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53 Cards in this Set
- Front
- Back
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True or False: A customer must provide name, address, phone number, SSN, employers name, employers address, DOB, Citizenship and annual income to open a new account
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FALSE. All of this information is required EXCEPT for annual income which is not required for a new account to be opened.
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True or False: Client investment profiles include: age, current needs, future needs, investment experience, investment objective, risk tolerance, time horizon, liquidity needs, and marital status.
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FALSE. All of the following are necessary for new accounts BUT marital status is NOT part of the client investment profile.
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Which SRO has the strictest rules regarding new accounts from employees of other broker dealers and what does this SRO require?
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NYSE: Permission of the employer, Notification to the employer, confirmation of trades and statements of the accounts
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Does the MSRB require the permission of an employees firm for that employee to open a new account?
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No. Notification is required, and confirmations are required.
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Does the MSRB require quarterly statements of employees of broker firms to be sent to that respective firm?
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No. Confirmations are required.
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Does the National Association of Securities Dealers Automated Quotes exchange require confirmations and statements be sent to a firm of a broker who has opened an account with your firm?
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Only upon request of the firm.
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FINRA rule 2090 requires what regarding new customers?
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The Know Your Customer Rule requires a broker dealer to know all essential facts about the customer.
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FINRA rule 2111 requires what 3 tests be satisfied for a recommendation to be made?
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1. reasonable basis: is it suitable for at least some investors
2. customer specific: is it suitable for a particular customer 3. Quantitative: even if suitable in isolation, is it suitable when taken together in light of the customers investment profile. |
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Which test under FINRA 2111 is failed when dealing with a customer who has not disclosed earnings information?
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Customer Specific test.
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Under FINRA rule 2111, which test is failed if a recommandation includes a security that may be too expensive for the respective client?
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Customer Specific
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Regarding senior clients, FINRA is concerned with what five recommendations?
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1. withdraw penalty securities
2. variable life settlements 3. complex structured products 4. mortgaging a home for investments 5. retirement savings in high risk securities |
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A firm designates an employee as a "Senior Specialist", can said employee use that title when talking to clients?
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No, there is not a certified professional backing to that title.
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Is FINRA concerned with sales pitches aimed towards the elderly which are in seminar form?
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Yes.
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Who is responsible for dealing with seniors who have diminished capacity regarding their account?
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The broker dealer is responsible and must have a compliance process for dealing with identified customers who may have diminished capacity.
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All account information must be verified by how many days after the initial transaction?
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30
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Account information must be reverified how often?
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36 months
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SEC regulation SP requires what disclosure be given to customers when an account is opened?
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A privacy notice detailing disclosure of customer information from the firm.
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SEC regulation SP requires an opt out provision that meets what requirement?
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reasonable means which means that the ability to opt out is regularly presented and visibly noticable.
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Customer identification procedures are required to maintain what 4 pieces of information?
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name, address, ssn, dob
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How can customer identification procedural information be verified?
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It must be matched to government issued ID OR through a credit bureau.
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A customer has finished and turned in a new account form. You notice that the customer may be on a SDN list. What does that mean?
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The customer is from a Specially Designated Nation by OFAC and your firm MUST reject the account.
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Is a SAR filed with OFAC or FinCEN and what does it do?
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FinCEN and it reports suspicious activity regarding potential terrorist or money laundering activity to a federal authority.
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How are securities held in a cash account different from securities held in a margin account?
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Cash account securities are held in CLIENT NAME ONLY and cannot be commingled with other securities. They MUST be held seperately in secure storage and cannot be hypothecated or borrowed.
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A margin account is officially opened when?
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Upon the execution of the FIRST transaction.
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A customer does not return the margin agreement with a signature in time. What happens?
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The account is frozen and limited to closing transactions.
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Are managed accounts held seperately at a firm?
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No, they are held in omnibus accounts that are delt with collectively.
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A customer with two accounts has one account with a negative balance. Is the other account liable to cover the problematic account?
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Yes, each account unconditionally guarantees the other.
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In an individual account, what additional supporting documentation must be provided beyond account verification?
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None. No beneficiaries listed no proof needed.
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4 individuals are in a JTWROS account managing a wildcat oil drilling program. A tragic accident occurs and a single individual is left alive. What percent of the program belongs to each of the 3 deceased's estate?
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0%. Rights of survivorship means the last living individual owns the account.
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In a JTWROS one of two partners passes away earlier in the week. Today you have learned that the other individual has passed away. What happens to the JTWROS account?
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The entire value is part of the most recently deceased individual's estate. This is because the account became the sole interest of this individual when the first partner passed away EARLIER in the week.
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In a 2 person JTIC an individual is legally declared mentally incompetent, what percentage of the JTIC is liquidated for the Gaurdianship account?
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0%. 50% is owned by the account but liquidation is not required to transfer ownership.
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In a cash account, an individual has had 4 declared day trades in five days. What should you, the representative do?
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Nothing, the account is a cash account and thus not required to have a margin at all.
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A margined Day Trader account must have a minimum margin of what?
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at least 25,000 or the value of the volume of trading in the account. Whichever is GREATER
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A client with a TOD account has an estate that donates his entire estate to a private non profit charity for cats. What happens to the TOD account?
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It is sent to the listed beneficiary and does not go to probate for the estate.
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If a limited partner in a partnership has signed a recourse note, what level of responsibility does the limited partner have?
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The limited partner is fiscally responsible for the value of the recourse note.
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In a partnership, the limited partner has signed a recourse note; what is the tax consequence?
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Increased cost basis
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A limited partner steps in for a very sick general partner at a factory for the weekend. The limited partner is overseeing production. Is this legal?
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Yes, but the limited partner now has assumed unlimited responsibility as a general partner for the entire partnership.
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When is a trade marked discretionary?
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when a representative has been granted authority through a written power of attorney. authority to decide regarding buy or sell, security or quantity.
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Between a UGMA or UTMA, when can a custodian determine the transfer age?
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UTMA
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Bill Gates opens a UGMA for your child and invests one hundred million into the account as punishment for your Apple product use. You are now liable for how much tax?
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Zero regarding this account. All taxes come out of the account. This would be the first very foolish move Mr. Gates would have made.
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A client informs you they mistakenly transferred a large cash sum to a UGMA. What can be done for the client?
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Nothing. The transaction is irrevocable and neither the child nor the custodian can remove assets from the account.
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Your relative has been legally declared mentally incompetent, and you wish to open a gaurdianship account for them. Can you open the account right now as a gaurdianship account?
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No, you need court approval FIRST.
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The last trade in an account occured 32 days ago, the next statement sent to a customer will be?
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at the end of the quarter
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A customer is taking a trip for 3 months to her German family and then 2 months in Miami before returning home. Mail can be held for?
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3 months. This is one consecutive trip.
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Morgan Stanley LLC fails tomorrow and a customer has a $500,000 securities position with $100,000 of debit balance. This customer also has $300,000 of cash with the firm. The customer receives:
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$400,000 of securities and $100,000 of cash. The customer is a general creditor for Morgan Stanley LLC in the amount of $200,000
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A stock is purchased in cash from Utah at 11:30am during daylight savings time. When does this trade settle?
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Tomorrow. This trade was executed AT 230 EST, NOT BY 230 EST.
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A customer deposits their margin requirement four days after the the trade. The account is now...
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In satisfaction with Regulation T requirements.
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FINRA form 111 must be held by the firm for?
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5 years. Form 111 is a Suspicious Activity Report.
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Is the CUSIP number required on the Order Ticket?
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The CUSIP number isnt generated until the trade is executed!!
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Is the solicitation status needed on a trade confirmation?
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No.
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A trade is performed on the National Association of Securities Dealer Automated Quote exchange. The trade confirmation will include what additional item when compared to a NYSE ticket?
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markup or markdown on principle trades
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A customer complaint must be retained by a firm for?
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4 years.
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A customer complained about a municiple bond five years ago to a manager, is the complaint still retained by the firm?
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No, a written complaint was never recorded. A complaint to a manager is not a valid complaint.
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