Unit 9: Brokerage Support Services

Question 1

_______ Department – sends proxy material to customers who have securities held in the broker-dealer’s name (street name).

Answer 1

Proxy

Question 2

_______ are used in interdealer trades for which one party to the transaction does not recognize the trade or, if it does, disagrees with the terms of the trade as submitted by the other party. The term can also be used within a broker/dealer when an order or wire room does not recognize the account number or other information on an order ticket.

Answer 2

Don’t Know (DK)

Question 3

The flow of an order through a brokerage firm

Answer 3

OPMC (Order Dept, P&S Dept, Margin Dept and finally Cashiering Dept)

Question 4

The account name or number must be on the order ticket before order execution. If a mistake is made (e.g. wrong account number), no change to the order can be made without the approval of the principal or the branch manager. All of the facts surrounding the change must be put in writing and retained for ______ years.

Answer 4

three

Question 5

The firm can act in one of two capacities in a customer transaction: _____ or _____

Answer 5

agency or dealer

Question 6

If the firm acts as an ______, it is the broker between the buying and selling parties._______ receive commissions for transactions they perform, and commissions must be disclosed on confirmation.

Answer 6

agent;

Agents

Question 7

If the firm acts as a ______ and transacts business for or from its inventory, it acts in a principal capacity and is compensated by a markup or markdown. Additionally, confirmations must disclose markups or markdowns for Nasdaq securities.

Answer 7

dealer

Question 8

A firm can _______ act as both agent and principal in the same transaction.

Answer 8

never

Question 9

If there is activity in an account or if penny stocks are held in the account, statements are sent monthly. If neither of these conditions exists, there are no activity, and penny stocks are not being held, then statements may be sent________.

Answer 9

quarterly

Question 10

True or False? If a customer of a broker/dealer requests of copy of the firm’s most recent income statement in writing, the broker/dealer must comply.

Answer 10

FALSE: Upon request, the customer is entitled to the most recent balance sheet, not income statement.

Question 11

_______ Date is the date on which ownership changes between buyer and seller.

Answer 11

Settlement

Question 12

_________ Code standardizes the dates and times for each type of settlement.

Answer 12

Uniform Practice Code (UPC)

Question 13

_______ settlement – for most securities transactions is the second business day following the trade date – T+2

Answer 13

Regular way

Question 14

______ fee is one that is not excessive, compared with the fees charged by other broker/dealers or investment advisers charge for similar services.

Answer 14

Reasonable fee

Question 15

A printed document that confirms a trade, its settlement date, and the amount of money due from or owed to the customer.

Answer 15

Trade confirmation

Question 16

______ settlement requires delivery of securities from the seller and payment from the buyer on the same day a trade is executed.

Answer 16

Cash settlement

Question 17

________ option contract – lets a customer lock in a selling price for securities without having to make delivery on the second business day. Instead the seller can settle the trade as specified in the contract. Buyer just needs one days written notice.

Answer 17

Seller’s

Question 18

A ________ option contract works the same way as a seller’s option contract, with the buyer specifying when settlement will take place.

Answer 18

buyer’s

Question 19

______ - _______transaction confirmation must include a description of the security with contract price (yield) and a trade date.

Answer 19

When-issued

*When-issued for municipal bonds cannot include accrued interest because settlement date is unknown.

Question 20

A limited power of attorney that a stockholder gives to another person, transferring the right to vote on the stockholder’s behalf. (like an absentee ballot).

Answer 20

Proxy

Question 21

The ______ department transmits orders to the proper markets for execution.

Answer 21

order department

Question 22

The ________ department records all transactions and handles all billing. Mails out trade confirmations.

Answer 22

The purchases and sales (P&S) department

Question 23

The ______, or credit department – handles activities involving credit for cash and margin accounts.

Answer 23

margin

Question 24

The ______ department is responsible for receiving and delivering securities and money.

Answer 24

cashiering (cage)

Question 25

The _______ department handles any transaction that represents a change in the securities outstanding.

Answer 25

reorganization

Question 26

The ______ department credits customer accounts with dividends and interest payments for securities held in the firm’s name.

Answer 26

dividend

Question 27

The ______ department sends proxy statements to customers whose securities are held in the firm’s name. Also sends out financial reports and other publications.

Answer 27

proxy

Question 28

The _______ department maintains the ledger that lists each stock owner and the certificate’s location.

Answer 28

stock record