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68 Cards in this Set
- Front
- Back
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What is needs to be completed before a customer can open an account?
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New Account Report Form
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In order to get approval what must be signed and by who in order to open a new customer account? Who has final approval?
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New Account Report Form must be signed by the BRANCH mgr OR Principal AND the Register Representative
**customer does not need to sign the form FInal approval by member firm is by the principal executive officer or partner |
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What are the 9 things that new account report firms must contain?
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1. Customers Name
2. Residence & business addresses and phone numbers 3. occupation & employer 4. whether the person is a citizen 5. DATE OF BIRTH 6. SS# or Tax ID# 7. Non-US citizens, tax ID, passport#, or aliens ID is sufficient 8. Provide government issued photo ID - verified on terrorist list 9. Numbered Acct - if the customer wants to open a number or symbol acct rather than their name they must submit WRITTEN STATEMENT attesting to ownership |
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When opening a new customer account does the firm need the following:
1. tax bracket 2. Date of birth 3. tax ID # 4. educational background 5. occupation |
tax bracket & educational background are NOT needed
a tax ID# or SS#, Date of Birth and occupation are all REQUIRED |
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If the customer's income changes would the RR be required to update records?
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Yes
as well as when there are changes in employment, address, invent objectives, and security positions |
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What does the Customer Identification program require and how long must the information be retained for?
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CIP is under the US Patriot Act requires broker-dealers to identify their customers and clear them from the terrorist list and residence of embargoed countries. this must be verified WITHIN 5 BUSINESS days for cash accounts and RETAINED for 5 YEARS AFTER account is CLOSED.
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What type of account would a natural person have?
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individual account
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Joint Tenants with Rights of Survivorship, Tenants in Common, and Transfer on Death are all considered what type of customer accounts?
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Joint accounts
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What type of joint customer account would pass on to the estate and not the survivor owner?
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Tenants in common
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What type of joint customer account would give the surviving owner sole ownership of securities upon presenting what two documents?
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Joint tenants with right of survivorship - JTWROS
if one owner dies then the other owner becomes the sole owner of the account upon death the survivor must present the death certificate and affidavit of domicile (place of residences at time of death) |
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In what type of joint account can both owners place orders?
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tenants in common and JTWROS
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What type of customer account would eliminate probate?
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Transfer on death - would be given to the beneficiaries stated in the TOD agreement and not be handled in probate (will of a deceased is handled in court)
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What kind of securities are allowed in a TOD? What type of assets are not eligible for TOD accounts?
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TODs can include basic securities such as stocks, bond, and mutual funds
CANNOT include limited partnerships, annuities, commodities, metals |
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In a JTWROS how must checks be written?
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must be written in BOTH names
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When a corporation opens an account for securities what must they provide?
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Corporation Resolution - document from Board of Directors of the corporation the authorizes a specific person(s) to enter orders on behalf of the company
Articles of Incorporation *must be completed for a cash or margin account |
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When opening a Limited Partnership Account who is required to sign?
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Only the general partner(s)
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What risk is a pattern day trader concerned with? What makes them a day trader?
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4+ day trades within 5 business days
market timing risk |
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what type of account has a minimum equity of $25,000 and is least susceptible to inflationary risk?
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pattern day traders
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What type of an account is an arrangement in which property is managed by one person for the benefit of another person?
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Trust account
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What is a trustee?
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A fiduciary who holds title to the trust assists for the benefit of the trust beneficiaries
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can a trustee establish a margin account for a trust?
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yes if authorized in trust agreement
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If a person receives compensation for giving advice what must they be registered under? Who is exempt?
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Investment Advisors Act 1940
Banks LATE - Lawyers, Accountants, Teachers, Engineers - anyone shoe gives advice as an incidental part of their profession and does note charge a separate fee |
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What type of account charges a fixed fee or a percentage of he customers account value rather than a transaction based commission? What type of customers do they benefit the most? When must fees and costs be disclosed?
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Non-Managed Fee Based Account Programs
Benefits customers who trade frequently fees and costs must be disclosed BEFORE account is established |
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Can a fiduciary grant trading authority to a third party?
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NO
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What type of accounts must follow Prudent Investor Rules and what does that mean?
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Financial institutions and Fiduciary accounts
conservative investments |
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What is the breakpoint discount from mutual funds for Investment clubs?
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None!
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If the president of a bank or officer of a financial institution opened a margin account would they be required to obtain authorization?
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No authorization but notification would be sent to their work
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under a UGMA/UTMA how is it set up? who is the SS# needed for opening the account? Who pays taxes? Are margin accounts allowed for UGMA/UTMA? What name are securities registered under
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One custodian - adult & one minor - beneficiary
minors SS# minore pays taxes no margin accounts; only fully paid securities securities registered under custodian |
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Can gifts of money, life insurance policies and annuity contracts be given in a UGMA/UTMA?
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only in certain states
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Can the custodian of a UGMA/UTMA hold cash proceeds from sales or dividends in their own account?
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only for a reasonable time period if the money id reinvested
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If the minor dies who has a UGMA/UTMA what happens to the account?
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the proceeds are given to the minor's estate
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Do all transactions in a customers account have to be reviewed and initialed by a principal or supervisory person of the broker-dealer?
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yes. ALL.
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What should a RR consider when determining a customers financial profile?
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equity in their home
dependents and educational needs martial status termperment |
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There are two type of discretionary accounts; limited or full power of attorney. Which of these allows withdraw of cash or securities?
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Full power of attorney
limited = buy/sell which security and when |
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How long is discretionary authorization good for?
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until a death of owner of the account or it is revoked in writing by the customer
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What is it called when a RR makes transactions which are excessive in size or frequency?
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churning and is NOT allowed
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If a client comes to you, the RR, and is terminally ill what should you do?
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advise them to see a tax attorney for estate tax advice
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What type of discretionary order does not require written authorization?
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time and price discretion are good for the day and do not require written approval but the RR does not decide how many shares or which security. they only decide when to execute the order at the best price during that day
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If an erroneous trade is made will the customer still be required to pay for the trade at the price they were told or at the price it was executed? What should an RR do if this happens to their client?
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The customer must pay the price that the trade was executed at and the RR should immediately report this to their supervisor
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If an order needs to be chained or corrected what must the RR do?
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they must get approval from the branch manager or supervisor
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If mr. johnson has an account with you and his wife Mrs. johnson comes to you and asks you to place an order to buy 100 ABC @ 50 and withdrawal $300 what should the RR do?
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ONLY if the RR has written authorization stating that the request of the spouse is authorized can the order and the withdrawal be made but the check will be made out to mr. johnson, not the spouse
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What allows for the transferring of a customers cash and/or securities?
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letter of authorization - LOA
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What should be the first thing an RR would do if a customer dies?
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Cancel all open orders
then: freeze account wait for estates rep obtain an affidavit of domicile |
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If one of the partners dies in a partnership what must the RR do?
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freeze the account since the partnership is legally dissolved upon the death of a partner
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What should an RR do if they learn a client has filed for bankruptcy?
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cancel all open orders to buy and sell
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Of the following what can an unregistered employee at a broker-dealer do:
1. have meetings with clients about investment objective updates 2. Talk to clients about clerical or administrative issues with an account 3. Send out mail invitations for a seminar |
an unregistered employee would be allowed to do all of the following except meet with clients regarding an update of their investment objectives
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If an account transfers from one RR in a firm to another RR how should the new RR address the account?
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they should treat the account as a new customer and update the customers profile
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what is the service that facilitates the transfer of accounts from one brokerage firm to another? How long does the transfer have to be completed from validation? How long does the firm carrying the account have to validate the transfer?
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Automated Customer Account Transfer Service - ACATS
the transfer must be done in 3 business days following validation of transfer the firm must validate the transfer within 1 business day |
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How long can a RR hold mail for a person traveling domestic? international?
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domestic = 2 months
international = 3months |
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What is sent to the confirming broker-dealer when trade comparisons do not match such as a price discrepancy?
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a DK (don't know)
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When must confirmations be sent out no later than?
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the following business day of the trade date
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On the order ticket is it required to show whether it was for a cash or margin account?
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no
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When can a broker-dealer vote on behalf of a customer?
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if they do not receive voting instructions from the beneficial owner of the security by the specified date that can got on their behalf for board members, and stock splits.
NOT ALLOWED to vote for: merger or consolidation proxy contest appraisal rights concerning a security |
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What is Regular Way settlement for the following:
Corporate Bonds, Municipal Bonds, Stocks? US government bonds, options? |
Corporate bonds, municipal bonds, and stocks = T+3
US government bonds and options = T+1 |
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In a delayed delivery/sellers option contract:
How long does the seller have to deliver the securities? What is the earliest the seller can deliver the securities? What has to be sent to the buyer the day before the delivery of the securities? When does the buyer have to put up the funds for the purchase? |
Seller has 180 days after trade date T+180
Earliest the seller can deliver security is 2nd day after trade date T+2 must give buyer 1 day written notice prior to delivery under Reg T buyer must pay by the 5th business day after trade date T+5 |
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When are cash transactions settled?
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on the day of the transaction by 2:30pm or within 30 minutes if after 2pm
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If a cash transaction is made at 204pm what time must the securities be made by?
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234pm on the same day
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When do COD or DVP transactions settle?
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35 calendar days after trade date
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what type of settlement contract settles on a date agreed on by both parties?
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When, as, & if issued contracts
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If a customer fails to deliver the securities 10 business days after the settlement date what rule would require it the customer to buy back the securities?
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SEC 15c3-3
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What rule says that if purchases are not paid within 5 business days after trade date they can sell them to someone else?
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Reg T
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What did the Securities Investment Protection Act of 1970 create?
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SIPC - Securities Investment Protection Corporation
Protects customers against the risk of loss due to failure of a broker-dealer |
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Is SIPC a part of the US government or an agency?
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NO
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How are revenues made by SIPC?
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assess registered broker-dearlers a percentage of their gross revenue or a nominal annual assessment
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If a broker-dealer fails who appoints the SIPC trustee to liquidate the firm and what is the trustee responsible for doing?
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the local federal court district appoint the SIPC trustee
-orderly liquidation of firm -distribution of customer securities -notifying customers of a firm in SIPC liquidation |
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How much does SIPC provide customers protection for and how much of it can be paid for a cash claim?
What happens if a customers claim exceeds the maximum protection? |
$500,000 for cash & securities
$250,000 cash (formerly $100,00) **per customer not per account customer becomes a general creditor of the firm and securities will be settled at the market value on the day the federal court was petitioned to appoint a trustee |
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Who regulates the Cold Calling Act?
What are the hours in which telephone solicitations may be made? What must be provided to the caller? What type of customer is excluded from these rules? |
Federal Government & FINRA
8am - 9pm local time of the party called identity of the caller and telephone OR address of caller OR firm rules do not apply to non profit organizations |
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Which of the following are true regarding the Cold Calling Act:
1. auto-dialing cannot be used in conduction with prerecorded messages when calling business not including healthcare facilities 2. a fax must contain the date & time of the fax sent 3. a fax must contain page numbers 4. Prior business relationship means anyone that has ever done business with the firm before |
1 & 2 are true
3 & 4 are not true prior business relationship is only limited for the previous 18 months on a fax it must contain the date time, sender, and phone number |
