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84 Cards in this Set
- Front
- Back
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what are the 4 critical pieces to open an account?
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1. name 2. address 3. DOB 4. SSN |
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if the customer refuses to give the 4 critical pieces of information, what must the rep do? |
no open account
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CIP requires that a firm independently verify information within
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a reasonable amount of time after opening the account
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A registered representative must also obtain the customer's
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occupation and name and address of employer
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An employee of FINRA member-firm must give __________ notice to the employer before opening an account at another member firm
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written notice (notice to both firms)
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Whose signature must be on the application to open a new account?
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the reps introducing the account and member/partner
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When is a customers signature required?
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opening a margin account or a discretionary account
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A TOD can skip what period?
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Probate period
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what is a limited power of attorney?
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can only enter buy and sell orders
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what is a full power of attorney? |
can trade and draw checks on account (checks must be in shareholder name) |
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A discretionary account allows the registered representative to...
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buy and sell for the customer's account (must have in writing in advance) |
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What is needed to open a discretionary account?
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signed discretionary power of attorney
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what things must be listed on an order ticket if a discretionary account?
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the word discretionary name of security quantity price note of discussion of location |
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Who must approve a discretionary account and each trade?
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a principal
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what is an omnibus account?
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investment advisors to handle purchases and sales for clients
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what 2 things are needed to open a corporate account?
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1. copy of corporate charter 2. corporate resolution that authorizes opening account |
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Name 3 types of fiduciary accounts:
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1. trust accounts 2. guardian accounts 3. custodian accounts (manages for a beneficiary) |
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What are the 2 basic rules for a fiduciary account?
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1. cash accounts only 2. no third-party trading authorizations |
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what is needed to open a trust account? |
copy of the trust agreement
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For an UGMA/UTMA, what state must the account be registered in?
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where the broker has the office
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For an UGMA/UTMA, who reports any income for tax purposes?
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the minor (under their social)
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If the custodian is not the donor, may they charge a management fee?
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Yes
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what is the kiddie tax rule?
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taxation of minor's unearned income at the parents tax bracket
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How old does the minor need to be for the kiddie tax rules to apply? |
until 18 (24 if a student)
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What is a wrap account?
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all services are wrapped into a single fee
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what is Regulation T?
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Margin accounts!
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when buying on margin, how much must the customer pay? |
50% up front
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what equities can be bought on margin?
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1. stocks on exchanges 2. closed end funds 3. stocks OTC on NASDAQ |
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can a mutual fund be purchased on margin?
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only after it has been held for 30 days
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what is hypothecation?
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pledging securities as collateral for the loan made by the broker-dealer to the customer
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Hypothecation allows the broker dealer to
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commingle (mix) (one customer's margin securities with other customer's margin securities) |
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Regulation T requires investors to deliver securities and make payments
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Promptly (but no later than 2 days after a regular way settlement) (T-5)
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what is regular way settlement?
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3 business days after trade
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If payment is not received for securities what can the broker-dealer do?
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1. liquidate that purchase 2. freeze account for 90 days |
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A frozen account means that investors
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must pay in advance for each trade
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If the amount a customer owes is less than ______, the broker-dealer may elect to disregard it and need not liquidate the purchase or freeze the account.
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$1,000
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The confirmation contains:
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1. trade date 2. settlement date 3. # of shares purchased/sold 4.price 5. commission/mark-up charged |
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confirmation must be sent by
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the next business day
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FINRA rules permit loans between representatives and customers in which circumstances:
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1. immediate family member 2.financial institution 3. registered firm of same firm 4. personal relationship 5. business relationship |
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How long must written customer complaints be kept on file?
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4 years
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Under Regulation S-P, a firm must provide customers with the following notices:
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1. initial privacy notice 2. an opt-out notice 3. annual privacy notice |
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what is the difference between a customer and a consumer
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customer-maintains account balance consumer-performs only a onetime transaction |
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how often does a CONSUMER get a privacy policy?
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only at opening/time of transaction (no annual notices)
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what does Regulation S-P protect?
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non-public information
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what are the 3 main activities of money laundering?
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1. placing money into a bank 2. structuring 3. integration |
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what is structuring?
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concealment thru multiple transactions of just under $5,000 |
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what is integration?
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commingling suspect funds with legitimate funds
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An Anti-Money Laundering Program must be in ________ and the member-firms ________ ____________ must approve it.
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must be in writing and the member-firms senior management must approve it
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when a non-resident wants to open an account what is needed?
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passport # US Tax Identification # Telephone # |
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A CTR is for amounts of ________ or more in cash and must be FinCEN within ________ calendar days.
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$10,000 15 calendar days ($3,000 wire transfers) |
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A SAR is for amounts of ________ or more for suspected money laundering activity and must be reported with FinCEN within _______ calendar days
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$5,000 30 calendar days |
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What are some indicators of suspicious activities when a customer opens an account:
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1. refuses to provide business info 2. lack of knowledge of their business 3. questions about compliance |
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What are the 4 categories of the customer profile?
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1. investment objective 2. financial status 3. risk tolerance 4. time horizon |
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what is preservation of capital?
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keeping principal safe and avoiding loss very small risk conservative investors defensive investment strategies |
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What are some examples of investments that will meet preservation of capital?
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money market funds GNMA funds US Treasury securities Municipal securities (NOT common stock) |
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what is capital appreciation?
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accept some risk to achieve growth usually don't need current income reinvest dividends |
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What are some examples of investments that will meet capital appreciation?
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common stock growth funds value funds |
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Describe aggressive growth:
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greater risk by investing in technology funds, emerging market funds and sector funds
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Describe current income: |
receiving income from investment only in bonds (corporate, government and municipal) |
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what is tax-exempt income? |
investment income that is free from federal income tax (public purpose municipal bonds) |
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what is growth and income
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capital growth and current income
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what is a personal balance sheet?
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gives a view of financial situation at a moment in time shows wealth |
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Assets is
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liabilities + net worth |
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Net worth is
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assets-liabilities |
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what is a personal income statement?
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shows client's income and expenses over entire year
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what is the formula for discretionary income?
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total income - total expenses
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discretionary income is the _________ amount a client has to invest
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maximum
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what is disposable income?
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total income less taxes
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Which aspects of financial status may appear on financial statements and are important decisions about investments?
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1.retirement plans/employee benefit plans 2. Life insurance 3. dependents and marital status |
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Aggressive investors that want to achieve high returns would invest in:
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technology funds sector funds emerging market funds hedge funds |
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For risk takers who have an investment objective of current income could invest in:
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high-yield bond funds
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For customers who are not aggressive but are risk tolerant and seek capital appreciation could invest in:
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growth funds value funds international funds |
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Conservative investors who are only able to tolerate a moderate level of risk will invest in:
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growth and income funds blue-chip stock funds |
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For a risk averse investor, what should they invest in if they are looking for preservation of capital and safety?
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government securities fun GNMA |
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For a risk averse investor who want some equity investment, what should they invest in?
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balanced funds asset allocation |
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Young persons will normally accept more ______ and seek ______ ____________ because they can overcome short-term losses and have time for earning to compound.
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more risk capital appreciation |
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What are 2 other things to keep in mind when assessing a client's tolerance for volatility?
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1. inflation risk 2. fluctuating income |
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If the customer refuses to provide personal financial information....
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the rep can't make recommendations but can open and accept UNSOLICITED orders
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What does it mean when a rep is making "blanket" recommendations of "penny stocks?"
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can't recommend low-price speculative securities to all customers without regard to suitability
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what is churning?
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trades to solely generate commissions
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what is selling dividends?
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buying mutual funds shortly before the fund will declare a dividend
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Representatives must have reasonable basis to believe that for a deferred variable annuity the following would be met
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1. general terms have been discussed 2. s/h would benefit from features 3. suitable for customer |
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when exchanging an annuity, what things must the rep keep in mind?
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1. surrender charge? 2. new surrender period? 3. lose any benefits? 4. increased fees/expenses? 5. exchange within past 36 months? |
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Within what time frame must the principal review and approve the application of a deferred variable annuity?
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no later than 7 business days
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