series 7 chapter 2 round 2

Question 1

prime brokerage account

Answer 1

a customer, GENERALLY AN institution, selects one member(the prime broker) to provide custody, trading and other services while other firms called executing brokers typically execute most of the trades placed by the customer.

advantage is that it provides the ability to trade with multiple brokerage houses while maintaining a centralized master account with all of the clients cash and securities.

Question 2

to open a corporate account

the following must be established

Answer 2

the business legal right to open the account must be established

an indication of any limitations that the owners, stock holders, a court, or any other entity has placed on the securities in which the business can invest

who will represent the business in transactions involving the account

Question 3

dividends paid from one corporation to another are

Answer 3

50% exempt for taxation

Question 4

finra rule requires that a person associated with a member, before opening an account or placing an initial securites order with another member,

Answer 4

notify the employer and the executing member(where the new account is to be maintained) in writing.

employing finra member must grant written permission

executing member must supply the employing member with duplicate copies of confirmations if requested

exeptions exist when registered reps is limited to purchasing directly from investment companies including variable contracts and 529

Question 5

non discrimination rules do not apply to

Answer 5

non qualified plans

Question 6

deferred compensation plan

Answer 6

a non-qualified deferred compensation plan is an agreement between a company and an employee in which the employee agrees to defer receipt of current income in favor of payout at retirement.

persons affiliated with the company soley as board members not eligible for this plan

The benefit at retirement is taxed as ordinary income. Employer is entitled to a tax deduction once the benefit is payed out

Question 7

deferred compensation plans usually benefit

Answer 7

highly compensated employees that are just a few years from retirement

Question 8

section 457 plans

Answer 8

nonqualified retirement plans set up by state and local governments and tax exempt to employers for their employees and independent contracts that work for those e entities.

Question 9

payroll deduction plans

Answer 9

non qualified and allows employees to authorize their employer to deduct a specified amount for retirement savings from their paychecks.

the money deducted after taxes is paid and may be invested in any number of retirement vehicles.

Question 10

401 k is what type of plan

Answer 10

salary deduction plan (qualified)

Question 11

between January 1 and april 15

Answer 11

contributions and adjustments may be made to an IRA for both the current year and the previous year

Question 12

excess contributions subject to

Answer 12

6% penalty

Question 13

keogh plans

Answer 13

retirement plans for self employed people

Question 14

the term required beginning date is for

Answer 14

qualified corporate plans

Question 15

tax sheltered annuities(403 b) for

Answer 15

public educational institutions

tax exempt organizations

religious organizations

Question 16

ERISA

Answer 16

established to prevent abuse and misuse of pension funds

Question 17

6 elements of ERISA

Answer 17

participation - all employees covered if they are 21 or older

funding- funds must be segregated from other corporate assets

vesting-employee always fully vested in employees own contribution plan

communication-plan document must be in writing and employees must be given annual statements

nondiscrimination- all employees must be treated through an informally applied formula

beneficiaries- benes must be named to receive anything upen death

Question 18

ERISA applies to

Answer 18

private sector(corporate) plans only .

does not apply to federal or state government workers(public)

not applicable to non qualified plans