Customer Accounts Flashcards
1
Q
What basic information is needed for a new account form?
A
- Customer name and address
- whether cash or margin account
- DOB
- SSN or Tax ID (if joint, only 1 SSN needed)
- Occupation (especially if bank/brokerage/etc employee)
2
Q
How much ownership would someone need to have in a public company to be considered an “insider”?
A
10% or more
3
Q
Program designed to verify a customer’s identity is the _______ program
A
CIP (Customer Identity Program)
4
Q
Each customer must be notified at the time the account is ____ that their account is covered by ______
A
opened, covered by SPIC (Securities Investor Protection Corporation) insurance
5
Q
It is mandatory that a customer sign an arbitration agreement. T/F?
A
False. This is not mandatory but many firms do it
6
Q
If customer is going to sign an arbitration agreement, they must do so within ___ days of opening an account.
A
30 days
7
Q
FINRA Rule 2090 is the “______” rule and requires that you know and retain “essential facts” relative to each customer, which are:
A
“Know your customer” rule; essential facts are those required to:
- effectively service customer’s account
- act in accordance with any special handling instructions
- understand the authority of each person acting on behalf of the customer
- comply with applicable laws, regs, and rules
8
Q
SEC Rule 17a-3 requires that the following info be collected from each new client:
A
- name
- tax id
- address
- dob
- phone #
- occupation and employer
- annual income
- net worth (excluding primary residence)
- investment objectives
- signature of associated person responsible for the account
- signature of the customer, if discretionary
9
Q
A customer signature is required to open the account. T/F
A
False. A registered rep can sign to open the account, UNLESS it is discretionary in which case you do need it
10
Q
Customer must verify account profile within ___ days and is sent the account profile every ___ months thereafter
A
30 days, 36 months
11
Q
FINRA investment profile includes:
A
- objectives
- experience
- age
- financial situation and needs
- tax status
- time horizon
- liquidity needs
- risk tolerance
- any other pertinent info
12
Q
Reasonable-basis suitability =
A
- covers the “big picture”
- prepare a list of recommended products and strategies
- must know the features of all these recommendations
13
Q
Customer-specific suitability =
A
- once reasonable-basis is established, that investment strategy has to make sense for each individual customer and their investment profile
14
Q
Quantitative-suitability =
A
- means you can’t recommend a “churn” strategy with excessive trading
15
Q
Personal balance sheet test
A
can’t recommend a strategy if it exceeds that customer’s liquid net worth
16
Q
The suitability rule does not apply to:
A
- institutional customers
- unsolicited trades
- investment analysis tools (retirement calculators and the such)
17
Q
Structured products typically have:
A
- a bond portion which pays interest bsed on performance of a well known index
- an embedded option to sell it back at par at maturity
- often illiquid, so are listed as an ETN (exchange traded note) on an exchange such as the AMEX
- main risk is credit risk (typical 5-7 year maturity) - subject to default risk
18
Q
A “pattern” day trader is someone who_____
A
engages in 4 or more day trades in a 5 business day period
19
Q
For a day trader, the firm must give the customer a statement that says:
A
- day trading is extremely risky
- be wary of exaggerated claims on profits
- requires knowledge of markets and firm ops
- will generate substantial commissions
- trading on margin can result in larger losses than one’s initial investment
- persons who day trade for others must be registered as an investment adviser or a BD
20
Q
If you know day trading is happening in an account but it hasn’t been registered as such, must approve the account no later than __ days following that knowledge
A
10 days
21
Q
If opening a NMFBA, must provide a _____ to the customer
A
disclosure
22
Q
Must conduct an ______ account review with the customer
A
annual
23
Q
NMFBA are considered an advisory product. T/F
A
True. They are considered advisory, not brokerage. Must be registered as an IA
24
Q
What are the “red flag” products for senior citizens?
A
- variable annuities, equity indexed annuities, real estate limited partnerships
- variable life settlements
- CDOs
- mortgage residence to obtain $ for investing
- use retirement savings for high-risk investments
25
If you suspect a senior citizen has diminished capacity, you should:
- document it and escalate it
- must have a designated person to escalate it to
- stop trading in account until concern no longer exists
- communicate with next of kin emergency contact
- maintain frequent contact with the investor to assess situation
- consult appropriate state statutes to determine next steps
26
Before an options account can be opened, customer needs to receive the _____
Options Disclosure Document (ODD)
27
Depending on customer's financial situation and experience, the customer wishing to trade options will be given a _____
Level. less sophisticated may only be able to buy calls and puts
28
Once a level for options trading is determined, customer is sent a ______ for signature and must return it in ____ days
options agreement, 15 days
29
Both the ____ and the ____ must sign the new options account form
registered rep and registered options principal (ROP)
30
For munis, you must obtain a customer's ______
tax status
31
For munis, if information cannot be obtained for a suitability determination, recommendations _____ be made
CANNOT - except for unsolicited trades
32
Accounts must be signed by the _____
branch manager - can trade in all things
33
New accounts signed by a Series 24 manager cannot trade in
options
34
Margin securities are held in ____ name
street name - the name of the brokerage firm
35
For a margin account, the margin agreement must be signed ______ the first settlement of the first trade
at or before
36
In addition to a margin agreemetn form, the firm can require a customer to sign a ______ to trade on margin
a loan consent agreement - gives firm right to loan out securities for short sales
37
For margin trading, must also give a customer a _____ disclosure statement
credit - basically tells them the terms of the loan the firm will make to them
38
For joint accounts, there are two options for account ownership:
- joint tenancy with rights of survivorship (each person owns an undivided interest)
- tenancy in common (each person specifies a particular interest in the account)
39
TOD stands for
transfer on death - helps avoid mucky situations with benes and also avoids probate since the estate is bypassed
40
To open an LP account, you only need the signature of the _____
GP
41
Two types of trading authorization are:
- limited (can buy and sell, but can't withdraw funds)
| - full (can buy and sell and can withdraw funds)
42
POA ceases upon death of the grantor. T/F
True
43
Types of fiduciary accounts
- trusts
- guardian
- estate administrator
- conservator for incompetent
- executor of estate
- receiver in bankruptcy
44
Fiduciaries can or cannot give power to trade to another person?
CANNOT
45
Fiduciary accounts are generally ______ from margin transactions
prohibited
46
Fiduciaries are limited to the _______ man rule for investment options
prudent - basically means they can only employ modern portfolio theory
47
For a discretionary account, the authorization form must be signed ______ any trading occurs.
BEFORE
48
A trade is considered discretionary if the adviser is choosing more than the ____ and _____
price and time of execution
49
For mkt-not held orders, what is the FINRA rule regarding execution?
Must be executed that day. If goes into second day, then must have written POA
50
Rule 407 requires that prior written consent of the _____ is required for accounts opened by ______ of member firms or their _______
consent of the employer is needed to accounts opened by employees of member firms or their spouses/family/etc.
51
Rule 407 requires that duplicate _____ and _____ be sent to the employer promptly
trade confirmations and account statements
52
Written consent of the employer is also required if an officer or employee of an NYSE member firm is trying to open an account:
- domestic or foreign BD
- investment adviser
- bank
- financial institution
53
For accounts opened by other muni employees, trade confirmations ______ be sent in duplicate
MUST, same for CBOE firms
54
The UGMA refers to the
Uniform Gifts to Minors Act
55
Rules for custodian accounts (UGMA)
- any adult can open for a minor, doesn't have to be a parent
- all securities must be registered in account name (no bearer securities)
- cash balances cannot be held for an extended amount of time
- one custodian for one minor on an account
- no margin trading
- gifts are irrevocable
- SSN of the minor appears on the account
- prudent man law applies
- at legal age, accounts transfers into name of new adult
- no third party trading authorization
- you can sell covered calls
- cannot let rights expire worthless
56
An omnibus account is for multiple client accounts for one _________
investment adviser
57
Wrap accounts charge one ____ for everything
one fee
58
Confirms for trades need to be sent no later than _____
the day after the trade date for regular way trades
59
statements must be mailed in any month during which a _____ took place, otherwise they may be mailed ______
trade took place, otherwise can mail quaterly
60
A firm may hold a customer's mail for up to ____ months
3 months in a 12 month period
61
RR need to hold current records of
- new account forms
- chronological record of trades
- current account statement
62
Accounts can be closed if specifically _____
requested in writing by the customer
63
With an account transfer, the receiving firm has ____ to complete the transfer after the validation is complete
3 days
64
if they cannot deliver all the securities on transfer (ie a margin account where shares have been sold short), the firm has _____ to buy in the shares and deliver them to the new firm
10 days
65
If a customer dies, RR must:
- cancel all open orders
- freeze account from removal of assets
- note customer is deceased on form
- await further instructions from the executor
66
Once an account is closed, new account forms must be retained for _____, customer statements for _____
3 years for account forms, 6 years for customer statements
67
SAR reports must be filed within _____ of the date initially detected
30 days
68
SEC Reg SP (Statement of Privacy)
must provide retail customers with notice of firm's privacy policies and practices
- delivered initially and then annually
69
Who are the first, second, and third parties to a brokerage account?
```
First = broker
Second = customer
Third = any one other than broker or customer
```
70
Instructions by muni employers must be followed when opening an account for one of their employees. T/F
True
71
Trusts are legal entities. T/F
True, they are taxed by the IRS and have their own tax ID #s
72
Custodian account is?
An account opened for the benefit of one minor - can only be a cash account
73
A guardian account is the same as a ______ account
conservator account
74
A guardian account is?
an account opened for an incompetent or a minor with a designated guardian
75
Taxes on a custodian account are the responsibility of the _____
Minor - they are not deferred until legal age and are on the minor to pay
76
Taxes on income from a custodian account are taxed at the rate of the ________
parents
77
The required times that need to be on a ticket record for a trade are:
- receipt
- entry
- execution
DO NOT NEED CONFIRMATION TIME
78
To send confirmations to a person designated with POA, you need a written request from the ________
customer
79
If trades need to happen in an account where the person has died, what forms do you need?
- death certificate
- executor's letter
- affidavit of domicile
80
the purchase and sales department does _____
prepares and mails customer confirmations
81
the margin department does ______
keeps a record of securities positions, and debit and credit balances
82
the reorganization department does ______
informs customers of takeovers or tender offers
83
the order department does _______
routes orders to the appropriate exchanges and send execution confirmations back to the person PLACING the order
84
A SAR is required to be reported to the SEC. T/F
False. Reports to the FinCEN
85
OFAC (Office of Foreign Asset Control) imposes ______
sanctions against hostile foreign countries and groups
