Customer Accounts Flashcards
Traditional brokerage account where securities must be paid in full. Either a cash balance must be maintained, or the investor must pay for the securities within 5 business days to purchase securities.
Cash Account
The following information was collected. What account is being opened?
- Name
- Address
- DOB
- SSN
- Signature of principal who approved account
- Customer investment suitability information
- Customer financial information
- Investment Objective
- Risk tolerance
- Time Horizon.
A new cash account
What government act requires broker/dealers to review the customer’s current, government issued photo ID which includes driver’s license, passport or military identification?
USA PATRIOT Act
The broker/dealer is about to ask the SRO for additional time for the customer, or the customer’s account will be frozen for 90 days. What did the customer do?
Failed to pay for the securities purchase by the 5 day Reg T deadline
What is the consequence for purchasing a security and selling the same security without first paying for the original purchase?
Your account is frozen
This form is used to transfer an account from one broker/dealer to another, that the customer must sign. The new broker/dealer sends this form to the old broker/dealer. FINRA allows the old broker/dealer 1 day to verify the account positions and another 3 days to complete the transfer. Under MSRB rules, a muni broker/dealer has 3 days to validate positions and 4 days to complete the transfer. Once form is signed and sent, all new trades executed with new firm and old frim freezes the old acocunt and cancels open orders.
Automated Customer Account Transfer Service (ACATS)
Trade in which the registered representative chooses one of more of the following
- Security
- Quantity
- Buy or sell
Discretionary Trade
Type of discretion where the representative may only authorize trades in the customer’s account
Limited Discretion
Type of discretion where a representative may in addition to authorizing trades in the customer’s account, also withdraw cash and/or securities from the account
Full Discretion
A customer just signed an account agreement which must be approved by a principal prior to the first trade. Also, a principal must regularly review activity in the account. What kind of account did the customer open?
Discretionary Account
What two things are fiduciaries often limited to when it comes to investing in discretionary accounts?
Legal List and Prudent Man Rule
Investments that fiduciaries use for discretionary accounts that are limited to safe securities only, such as government, as well as municipal and corporate debt offerings rated BBB or better. Equities and options are not included.
Legal List
Conservative, prudent investments; only investments that would be made by a prudent individual are allows
Prudent Man Rule
Account owned entirely by one adult. The broker/dealer may discuss the account with, and accept trades from the account owner, but cannot share information outside of the relationship.
Individual Account
Account that bypasses probate and transfers directly to the deceased owner’s beneficiaries. This is always an individual account.
Transfer on Death Account (TOD)
Accounts for wealthy individuals or portfolio managers who want reduced paperwork, that is taken care of by the broker/dealer. Because the broker/dealer is involved in safekeeping assets, they are subject to a higher net capital requirement per SEC.
Prime Brokerage Account
Account where two or more adults has an undivided interest in its entirety. Any owner may issue trade instructions. To withdraw cash, every owner’s name must be on it.
Joint account commonly used for married couples that requires equal ownership ineterests, is subject to estate taxes and bypasses probate. If one owner dies, the survivor inherits the account and can continue making trades.
Joint Tenant with Rights of Survivorship (JTWROS)
Joint account where unequal ownership is allowed and the deceased’s ownership interest passes to the owner’s estate
Joint Tenants In Common (TIC)
The following occurs:
- The account is frozen
- All open orders are cancelled
- The account is marked
- Legal paperwork including affadavit of domicile, tax waiver form and will are needed
What happened?
An account owner died