FC Chapter 13 PART1 Flashcards
If a customer changes his address, where and when must notification of the change be sent?
Notification must be sent to the customer’s old address within 30 days of the change.
From what requirement of the penny stock rules are established customers exempt?
The account approval requirement
True or False: If the custodian is not a donor of the assets in a custodial account, she may charge a management fee.
True
True or False: The capacity in which a firm acts appears on both the confirmation and the order ticket.
False. Firm capacity is disclosed on the confirmation, not the order ticket.
What happens to the deceased’s portion in a joint account with right of survivorship?
Her portion passes to the survivor.
True or False: Short tendering is acceptable provided the subject company stock is not on the threshold security list.
False. Short tendering of stock is prohibited. An investor must be long the subject company’s stock or its equivalent.
True or False: A 457 plan is a qualified retirement plan.
False. A 457 plan is a nonqualified retirement plan.
What is required for an account being opened for a client who wishes to engage in short selling stock?
(1) Principal’s signature and (2) client’s signature (since the activity requires a margin account)
A client granting third-party authorization to another person does NOT constitute ______ ownership.
A client granting third-party authorization to another person does NOT constitute joint ownership.
What steps are taken if a customer dies?
Mark the account “deceased,” cancel open orders, and await instructions.
How much may be contributed to a 529 plan and avoid gift tax?
A donor may give up to $14,000 per year and avoid the gift tax.
A _______ plan is available for employees of non-profits, while a _____ plan is available for municipal employees.
A 403(b) plan is available for employees of non-profits, while a 457 plan is available for municipal employees.
For a joint account, how many account numbers and SSNs are used for tax reporting?
One
How is SIPC funded?
Through assessments on BDs that are SIPC members
What is required for a client’s account to be identified by number instead of name?
The client must sign a statement attesting to the ownership of the account.
Who may enter orders in a joint account?
Any owner named on the account
True or False: Any odd-lot differential or fee is disclosed on a customer confirmation.
True
May an individual with a Keogh Plan also fund an IRA?
Yes, but since the Keogh is a qualified plan, the IRA contributions may not be tax-deductible.
What steps should be taken when an RR executes a trade but uses the wrong account number?
Do a cancel and re-bill. Transfer the trade to the correct account number with permission of a supervising principal.
True or False: Client signature is required when opening either a cash or margin account.
False. Client signature is required when opening a margin account, but not a cash account.
True or False: Money may be withdrawn from a joint account in one owner’s name.
False. Any checks should be in both parties’ names.
If a client does not have a valid driver’s license or passport, what may be used to verify identity?
Client financial statements or checking references/information with other institutions or consumer reporting agencies
Do clients need to sign a letter of authorization (LOA) to begin receiving confirmations and statements electronically?
No
If not needed for a child’s education, may the funds in a 529 Plan be transferred to a relative’s 529 Plan?
Yes
True or False: Transfer and hold is an alternative to holding client securities in street name.
True. Transfer and hold indicates the securities are registered in the client’s name, but held at the brokerage firm.
If a client grants discretion to a third party, the ___________ of the person granted discretion must be obtained.
If a client grants discretion to a third party, the signature of the person who has been granted discretion must be obtained.
For SIPC purposes, what is a money-market mutual fund considered?
The fund is considered a security, not cash.
At the death of a client with a Transfer on Death designation, assets are transferred without going through ________.
At the death of a client with a Transfer on Death designation, assets are transferred without going through probate.
Jess has purchased Omega Industries, a penny stock, on three separate occasions. Is Jess an established client?
No. Established customers are those who have purchased three different penny stocks on three separate days.
What retirement plan is available for employees of state and local government entities?
A 457 plan
John has opened an account with a BD. When is the firm required to provide John with a privacy notice?
Since John is a customer, it must be provided at the time the account is opened.
Under the UGMA, when may a gift given to a minor be revoked?
Under no circumstances, since gifts to minors are irrevocable
List some retirement accounts that have required minimum disributions.
Required minimum distributions apply to traditional IRAs, 401(k), 457, and 403(b) plans.
If a firm makes an error in executing a client order, a __________ must be consulted to correct the error.
If a firm makes an error in executing a client order, a principal must be consulted to correct the error.
What is some of the important information to obtain when opening a new client’s account?
Name, address, age, occupation, SSN, citizenship, income, net worth, objectives, risk tolerance, investment experience
When is an individual (single filer) eligible to make tax-deductible contributions to a Traditional IRA?
When not covered by an employer-sponsored plan or when covered by a plan and below an adjusted gross income limit.
When is a privacy notice presented to a customer?
No later than when the relationship is established
The ___________________ must sign the account form.
The supervising principal must sign the account form (clients are not required to sign).
What triggers a BD’s filing of a Currency Transaction Report (CTR)?
Any cash transaction executed by a customer during one day that exceeds $10,000
True or False: Custodial accounts are solely carried in the name of the minor.
False. The account is in the custodian’s name for the benefit of the minor.
True or False: A FINRA notice of disqualification must disclose that the member firm may request relief from the action.
True. The firm may file a written application requesting relief for itself or its employee
True or False: When documenting third-party authorization, a BD must record the date on which authorization is granted.
true
What is filed if a client opens an account with $12,000 and offers $1,000 in cash to keep the teller from filing a CTR?
The $1,000 incentive payment, which amounts to a bribe, triggers an SAR.
According to the Uniform Gifts to Minors Act, gifts to minors are ____________.
According to the Uniform Gifts to Minors Act, gifts to minors are irrevocable.
What program must be established by BDs to verify the identity of each customer opening an account?
Customer Identification Program (CIP)
True or False: In a 401(k) plan, employers must make matching contributions on behalf of employees.
False. Employers may, but are not required to, make matching contributions.
True or False: A self-employed individual with a Keogh plan is not required to make contributions for others.
False. Full-time employees who are 21 or older must receive contributions at the same percentage as the employer.
What document allows a BD to lend customer securities to someone wishing to sell them short?
Loan Consent Agreement
True or False: Penny stock trades with institutional accredited investors are subject to the disclosure rules.
False. These trades are excluded from the disclosure rules.
True or False: A not held order may be executed at any point during the course of a week.
False. Not held order may only be executed on the day the order was entered.
If a client refuses to disclose her age when opening an account, what should the BD explain to her?
The firm should explain that without proof of age, an account may not be opened.
True or False: Only one person must provide information to open a joint account.
False. Each owner must provide information to open a joint account.
What is required for an investment adviser to place a transaction for its client?
The client would be required to sign a third-party trading authorization.
Grandparents contributing to a grandchild’s 529 plan may give how much money and still avoid gift tax consequences?
Front-loading five years of contributions is allowed; therefore, each could contribute $70,000 for a total of $140,000.
The Telephone Consumer Protection Act (TCPA), allows calls from ________ to ________ local time of the called party.
The Telephone Consumer Protection Act (TCPA), allows calls from 8:00 a.m. to 9:00 p.m. local time of the called party.
Define penny stock.
A non-exchange-traded (Pink Sheets or OTCBB) equity with a bid price below $5.00
If the sponsor of a deferred compensation plan fails, what are plan participants considered?
General creditors (the plan is not covered under ERISA guidelines)
True or False: Names appearing on the OFAC List are customers who had a previous business relationship with the firm.
False. The list shows the names of suspected terrorists and criminals.
As it relates to account management, what is the role of a guardian?
To handle the affairs of a person who is legally disabled based on age, or physical or mental incapacity
When must IRA withdrawals begin in order to avoid the late withdrawal penalty?
By April 1st of the year after an individual turns age 70 1/2
Where must SIPC membership be displayed?
In each branch and home office of the BD. Also, any retail communication must contain the SIPC logo.
IRA rollovers must be completed within ____ days.
IRA rollovers must be completed within 60 days.
What two forms are required for Sue’s son to make her investment decisions and pay her bills while she’s on vacation?
1) Full power of attorney, and 2) a signed request from the client
True or False: All contributions made to IRAs are tax-deductible.
False. Only contributions to Traditional IRAs are tax-deductible; Roth IRA contributions are NEVER deductible.
