FC Chapter 13 PART2 Flashcards
Both the ____________ and the ____________ are required for a corporation to open an options or margin account.
Both the Corporate Resolution and Corporate Charter are required for a corporation to open an options or margin account.
Under the Customer Identification Program, may accounts be opened for clients refusing to provide required information?
No
When is confirmation of a transaction sent to a client?
No later than completion of the transaction
True or False: Although 457 plans are considered nonqualified, contributions and growth are tax-deferred.
True
What is SIPC?
Securities Investor Protection Corporation. SIPC protects separate customers in the event of BD bankruptcy.
When are firms required to provide a non-customer (consumer) with a copy of their privacy notice?
Prior to the sharing of non-public personal information
True or False: Clients need not sign the account form for a cash account.
True, but signature would be required for an option or a margin account.
A child with a UGMA account dies at age 11 without a will. To whom do the assets revert?
To whomever state law dictates
What are some of the acceptable reasons that a custodian may liquidate positions in a custodial account?
To support or provide school funds for the child, or for reimbursement of expenses associated with being a custodian
True or False: Firms may use the official SIPC logo or create their own.
False. Only the official SIPC logo may be used.
What is needed to exercise discretion over a client’s account?
Written power of attorney
For Sue and her nonworking spouse to make the maximum contribution to their IRAs, the money must be invested ________.
For Sue and her nonworking spouse to make the maximum contribution to their IRAs, the money must be invested equally.
Since the _______ is responsible for any tax liability, custodial accounts use the tax ID of the _______.
Since the minor is responsible for any tax liability, custodial accounts use the tax ID of the minor.
A self-employed individual with income of $120,000 would like to open a Keogh plan. How much may be contributed?
The lesser of 25% of self-employment income or $56,000. In this example, $30,000 may be contributed ($120,000 x 25%).
An established customer is one that has traded with a firm for more than ____ year.
An established customer is one that has traded with a firm for more than one year.
Where would a firm disclose that it is not a member of SIPC?
On the customer confirmation
Which of the following accounts requires no supplemental documentation–guardian, partnership, UTMA, or estate account?
A UTMA (or UGMA), since account forms offer these accounts as a standard ownership choice
Under the Customer Identification Program of the USA PATRIOT Act, what information MUST be obtained about a client?
Date of birth, name, address, and an ID number
To participate in a tender offer, an investor must be long ___________ or its ____________.
To participate in a tender offer, an investor must be long the stock or its equivalent.
True or False: Principals must approve discretionary orders prior to entry.
False. The orders must be approved promptly afterward.
Under the TCPA, how is an established customer defined?
One that has made an unsolicited inquiry or effected a transaction with the firm
True or False: Required minimum distributions apply to Roth IRA accounts.
False. Required minimum distributions apply to traditional IRA accounts, not Roth IRAs.
SIPC provides coverage of $_________ of which no more than $_________ can be cash.
SIPC provides coverage of $500,000 of which no more than $250,000 can be cash.
Where would Do Not Reduce (DNR) instructions appear?
On the order ticket
List the proper naming sequence for registering a custodial account.
Custodian’s name, then the minor’s name, followed by the appropriate state
True or False: 529 plans allow for a five-year front-end contribution of $70,000, which avoids gift tax.
True ($14,000 x 5 years)
______ power of attorney allows a person to buy or sell securities, transfer assets, or have check writing privileges.
Full power of attorney allows a person to buy or sell securities, transfer assets, or have check writing privileges.
Define the term structuring as it relates to money laundering.
Breaking up large transactions into smaller amounts in an attempt to evade AML reporting requirements
What are some of the investments that are not suitable for IRA contributions?
Collectibles, insurance, and metals (except U.S. gold and silver coins)
Ted’s dad has been declared incompetent. A court names Ted to oversee his dad’s brokerage account. What does Ted need?
Evidence of appointment of incumbency
For an hourly employee, working _____ hours per year is considered full-time employment.
For an hourly employee, working 1,000 hours per year is considered full-time employment.
For SIPC purposes, what happens to securities that are able to be specifically identified as belonging to a client?
They are distributed to the client without regard to the dollar amount limit.
Under Regulation SP, a _________ is someone who gives nonpublic, personal information to a BD that may result in trades.
Under Regulation SP, a consumer is someone who gives nonpublic, personal information to a BD that may result in trades.
True or False: At death, assets in an account with a Transfer on Death designation are subject to estate taxes.
True
When does a firm file a Suspicious Activity Report (SAR)?
When it knows or believes the client’s funds derived from illegal activities, or the trades have no legitimate purpose
According to penny stock disclosure rules, what must BDs disclose for each penny stock trade?
The current quote of the security and the compensation to be received by both the BD and RR
When are covered option positions and penny stock transactions permitted in a custodial account?
When they do not comprise a significant portion of the account assets
After what age may traditional IRA plan contributions no longer be made?
After age 70 1/2
Beyond a death certificate, what other documents may be required at the time of a client’s death?
Inheritance tax waiver, affidavit of domicile, and letters testamentary
Ben’s margin account has a market value of $800,000 and a debit balance of $350,000. How much SIPC coverage is provided?
In a margin account, SIPC covers the net equity (market value minus debit). In this example, $450,000.
May a wife enter trades in a husband’s account?
Yes, with written third-party authorization.
A BD client of six months has purchased penny stocks on five occasions. What is the client considered?
An established customer
Under Regulation SP, a _________ is someone who has an ongoing relationship with a firm.
Under Regulation SP, a customer is someone who has an ongoing relationship with a firm.
True or False: Prior to recommending stock to a client, the member must review the issuer’s current financial condition.
True
In a one-year period, how many times may a qualified plan be transferred via a trustee transfer?
There is no limit to the number of trustee transfers.
What is a security quoted on the OTCBB at 4.85 - 5.03 considered?
A penny stock
What is the maximum amount of securities that a BD may rehypothecate to a bank?
140% of the debit balance
This year, Jim contributes $7,000 to his IRA with $3,000 to his nonworking spouse’s IRA. Is this acceptable?
No. While equal amounts are not required, neither account may have more than the $6,000 maximum.
What must be included in the monthly statement sent to clients with penny stocks in their accounts?
Each penny stock owned, the number of shares, and the stock’s estimated market value
When rolling over a distribution from a qualified plan, when must the participant complete the transfer?
Within 60 days from the receipt of the funds from the old plan
How often must an updated copy of the privacy notice be provided to customers?
At least once during each 12-month cycle
True or False: The recommendation to a new client of a $4.00 stock on the OTCBB is subject to penny stock rules.
True
True or False: Under Regulation SP, requiring a client to write a letter to opt-out of information sharing is allowed.
False
Shares were mistakenly bought in a client’s account. Who is authorized to place the shares in the firm’s error account?
The firm’s principal
If a quantity error occurs when filing a trade, the client is obligated to accept the _________ quantity.
If an quantity error occurs when filing a trade, the client is only obligated to accept the desired quantity.
In a 529 Plan, what happens if the funds are withdrawn, but not used for qualified education expenses?
The earnings would be subject to ordinary income tax plus a 10% penalty.
If a client serves in the military and does not have a residential or business street address, what may be used instead?
Military personnel may use an Army Post Office Box (APO) or Fleet Post Office Box (FPO)
Once placed, a tender offer must remain open for at least ____ business days from the announcement.
Once placed, a tender offer must remain open for at least 20 business days from the announcement.
What must be checked before a BD makes telephone solicitations?
The firm’s Do Not Call List
What is the purpose of ERISA?
To establish guidelines for private sector retirement plans and protect employees from improper investments by employers
