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Series 24 - Session Two - Customer Accounts > Series 24 - Session Two - Customer Accounts > Flashcards

Series 24 - Session Two - Customer Accounts Flashcards

1
Q

An individual account can be set up as TOD. What does this mean?

A

Transfer on death which allows the transfer of securities to the beneficiary at the death of the owner. It supercedes the will and is not subject to probate.

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2
Q

Can a minor be a joint owner of an account?

A

No

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3
Q

Who can make trades and disburse cash and securities in a joint account?

A

Any one of the account holders

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4
Q

What is JTWROS?

A

Joint Owners With Right of Survivorship which means an undivided interest in the account

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5
Q

What is TIC?

A

Tenants in common and each account owner has a percentage interest in the account.

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6
Q

In a corporate account, why is a resolution required?

A

A resolution defines who has legal authority and who can trade in the account.

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7
Q

When can a corporate account give permission to officers to trade on margin?

A

Only if it is specifically stated int he charter or bylaws

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8
Q

In a partnership account, why is a resolution required?

A

The resolution defines which partners are authorized to trade in the account

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9
Q

When can a partnership account give permission to partners to trade on margin?

A

If is it clearly stated in the partnership agreement

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10
Q

How often are partnership agreements required to be updated?

A

Annually

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11
Q

In a fiduciary account, describe the prudent man rule.

A

The prudent man rule says anything can be bought and/or sold in the account if it is a product a prudent man would invest in

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12
Q

In a fiduciary account, describe the legal lists by state?

A

The list is decided upon by the state legislature and other those products on the list can be purchased in a fiduciary account.

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13
Q

Can margin trades be made in a fiduciary account?

A

Usually not unless it is clearly stated in the agreement.

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14
Q

What is required to open an account in the name of a trust?

A

a copy of the trust agreement

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15
Q

Can margin trades be made in a trust account?

A

only if provided for in the trust agreement

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16
Q

What is a guardianship account and what are the time requirements for opening?

A

A guardianship account is mandated in a court order and must be opened within 60 days of the court appointment - certificate of incumbency.

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17
Q

What are the two types of custodial accounts?

A

UGMA and UTMA

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18
Q

In a minor account, how many custodians and how many minors are allowed per account?

A

one custodian and one minor

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19
Q

In a custodial account, who can open an account for a minor?

A

Any adult

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20
Q

Whose social security number is on a minor account…who will receive the 1099?

A

the minor

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21
Q

What supporting documentation is required to open a minor account?

A

none

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22
Q

Can a custodian be reimbursed for expenses?

A

Yes

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23
Q

Can a custodian be paid for services?

A

Yes unless he custodian is also the donor

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24
Q

What happens at the death of the minor in a minor account?

A

The assets go to the minor’s estate

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25
Q

What two things can a custodian not allow in a minor account?

A

1) rights or warrants to expire worthless 2) free credit balances to build up over time

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26
Q

What age does the minor become legal in a UGMA account?

A

The age of majority for the state.

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27
Q

What age does the minor become legal in a UTMA account?

A

Up to age 25

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28
Q

What are DVP accounts?

A

Delivery vs payment - basically COD

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29
Q

Who make delivery or securities sold or makes payment for securities purchased in a DVP account?

A

An agent bank (U.S bank)

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30
Q

Who provides the name, address and account number on file for the agent bank in a DVP account?

A

The customer

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31
Q

Who must assure that proper instructions have been given to the agent bank in a DVP account?

A

The customer

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32
Q

How are trades settled for DVP accounts?

A

Regular way

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33
Q

If delivery is delayed in a DVP account, how many days does the member have to make payment?

A

35 calendar days

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34
Q

Typically, what is the difference between when business days are used and calendar days are used?

A

If it’s more than 30 days, calendar days are usually used. If it’s less than 30 days, business days are typically used.

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35
Q

What is the minimum net capital required for a prime brokerage account?

A

$1.5 million

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36
Q

What is a fee-based account?

A

One that charges a fixed monthly or annual fee for all trades

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37
Q

How often are fee-based accounts required to be reviewed?

A

periodically

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38
Q

Fee-based accounts are not appropriate for buy and hold customers. True or False

A

True

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39
Q

In an UGMA minor account, at the death of the minor, the assets in the account pass to the custodian. True or False

A

False

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40
Q

A new account form must include what 4 primary things?

A

1) an arbitration agreement 2) signatures - customer and principal 3) Form w-9 for US citizens and Form W-8 for non US citizens 4) Patriot Act requirements of name, address, dob and SSN

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41
Q

Do RRs have to sign an account opening form?

A

no, only a principal

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42
Q

What documents can be used to verify identity according to the US Patriot Act?

A

passport, driver’s license; military ID; state issued ID

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43
Q

What is the procedure if you are unable to verify a customer’s identity?

A

refuse to open the account or close the account

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44
Q

A customer new account form for the customer to verify the information must be provided within how many days?

A

within 30 days of account opening

45
Q

How many days for changes to a customer account?

A

30 days

46
Q

How often does customer account information have to be updated?

A

Every 36 months

47
Q

Order tickets must be reviewed by a principal within what time frame?

A

promptly

48
Q

Discretionary accounts should be reviewed how often and for what two main purposes

A

1) at least quarterly 2) for unsuitable trade and churning

49
Q

What is required to revoke discretionary authority of an account?

A

it must be in writing

50
Q

Not-held orders do not required discretionary authority. Why not?

A

1) you do not choose timing and price 2) they are considered day orders

51
Q

What happens to discretion authority at the customer’s death?

A

It ceases

52
Q

Discretionary authority gives the RR the ability to make decisions on what 3 things?

A

1) activity - whether to buy or sell 2) amount - how many shares should be purchased and 3) which asset to purchase, i..e, IBM stock, T-bills, etc.

53
Q

What 2 things does the RR not have discretionary authority over?

A

1) timing 2) price

54
Q

What 3 things should be done immediately if an individual customer dies?

A

1) cancel open orders, limit orders, stop orders, POAs, and freeze accounts 2) mark the account “deceased” 3) await proper legal papers

55
Q

What are “proper legal papers” required at the death of a customer?

A

1) copy of the death certificate 2) who is required to pay the inheritance tax 3) letter of testamentary

56
Q

What is an affidavit of domicile and when it is required?

A

some state require this at the customer’s death –usually any state with an inheritance ta provision

57
Q

What happens when one of the JTWROS owner dies?

A

The surviving tenant assumes the decendents interest with proper documentation

58
Q

Can a surviving JTWROS continue to enter orders in an account?

A

Yes but they cannot remove assets without documentation

59
Q

What happens when one of the TIC owner dies?

A

1)Decedents interest goes to their estate with proper documentation 2) surviving tenant cotenant with the decedent’s estate until transferred 3) surviving tenant cannot enter orders until documentation is provided

60
Q

What 4 things are required on an order ticket?

A

1) Name or number 2) prompt endorsement by a principal 3) all ticketes must be marked solicited or unsolicited 4) sell tickets must be marked long or short

61
Q

When are customer confirmation required to be sent?

A

On or before settlement date. Electronic delivery ok with customer permission. Website = access = delivery

62
Q

SEC Rule 10b-10 outlines requirements for disclosure on a customer confirm. What 8 disclosures are required?

A

1) agent or principal 2) market maker status is applicable 3) control relationship, if applicable 4) dual agency, if applicable 5) mark up or mark down 6) name of other party in agency trades 7) commission 8) preference order payment flow

63
Q

What is a riskless principal transaction?

A

I do not know

64
Q

When are customer statements required?

A

Quarterly if no activity; monthly if activity

65
Q

How often is notice to customers of free credit balances required?

A

Quarterly

66
Q

Electronic delivery of information to customer is allowed if what?

A

1) customer has provided written permission 2) a website is accessible and is password protected

67
Q

How long does a carrying firm have to validate and ACAT form (used for transferring accounts)?

A

1 business day

68
Q

Within how many does must a carrying firm complete the transfer of accounts?

A

within 3 business days

69
Q

What does the carrying firm do to open orders, limit orders, and stops for account that are being transferred?

A

They are canceled.

70
Q

Option positions are not transferred if they expire within how many days?

A

7 business days

71
Q

When are bulk transfers ok?

A

with a positive affirmation letter

72
Q

How many days do you have to settle/resolve an disputes over position or money balances?

A

5 business days

73
Q

B/Ds can hold customer mail for how long if the customer is traveling in the US?

A

60 days

74
Q

B/Ds can hold customer mail for how long if the customer is traveling outside the US?

A

90 days

75
Q

Regulation S-P is a re-write of Gram Leach Blily? What does it say?

A

Firms must adopt policies and procedures to address the protection of non-public information.

76
Q

When and how often are privacy notices required to be given to customers?

A

1) at account opening 2) annually to customers with an ongoing relationship

77
Q

When is an initial notice the only requirement of the privacy act?

A

For a consumer (not a customer) who obtains a product or service but has no further contact with the firm

78
Q

Opt out methods must be easy. What does that mean?

A

firms must provide a 1-800 number or a pre-paid post card

79
Q

A B/D is prohibited from using eligibility information from an affiliate company to solicit a prospect unless what?

A

1) it is disclosed 2) customers may opt out of receiving solicitations

80
Q

A birth certificate can be used to verify identity. True or False

A

False

81
Q

A durable power of attorney survives incapacitation. True or False

A

True

82
Q

A limited power of attorney allows a third party to trade in the account. True or False

A

True

83
Q

A limited power of attorney ceases at death. True or False

A

True

84
Q

Who regulates the extension of credit in the securities industry (margin accounts).

A

The Federal Reserve Board

85
Q

Regulation T - what is the initial requirement for non-exempt securities

A

50% - cash 50% fully paid securities 100%

86
Q

Which does customers receive a risk disclosure statement

A

At account opening and annually thereafter

87
Q

Corporation accounts survive death of a corporate officer. What happens to partnerships on the death of one of the partners?

A

They dissolve. You must freeze the account and cancel open trades

88
Q

Fee based accounts are not appropriate for what type of customers?

A

buy and hold customers

89
Q

Fee based accounts require a separate disclosure that says whay?

A

fees may not be reasonable

90
Q

On a DPP roll up, how many days tender offer?

A

60

91
Q

What is normal tender offer days?

A

20

92
Q

Frequent review of discretionary accounts is required. What is frequent?

A

at least quarterly

93
Q

Discretionary accounts are review frequently (at least quarterly.) What are they looking for?

A

unsuitable trades and churning

94
Q

If an order ticket indicates it was sold long, what is required?

A

to know where the certificates are located

95
Q

Disclosure of markup or markdown in exchange traded stocks is required when what?

A

1) acting as a dealer 2) riskless principal transaction

96
Q

Notification of free credit balances is required how often?

A

at least quarterly

97
Q

Can a birth certificate be used to validate a customer’s identity?

A

no

98
Q

Uses of SMA: what is the borrowing power ratio?

A

1:1

99
Q

Uses of SMA. What is the buying power ratio?

A

2:1

100
Q

To what level could market fall to put the account a minimum equity?

A

to compute - debit balance divided by .75

101
Q

If selling securities in a restricted account, 50% of the proceeds must what?

A

retained in the account to reduce debit

102
Q

What is excess margin securities?

A

more than 140% of customer debit balance

103
Q

What does Reg X refer to?

A

margin credit obtained outside the US

104
Q

What is a pattern day traders?

A

four or more trades in a 5- business day period

105
Q

Which is not required for a margin account? 1) loan consent agreement 2) new acccount form 3) credit agreement 4) hypothecation form

A

loan consent agreement

106
Q

what is the minimum required deposit in a margin account?

A

$2,000

107
Q

If a customer is approved for writing uncovered options, they are also approved for what?

A

margin account

108
Q

In a margin account, customers must receive and acknowledge a risk dislcosure statement when?

A

at or prior to the initial transaction

Series 24 - Session Two - Customer Accounts (1 decks)

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