Section 6

Question 1

Finder’s fees are always illegal.

Answer 1

Finder’s fees are always illegal.

Question 2

Under Federal Reserve Board Regulation T, if a client fails to settle a stock purchase within five business
days, the client’s position must be liquidated, unless an extension is granted.

Answer 2

Under Federal Reserve Board Regulation T, if a client fails to settle a stock purchase within five business
days, the client’s position must be liquidated, unless an extension is granted.

Question 3

SIPC covers broker/dealer insolvency up to $500,000 per separate customer.

Answer 3

SIPC covers broker/dealer insolvency up to $500,000 per separate customer.

Question 4

SIPC covers up to $500,000 per separate customer, of which $250,000 may be cash.

Answer 4

SIPC covers up to $500,000 per separate customer, of which $250,000 may be cash.

Question 5

SIPC covers cash and securities held for customers by an insolvent broker/dealer.

Answer 5

SIPC covers cash and securities held for customers by an insolvent broker/dealer.

Question 6

SIPC does not cover mutual fund accounts.

Answer 6

SIPC does not cover mutual fund accounts.

Question 7

SIPC covers insolvent broker/dealers.

Answer 7

SIPC covers insolvent broker/dealers.

Question 8

All new customer accounts must be approved by the registered principal of the broker/dealer.

Answer 8

All new customer accounts must be approved by the registered principal of the broker/dealer.

Question 9

An unhappy client has up to six years to file for arbitration.

Answer 9

An unhappy client has up to six years to file for arbitration.

Question 10

Under Regulation T, if the client does not pay by the end of the fifth business day and no extension has been granted, the broker/dealer must liquidate the trade.

Answer 10

Under Regulation T, if the client does not pay by the end of the fifth business day and no extension has been granted, the broker/dealer must liquidate the trade.

Question 11

When opening a new account, you must ascertain the client’s date of birth.

Answer 11

When opening a new account, you must ascertain the client’s date of birth.

Question 12

$50,000 is the maximum amount that may be arbitrated under FINRA’s simplified arbitration procedure.

Answer 12

$50,000 is the maximum amount that may be arbitrated under FINRA’s simplified arbitration procedure.

Question 13

When opening an account with another firm to buy corporate securities, a R/R must notify both the executing firm and their employing firm in writing.

Answer 13

When opening an account with another firm to buy corporate securities, a R/R must notify both the executing firm and their employing firm in writing.

Question 14

Under Tenants in Common, owners may have a fractional interest in the undivided whole. Upon death, the interest passes to their estate, unlike Joint Tenants with the Right of Survivorship, where the interest passes to the survivor upon death.

Answer 14

Under Tenants in Common, owners may have a fractional interest in the undivided whole. Upon death, the interest passes to their estate, unlike Joint Tenants with the Right of Survivorship, where the interest passes to the survivor upon death.

Question 15

Under the Uniform Gift to Minors Act, unearned income in excess of the current limit allowed that is received by a child, if the child is under age 19 or a full-time student and under age 24, is taxed at the parent’s top marginal tax bracket.

Answer 15

Under the Uniform Gift to Minors Act, unearned income in excess of the current limit allowed that is received by a child, if the child is under age 19 or a full-time student and under age 24, is taxed at the parent’s top marginal tax bracket.

Question 16

When selling shares held by tenants in common, the shares must be endorsed by both parties.

Answer 16

When selling shares held by tenants in common, the shares must be endorsed by both parties.

Question 17

Under the UGMA, there can be only one child and one custodian per account.

Answer 17

Under the UGMA, there can be only one child and one custodian per account.

Question 18

Regulation S-P requires that a Privacy Notice be given at the time of opening a new account and again annually.

Answer 18

Regulation S-P requires that a Privacy Notice be given at the time of opening a new account and again annually.

Question 19

A ‘discretionary agreement’ is a limited power of attorney a B/D or agent obtains from a customer in order to buy or sell stocks on their behalf.

Answer 19

A ‘discretionary agreement’ is a limited power of attorney a B/D or agent obtains from a customer in order to buy or sell stocks on their behalf.

Question 20

Gifts under UGMA are considered to be irrevocable.

Answer 20

Gifts under UGMA are considered to be irrevocable.

Question 21

When opening a new account, a R/R must determine if the client is of legal age, their investment objective and the name and address of their employer. However, their employer’s tax ID is NOT required.

Answer 21

When opening a new account, a R/R must determine if the client is of legal age, their investment objective and the name and address of their employer. However, their employer’s tax ID is NOT required.

Question 22

When opening a joint account with a customer, a R/R must obtain approval of the firm where the customer maintains his account.

Answer 22

When opening a joint account with a customer, a R/R must obtain approval of the firm where the customer maintains his account.

Question 23

When a R/R wants to open an account with another firm to buy corporate securities, they must notify the executing firm of their affiliation.

Answer 23

When a R/R wants to open an account with another firm to buy corporate securities, they must notify the executing firm of their affiliation.

Question 24

If a R/R wants to arbitrate $43,000 in commissions he says are due from his firm, he should file under the Simplified Code of Arbitration (disputes limited to $50,000 or less).

Answer 24

If a R/R wants to arbitrate $43,000 in commissions he says are due from his firm, he should file under the Simplified Code of Arbitration (disputes limited to $50,000 or less).

Question 25

Disguising financial assets so they can be utilized without detecting the illegal activity that produced them is known as ‘money laundering.’

Answer 25

Disguising financial assets so they can be utilized without detecting the illegal activity that produced them is known as ‘money laundering.’

Question 26

Under the Bank Secrecy Act, broker/dealers are required to file a Currency Transaction Report when a cash transaction exceeds $10,000.

Answer 26

Under the Bank Secrecy Act, broker/dealers are required to file a Currency Transaction Report when a cash transaction exceeds $10,000.

Question 27

Broker/dealers may hold a customer’s mail if the customer is travelling domestically for two months.

Answer 27

Broker/dealers may hold a customer’s mail if the customer is travelling domestically for two months.

Question 28

Broker/dealers may hold a customer’s mail if the customer is travelling internationally for three months.

Answer 28

Broker/dealers may hold a customer’s mail if the customer is travelling internationally for three months.

Question 29

Registered Representatives are required to complete the firm element of continuing education annually.

Answer 29

Registered Representatives are required to complete the firm element of continuing education annually.

Question 30

The regulatory element of continuing education must be completed within 120 days of the registered representatives second anniversary date and every three years thereafter.

Answer 30

The regulatory element of continuing education must be completed within 120 days of the registered representatives second anniversary date and every three years thereafter.

Question 31

FRB Regulation T sets the initial margin requirement in a margin account at 50% or $2,000, whichever is greater.

Answer 31

FRB Regulation T sets the initial margin requirement in a margin account at 50% or $2,000, whichever is greater.

Question 32

Under, Regulation T clients must settle their transactions within T + 5 business days.

Answer 32

Under, Regulation T clients must settle their transactions within T + 5 business days.

Question 33

Under FINRA’s Code of Arbitration, the award may contain a rationale underlying the award if all parties
jointly request an explained decision at least 20 days prior to the first schedule hearing date.

Answer 33

Under FINRA’s Code of Arbitration, the award may contain a rationale underlying the award if all parties
jointly request an explained decision at least 20 days prior to the first schedule hearing date.

Question 34

An explained decision is a fact-based award stating the general reason(s) for the arbitrator decision.

Answer 34

An explained decision is a fact-based award stating the general reason(s) for the arbitrator decision.

Question 35

Firms are required to implement a written Customer Identification Program to verify the identity of each customer who opens an account.

Answer 35

Firms are required to implement a written Customer Identification Program to verify the identity of each customer who opens an account.

Question 36

A firm’s CIP program must, at minimum, contain procedures to:

1. Verify the identity of any person seeking to open an account, to the extent reasonable and practical
2. Maintain records of the information used to verify a person’s identity
3. Determine whether the person appears on any lists of known or suspected terrorists or terrorist organizations provided to broker/dealers by any government agency
4. Provide customers with notice that their broker/dealer is requesting information to verify their identity

Answer 36

A firm’s CIP program must, at minimum, contain procedures to:

1. Verify the identity of any person seeking to open an account, to the extent reasonable and practical
2. Maintain records of the information used to verify a person’s identity
3. Determine whether the person appears on any lists of known or suspected terrorists or terrorist organizations provided to broker/dealers by any government agency
4. Provide customers with notice that their broker/dealer is requesting information to verify their identity

Question 37

Notice regarding the firm’s Customer Identification Program procedures must occur before the account is opened.

Answer 37

Notice regarding the firm’s Customer Identification Program procedures must occur before the account is opened.

Question 38

The notice shall be provided in a manner reasonably designed to ensure that a customer is able to view the notice, or otherwise given notice, before opening an account.

Answer 38

The notice shall be provided in a manner reasonably designed to ensure that a customer is able to view the notice, or otherwise given notice, before opening an account.

Question 39

The notice does not have to be given to the customer in writing.

Answer 39

The notice does not have to be given to the customer in writing.

Question 40

The minimum identifying information about each customer must be obtained prior to opening an account.

Answer 40

The minimum identifying information about each customer must be obtained prior to opening an account.

Question 41

The minimum identifying information required by the Customer Identification program includes the client’s: name, date of birth, address and tax identification number.

Answer 41

The minimum identifying information required by the Customer Identification program includes the client’s: name, date of birth, address and tax identification number.

Question 42

A person who does not have a physical address can still open an account by providing a residential or business address of a next of kin or another contact individual.

Answer 42

A person who does not have a physical address can still open an account by providing a residential or business address of a next of kin or another contact individual.