Chapter 6: Customer Accounts Flashcards
______ is concerned with the relationship between the securities firm and its customers as well as the rules regulating that relationship.
FINRA
A customer can buy on ______ and sell ______ in a margin account. A margin account has much greater ______ than the cash account, where customers can only establish ______ positions and must pay in ______.
- Credit
- Short
- Risk
- Long
- Full
If the customer is a minor with a required custodian, the account must be opened as either ______ or ______. Only one custodian and one minor are permitted with either account.
- Uniform Gifts to Minors Act (UGMA)
2. Uniform Transfers to Minors Act (UTMA)
The ______ is called a(n) ______. Securities purchased must be paid for in full (no margin).
- Cash Account
2. Special Cash Account
Cash accounts are specifically required for ______, since all securities purchased must be registered in the name of the ______ for the benefit of the ______. Because of this, ______ is impossible. Securities purchased on ______ are held ______ (or in the name of the broker/dealer).
- Minors
- Custodian
- Minor
- Margin
- Margin
- Street Name
______ are specifically required in the case of guardianship, because all securities must be registered in the name of the ______.
- Cash Accounts
2. Guardian
In a(n) ______, the investor must maintain a cash balance sufficient to purchase securities, or the investor must pay for the securities within ______, which is the Reg T payment deadline.
- Cash Account
2. 4 Business Days
The following information is the minimum required on a new cash account:
- Customer’s ______.
- Customer’s ______.
- Customer’s ______.
- Customer’s ______.
- Signature of the ______ who approved the account.
- Customer investment ______ information, including:
a. Customer financial information
b. Investment objective
c. Risk tolerance
d. Time horizon
- Name
- Residential Address
- Date of Birth
- Social Security Number
- Principal
- Suitability
The ______ requires the broker/dealer to review the customer’s current, government-issued photo identification. This includes a driver’s license, a passport, or a military identification.
USA PATRIOT Act
The ______ does not require a customer signature on the new account form. However, the ______ may require it.
- Self-Regulatory Organization (SRO)
2. Broker/Dealer
Firms must have the customer verify new account information within ______ of the account opening.
30 Days
After the account is open, a change in the account registration, for example, as the result of marriage or divorce, must be updated within ______. The same is true for updating a change of address.
30 Days
On an ongoing basis, customer account information must be verified every ______.
3 Years (36 Months)
Firms must retain a record of the account’s last update for a period of ______ after the update to any customer account information. If there are no updates, the record must be retained for ______ after the account is closed.
6 Years
If there is a(n) ______, meaning that the account is transferred from one registered representative to another within the same firm, the new registered representative must verify all information.
Internal Account Transfer
A(n) ______ is the traditional brokerage account.
Cash Account
If the customer purchases securities in a cash account and does not pay for the securities within the ______ required by Reg T, the broker/dealer may either ask the ______ for additional time on behalf of the customer or ______ the securities out and ______ the account for ______.
- 4 Business Days
- Self-Regulatory Organization (SRO)
- Sell
- Freeze
- 90 Days
If a customer’s account is frozen, the customer must have ______ in the account before the broker/dealers enter any ______ on behalf of the customer.
- Money
2. Buy Orders
If a customer purchases a security and sells the same security without first paying for the original purchase, the broker/dealer will ______ (______) the customer’s account for ______, and will not release the sales proceeds to the customer until the customer pays for the original purchases. If the customer pays before the Reg T ______ requirement is up, the broker/dealer will then remove the ______ on the account.
- Restrict (Freeze)
- 90 Days
- 4-Day
- Restriction
When a customer transfers an account form one broker/dealer to another, the customer signs a(n) ______ form. The new broker/dealer sends this form to the old broker/dealer.
- Automated Customer Account Transfer Service (ACATS)
FINRA allows the old broker/dealer ______ to verify the account positions and another ______ to complete the transfer. Any option position within ______ of expiring remains at the old firm.
Under MSRB rules, a municipal securities broker/dealer has ______ to validate positions and ______ to complete the transfer.
- 1 Day
- 3 Days
- 7 Days
- 3 Days
- 4 Days
Once the ______ form is signed and sent, all new trades are executed through the ______ firm. The ______ firm freezes the old account and cancels any open orders.
- Automated Customer Account Transfer Service (ACATS)
- New
- Old
When a registered representative is recruited by a broker/dealer and the registered representative’s ______ are transferred to the new firm (also called the ______), the new firm is required to deliver a FINRA-created ______ to the registered representative’s former customers.
- Accounts
- Recruiting Firm
- Educational Communication
The FINRA-created ______ highlights key considerations when transferring their assets, including a summary of the direct and indirect impacts of the transfer. It also must include information about the new firm’s recruitment practices.
Educational Communication