Unit 2- Obtain Necessary Suitability Info And Approvals Flashcards
What is on a household balance sheet?
- Assets
- Liabilities
NOTE: Does NOT include incomes sources.
What is on the household income sheet?
- Salary
- Dividends
- Interest
- Expenses
What to do if a client insists on an unsuitable trade?
Execute the trade, and mark it “unsolicited”.
Define: Accredited Investor
- A net worth of $1 million (excluding primary residence)
OR
- Individual with income in excess of $200,000 for the past two years, and is expected to continue.
OR
- A couple with income in excess of $300,000, expected to continue.
Steps a rep can take to verify an investor is accredited?
- Tax returns or W2 for the last two years.
- Weitten statement from the customer.
- Bank or brokerage statements from the past three months
- A credit report
- A written confirmation from one of the following:
- Registered broker dealer
- Investment advisor
- Licensed attorney
- CPA
Special documents when opening an options account?
- Options Discloser Document (given to customer)
- Options Account Agreement (signed/returned by customer, within 15 days of account approval)
Three documents needed to open a margin account?
- Credit agreement (mandatory)
- Hypothecation agreement (mandatory)
- Loan concent form (optional)
When is a Risk Disclosure Document provided to a customer with a margin account?
At opening of account, and once per year there after.
What are the three “A”s of a discretionary order?
- Activity (action)
- Amount (qty)
- Asset
The three types of suitability analysis?
- Reasonable basis
- Quantitive analysis
- Customer specific analysis
Define: Prudent Investor Rule (or Prudent Trustee Rule)
A fiduciary may invest in anything that a president investor would. (Flip side: they are not limited to a state defined list of acceptable securities)
Under Reg BI, what is a key characteristic of an investment recommendation?
A call to action.
