Chapter 9 - Client Funds and Securities Flashcards
Increased control of a client’s account by a professional or firm is inherently ______ risky that otherwise.
MORE RISKY
IAs who take custody of client assets must follow these rules:
- must be segregated from each other and documented
- quarterly statements to clients about their accounts
- client accounts and records must be audited annually
- no commingling of adviser and client assets
- cannot misappropriate client funds
- client instructions must be followed
- must notify client in writing of where and how their funds are being held and of any updates to that info
To avoid taking custody, IA must
- send back securities within 3 days of receiving them
- must forward checks to 3rd parties within 3 days
When a BD does not keep their securities separate from customer’s securities, they are _______ their funds
commingling
BDs cannot ________ or re-________ a customer’s securities, unless previously consented to in writing by the client
hypothecate or re-hypothecate
Agents cannot take _____ of customer assets
custody
A client can grant permission to their professional to buy a security they have already chosen with a “_________” permission
time and price
If client wants to give a professional full discretion, must provide permission in _____ and do so within _____ of when the first discretionary trade is made
writing within 10 days
A “trading authorization” gives a ______ the authority to trade in a client’s account. MUST be written an outline specific authorities given.
a 3rd party
Suitability of an investment takes into account many factors, which must only be measured in comparison to a client’s
financial situation, investment objectives and risk tolerance
You generally should not make a blanket recommendation. T/F
True, doesn’t take into account suitability for individual investors
Under FINRA, a suitability obligation for a BD has three components:
- reasonable-basis obligation (BD must understand investment strategy and determine suitability)
- customer-specific obligation (BD must have a reasonable basis to believe rec is suitable for that client)
- quantitative suitability obligation (reason to believe recs are not excessive)
A BD can accept unsolicited orders from someone who has not provided suitability information. T/F
True.
A BD is required to recommend a ______ investment to their client while an IA is required to recommend the ______ investment for their client
suitable, best
An order ticket contains information about what
a trade
