Unit 15: Handling Customer Accounts

Question 1

What is a trade confirmation? What does it include?

Answer 1

1. Amount of money due from or owed to the customer
2. Date the money changes hands (settlement date)

Many others…

Question 2

What are the terms for a confirmation delivery?

Answer 2

Customer must be given a written confirmation of the trade at or before the completion of the transaction (settlement date)

Question 3

What is on the confirmation of a municipal when-issued bond? What must it include?

Answer 3

Since they are sold before they are available for delivery, they don’t have all the information

Confirmation does not include:

1. Total dollar amount
2. Settlement date
3. Accrued interest cannot be calculated
4. Description of the security
5. Purchase price or yield
6. Trade date

Question 4

What must happen for electronic delivery of confirmations?

Answer 4

1. Must have procedures in place to show that the transactions have been delivered
2. Customer must have provided written consent to electronic delivery (must be provided paper form upon request)

Question 5

How long must customer confirmations be retained for?

Answer 5

Three years

Question 6

How are illiquid investments shown on a customer confirmation?

Answer 6

They must get an estimated value of the DPP or unlisted REIT security

Question 7

How often are customer accounts sent statements?

Answer 7

Quarterly

Question 8

How long do you have to furnish an account record? How long do you have to solicit for new information?

Answer 8

Within 30 days of opening

Within 36 months

Question 9

If a customer makes a change to an account, how quickly do they have to receive an account record?

Answer 9

Within 30 days of receiving notice of the change

Question 10

How long must a firm retain records for?

Answer 10

5 years after the record is made

Question 11

What happens to accounts that have been acquired?

Answer 11

Not subject to customer identification procedures; can be presumed that the other member fulfilled its obligation

Question 11

What happens to accounts that have been acquired?

Answer 11

Not subject to customer identification procedures; can be presumed that the other member fulfilled its obligation

Question 12

What is the Transfer Initiation Form (TIF)? Who sends it? Where does it go? How long does the carrying firm have to respond? How long does the transfer take? When can they stop it?

Answer 12

Form signs an account transfer form and is sent directly to Automated Customer Account Transfer Service (ACATS) where it automates and standardizes the procedure for the transfer

TIF is immediately sent to ACATs by the receiving firm

One business day

if there is a lien or bona fide claim

Question 13

What does the educational material sent to a customer who wants to follow a rep say? How must it be delivered? How long?

Answer 13

1. If there are financial incentives for the rep
2. Some assets are not directly transferrable
3. Potential costs related to transferring
4. Differences in products

In paper or electronic when the member individually contacts the customer to transfer assets or when a former customer transfers on their own

Within 3 days if oral

Question 14

On a premium, is YTM higher or lower than YTC?

Answer 14

Premium bond = yield to call is the lower of the two

Question 15

What are records needed for lifetime?

Answer 15

1. Stock Certificate Book
2. Partnership Agreement or Articles of Incorporation
3. Minutes of Board or Partnership Meetings

Question 16

What are records needed for 6 years?

Answer 16

1. Blotters
2. General Ledger
3. Stock Ledger
4. Customer ledgers
5. Customer Account Records
6. Designated Principals

Question 17

What are records needed for 3 years?

Answer 17

1. Virtually all other records

Focus reports
Trial balances
Forms U4 and U5
Fingerprint cards
Confirmations of trades
Order tickets
Security and cash loan records
Failed to receive and failed to deliver records
Long and short securities differences

Question 18

How long are customer complaints held for?

Answer 18

Four years

Question 19

What are trade blotters? What do they not contain? How long must they be posted for?

Answer 19

Daily record of all activity (does not include client information or settlement dates)

Must be posted no later than the first business day following activity

Question 20

What happens when a firm becomes aware of a death of a customer?

Answer 20

Must cancel all open orders
Mark the account deceased
Freeze the assets until hearing from the executor of the decedent’s estate
Third party power is revoked

Question 21

What happens if someone dies in a JTWROS?

Answer 21

Account is not transferred until death certificate is presented

Question 22

What happens if someone dies in a tenants in common (TIC)?

Answer 22

Interest goes to the decedent’s estate
Documents are necessary
Account must freeze

Question 23

What are the three main steps that apply to death of customer?

Answer 23

1. Cancel open orders
2. Freeze the account
3. Await instructions from the executor of the estate

Question 24

How long can FINRA permit someone to hold mail for?

Answer 24

3 months, firm must be able to contact them regardless

Question 25

What are the AML compliance needs?

Answer 25

Approving senior manager needs to approve it
If manager leaves, then someone else needs to reapprove it
Provide ongoing education