Customer Accounts--Documentation

Question 1

True or False: SIPC provides coverage for both commodities and futures accounts.

Answer 1

False

Question 2

Name some of the different items found on a customer confirmation. 7

Answer 2

1. Description,
2. amount,
3. purchase/sale,
4. execution price,
5. trade/settlement date,
6. BD capacity,
7. commission (on agency)

Question 3

When do gifts become the property of the minor in a custodial account?

Answer 3

When gifted

Question 4

Only ______ custodian is allowed per minor’s account.

Answer 4

Only one custodian is allowed per minor’s account.

Question 5

True or False: Only one person must provide information to open a joint account.

Answer 5

False. Each owner must provide information to open a joint account.

Question 6

True or False: Gifts made to minors are irrevocable.

Answer 6

True

Question 7

The ___________________ must sign the account form.

Answer 7

The supervising principal must sign the account form (clients are not required to sign).

Question 8

What age must be attained for the minor to gain control over his account?

Answer 8

Age of majority

Question 9

Is discretionary authorization required to enter a not held order?

Answer 9

No, since discretion is limited to time and/or price for not held orders.

Question 10

Based on written request, what is the maximum period that a B/D may hold customer correspondence?

Answer 10

Three months. To exceed three months, the customer must provide the B/D with a valid reason for the request.

Question 11

What program must be established by BDs to verify the identity of each customer opening an account?

Answer 11

Customer Identification Program (CIP)

Question 12

Does SIPC protect separate customers or separate accounts?

Answer 12

Separate customers. A customer with both a cash and margin account with a BD would be covered once.

Question 13

What happens to the deceased’s portion in a joint account with tenants-in-common?

Answer 13

The deceased’s portion goes to his estate for tax purposes.

Question 14

Who notifies customers of BD bankruptcy?

Answer 14

The trustee handling the liquidation

Question 15

True or False: Jim’s joint account with his wife is considered a separate customer by SIPC.

Answer 15

True. E.g. Jim’s cash and margin account are combined for coverage, but Jim’s joint account with his spouse is separate.

Question 16

SIPC provides coverage of $_________ of which no more than $_________ can be cash.

Answer 16

SIPC provides coverage of $500,000 of which no more than $250,000 can be cash.

Question 17

What steps should be taken when an RR executes a trade but uses the wrong account number?

Answer 17

Do a cancel and re-bill. Transfer the trade to the correct account number with permission of a supervising principal.

Question 18

For how long may a not held order be maintained?

Answer 18

A not held order is considered a day order.

Question 19

True or False: Custodial accounts are solely carried in the name of the minor.

Answer 19

False. The account is in the custodian’s name for the benefit of the minor.

Question 20

_____________________________ protects customers from BD bankruptcy.

Answer 20

Securities Investor Protection Corporation (SIPC) protects customers from BD bankruptcy.

Question 21

Custodians have a ____________ duty to do what is best for the minor.

Answer 21

Custodians have a fiduciary duty to do what is best for the minor.

Question 22

True or False: Clients need not sign the account form for a cash account.

Answer 22

True, but signature would be required for an option or a margin account.

Question 23

What will SIPC cover in a customer’s margin account?

Answer 23

Only the customer’s equity (securities clear of any outstanding loan)

Question 24

Identify the acronym: CTR

Answer 24

Currency Transaction Report

Question 25

Based on written instructions, a B/D may hold customer correspondence for _____ months.

Answer 25

Based on written instructions, a B/D may hold customer correspondence for three months.

Question 26

True or False: Names appearing on the OFAC List are customers who had a previous business relationship with the firm.

Answer 26

False. The list shows the names of suspected terrorists and criminals.

Question 27

Both the ____________ and the ____________ are required for a corporation to open an options or margin account.

Answer 27

Both the Corporate Resolution and Corporate Charter are required for a corporation to open an options or margin account.

Question 28

For active accounts, account statements must be sent ____________.

Answer 28

For active accounts, account statements must be sent monthly.

Question 29

The _________ is responsible for taxes on income in a custodial account.

Answer 29

The minor is responsible for taxes on income in a custodial account.

Question 30

What list must be checked to identify suspected terrorists and criminals?

Answer 30

OFAC List (Treasury Department’s Office of Foreign Assets Control)

Question 31

True or False: All corporate officers may effect transactions for the corporation.

Answer 31

False, only those named in the Corporate Resolution

Question 32

May a custodian make speculative investments in a minor’s account?

Answer 32

Yes, provided they are suitable based on the objectives.

Question 33

RRs must examine what document to open any corporate account?

Answer 33

Corporate Resolution

Question 34

Regulation S-P requires clients be provided with a ______________ detailing how BDs handle personal client information.

Answer 34

Regulation S-P requires clients be provided with a Privacy Notice detailing how BDs handle personal client information.

Question 35

True or False: Money may be withdrawn from a joint account in one owner’s name.

Answer 35

False. Any checks should be in both parties’ names.

Question 36

What may an RR do with full discretion, but not with limited discretion?

Answer 36

Withdraw money from the account

Question 37

What triggers a BD’s filing of a Currency and Monetary Instrument Report (CMIR)?

Answer 37

When anyone physically transports or receives cash (or equivalents) exceeding $10,000 into, or out of, the U.S.

Question 38

A ___________________ is required to open an account for a partnership.

Answer 38

A Partnership Agreement is required to open an account for a partnership.

Question 39

What regulation protects the non-public personal information of customers?

Answer 39

Regulation S-P

Question 40

Account statements must be sent to customers at least ____________.

Answer 40

Account statements must be sent to customers at least quarterly.

Question 41

True or False: Principals must approve discretionary orders prior to entry.

Answer 41

False. The orders must be approved promptly afterward.

Question 42

What triggers a BD’s filing of a Suspicious Activity Report (SAR)?

Answer 42

Any suspicious transactions of $5,000 or more

Question 43

What steps are taken if a customer dies?

Answer 43

Mark the account “deceased,” cancel open orders, and await instructions.

Question 44

What three items must be specified on a not held order?

Answer 44

Action (buy/sell), Amount (quantity), and Asset (security)

Question 45

Is margin permitted in a minor’s account?

Answer 45

No, securities must be fully paid.

Question 46

If a BD goes bankrupt, what happens to securities registered in the customer’s name?

Answer 46

They are returned to the customer without regard to SIPC limitations.

Question 47

What is a TOD account?

Answer 47

An account in one person’s name that allows a beneficiary to gain control upon the account holder’s death.

Question 48

May a wife enter trades in a husband’s account?

Answer 48

Yes, with written third-party authorization.

Question 49

What triggers a BD’s filing of a Currency Transaction Report (CTR)?

Answer 49

Any cash transaction executed by a customer during one day that exceeds $10,000

Question 50

What items are acceptable as proof of identity under the Customer Identification Program (CIP)?

Answer 50

Passport or driver’s license (both have a picture)

Question 51

What happens to the deceased’s portion in a joint account with right of survivorship?

Answer 51

Her portion passes to the survivor.

Question 52

For a joint account, how many account numbers and SSNs are used for tax reporting?

Answer 52

One

Question 53

Describe a wrap account.

Answer 53

An account that charges the client a single fee that covers transaction execution and account management

Question 54

True or False: Not held orders may only be executed in a discretionary account.

Answer 54

False. Discretionary power of attorney is not required.

Question 55

Who may enter orders in a joint account?

Answer 55

Any owner named on the account

Question 56

What is needed to exercise discretion over a client’s account?

Answer 56

Written power of attorney

Question 57

Custodial accounts are opened under whose Social Security number?

Answer 57

The minor’s

Question 58

Customers become ___________________ if their cash or securities positions exceed SIPC coverage.

Answer 58

Customers become general creditors if their cash or securities positions exceed SIPC coverage.