 minor
Custodial accounts are Cash accounts, no margin and no options except for covered call writing.
