Kaplan Section 5 Flashcards
What must appear on the application when a new client opens an account?
When a customer opens an account, the information needed includes, but is not limited to:
- The Customers Name and social security #(tax id #)
- Any employment with another FINRA member firm
The client does NOT need to sign the new account form but the Principal of the firm does
Who are disputes regarding the provisions of the Uniform Practice Code(UPC) handled through?
(disputes on issues like delivery and payment of securities)
Disputes regarding the provisions of the Uniform Practice Code (UPC) are handled through the Code of Procedure (COP)
What is TOD?
TOD stands for Transfer of Death
TOD is used to facilitate the transfer of assets in an account upon the death of the account holder without the need for probate
Only the assets held at the B/D where the TOD is held are transferred
The account holder may change the beneficiary at will
The TOD does NOT avoid estate taxes
What is COP?
COP stands for Code of Procedure
The Code of Procedure is followed when handling trade practice complaints involving violations of the Conduct Rules
Churning
Churning is Trading in a discretionary account that is excessive in size and or frequency for the purpose of generating commissions which is prohibited.
A manager inspecting an account for CHURNING would focus primarily on comparing account activity to the accounts financial resources and objectives.
Discretionary Orders
Discretion authorizes a representative to choose:
- The Security
- The amount of shares
- Whether to buy or sell
If an example comes up must have all 3 of these…in practice test there was a question with the customer specifying to sell 300 shares at the time and price that seemed appropriate. That example has the customer selecting the securities and the amount of shares and even though the rep chose when and for how much it did not qualify as a discretionary order. The reason it was wrong is because the customer told him which shares and how many…
Time and price do not count as discretionary
Appeals on charges by the Department of Enforcement are filed with who?
Appeals on charges by the department of enforcement are filed with the National Adjudicatory Council.
Appeals must be made within 25 days of the decision or the decision is final
What is MRV?
MRV stands for Minor Rule Violation.
The maximum fine for a minor rule violation is $2,500.
If/once a respondent agrees to the MRV provisions they may not appeal the finding or penalty
What is CTR?
CTR is Currency Transaction Report
Every financial institution is required to file a CTR for each cash transaction that exceeds 10k(not 10k or more). This applies to the transfer of funds electronically as well as the purchase of certificates of deposit, stocks bonds and other investments.
The act also requires the reporting of wire transfers in excess of 3k
The report is filed on FinCEN Form 112 with the IRS
What is an SAR?
SAR is a Suspicious Activity Report required by the USA Patriot act
Requires Broker Dealers to file suspicious activity reports(SAR’s) involving transactions of $5,000 or more when the financial behavior appears commercially illogical and serves no apparent purpose
UGMA/UTMA
UGMA/UTMA
-Custodial Accounts under the Uniform Gifts/Transfers to Minors Act
There can only be one child per account
There can only be one custodian per account
Gifts are IRREVOCABLE
Custodian retains all management obligations
Custodian may ONLY use the assets for the benefit of the child
NO LIMIT to the size of the gift.
Gifts exceeding the current years gift tax exclusion are subject to the gift tax
In an UGMA state assets become the child’s as early as age 18
In an UTMA state assets become the child’s as early as age 21
Corporate and personal retirement accounts and custodial accounts must be opened as cash accounts
Corporate and personal retirement accounts and custodial accounts must be opened as cash accounts
