Front Office Functions Flashcards
What rule governs the preparation of broker dealer books and records?
SEA Rule 17a-3
What rule governs the maintenance of broker-dealer records?
SEA Rule 17a-4
What record does a registered representative complete to show all information about a customer?
New Account Form
What is an individual account?
A type of account in which only an individual has the right to trade. Upon the individual’s death, the account passes to the individual’s estate.
What is Joint Tenant with Right of Survivorship?
A type of account in which each individual named on the account has the right to trade without the authorization of the other party. Upon death of any account owner, the account passes to the surviving owner without passing through probate.
What is Joint Tenant in Common (or Tenant in Common)?
A type of account in which each individual in the TIC arrangement has a specified ownership interest. Trades must be approved by all members of the TIC or trading authorization must be given to one of the members. Upon death of any account owner, his/her proportional share of the account passes to his/her estate.
How long must a firm keep records?
In general, a firm must keep records for three years. Certain records must be kept for six years. See SEA Rule 17a-4.
In what form must a firm maintain records?
A firm must maintain records in hard copy or electronic form. If electronic, the records must be secure and in a write-once, read-many (WORM) format.
What is a cash account?
In a cash account, the customer pays for each transaction with cash. The firm may not lend the customer money.
What is a margin account?
In a margin account, the firm may lend the customer money to purchase securities.
What rules govern margin accounts?
FINRA Rule 4210 and Regulation T.
What is order execution?
Order execution refers to a firm’s fulfillment of a customer’s buy or sell order.
Where does order execution usually happen?
Execution usually happens on an exchange. (But it can occur in other venues, such as an Alternative Trading System.)
How does execution usually occur?
Execution usually occurs when a firm identifies a counterparty for a customer’s order and commits to trade with the counterparty. (But it can happen in other ways.)
What is an “in-house cross?”
An “in-house cross” is a type of order execution in which a firm matches two customer orders.
What is “internalization?”
Internalization is a type of order execution in which a firm takes the other side of a customer’s trade.
What is a “lit” market?
A lit market such as an exchange posts bid and ask prices publicly, thus shedding light on supply and demand.
What is a “dark pool?”
A dark pool is an alternative trading system (ATS) that does not post bid and ask prices although willing buyers and sellers are participating in the market.
What is a 606 report?
Rule 606 of Regulation NMS requires broker-dealers to file a quarterly report that discloses to which market makers they routed non-directed orders in NMS stocks and NMS options contracts during the quarter.
What is a market order?
A firm must fill a market order immediately upon receipt at the best available price. The price at which the order is executed may be better than, worse than, or the same as the price quoted when the customer placed the order.
What is a limit order?
A firm must execute a limit order when a security’s price reaches a price specified by the customer. If the firm cannot execute the order at the limit price or better, the order is cancelled.
What is a stop order?
A stop order converts to a market order when a security’s price reaches a price specified by the customer. The price at which the order is executed may be better than, worse than, or the same as the stop price.
What is a marketable limit order?
A marketable limit order is a limit order that will be filled because the market price of the security is at the limit price or better.
