Series 7 Chapter 4 Part 1

Front 1

FINRA requires the following information to open an account:

Back 1

1. Customers Name
   
2. Residence (not PO box)
3. That the Customer is of legal age
4. Name of the registered rep responsible for account (if multiple and client is not an institution, responsibilities must be explained)
5. Signature of supervising party approving account.

Front 2

Who is a supervising part responsible approving an account

Back 2

1. Partner
2. officer
3. or manager (principal)

Front 3

What is an Institutional Acccount

Back 3

An account held by:

1. Bank

2. Savings and loan association

3. Insurance Company

4. Registered investment company

5. Registered investment adviser

6. Any person with total assets that total at least $50 Million

Front 4

Prior to the settlement date of the first transaction of a new (non-institutional) account, FINRA requires that the RR makes a reasonable attempt to obtain this information:

Back 4

1. Tax ID
   
2. Customers Occupation
3. Employer's name and address
4. Whether the customer is associated with a member firm.

Front 5

The length of time that FINRA requires a firm to retain a record of the customers account is:

Back 5

Six years from the last update, or six years from the date that the account is close.

Front 6

The account information that the SEC requires a Broker-Dealer to maintain is:

Back 6

1. Name
   
2. Tax ID
3. Address
4. Telephone Number
5. Date of Birth
6. Employment Status (including occupation)
7. Whether the customer is associated with a B/D
8. Annual Income
9. Net worth (Minus principal place of residence)
10. Investment Objectives

Front 7

Signature requirements for a cash account are:

Back 7

Signature is required by principal, but not the client.

Front 8

Signature requirements for margin accounts

Back 8

Signature required by principal AND client

Front 9

Signature requirements for options account

Back 9

Signature required by principal AND client

Front 10

True or False, Numbered and Nominee accounts are allowed to be maintained to protect a clients privacy

Back 10

True

Front 11

What requirements is a B/D to abide by if they allow clients to have a Number or Nominee account

Back 11

The B/D must maintain records regarding the beneficial owners of all such accounts.

Front 12

This type type of account allows for a client to pay for all transaction in full at the time of purchase:

Back 12

Cash account

Front 13

This type of account allows for the client to borrow funds from the Broker-Dealer in order to purchase shares.

Back 13

Long Margin Account

Front 14

This type of account allows for a client to borrow shares from a broker dealer to sell them on the market

Back 14

Short Margin Account

Front 15

What is the deposit amount typically required by a Broker/Dealer when a client in tends to transact in a margin account

Back 15

50% of the trade amount

Front 16

This document, which must be signed before a client may open a margin account,and which typically contains three main provision, is called:

Back 16

Margin Agreement

Front 17

This provision in a Margin Agreement discloses the terms under which the broker-dealer will finance the customers purchases:

Back 17

Credit Agreement

Front 18

In a Margin Agreement The Credit Agreement includes what information about the terms of the margin account?

Back 18

interested is calculated and how it is charged to the account

Front 19

This provision of the Margin Agreement stipulates that the securities purchased by the customer will be collateralize the debt to the broker-dealer

Back 19

Hypothecation agreement

Front 20

In a Margin Agreement, The Hypothecation Agreement disclosed that the Broker-Dealer is allowed to do what with the with the securities purchased by the customer?

Back 20

Re-Hypothecate the securities, (ie obtain a loan from a bank using the customers securities)

Front 21

This provision of a Margin Agreement gives the broker dealer the right to lend the customers securities to other clients or broker-dealers.

Back 21

Loan Consent Agreement

Front 22

In a Margin Agreement, why is the Loan Consent Agreement optional?

Back 22

The loan Consent Agreement is optional because it allows the broker dealer to lend the customers securities to other clients (or broker-dealers). The customer looses the right to vote on such loaned stock.

Front 23

This type of account involves extremely risky trading that firms are required to have a procedure in place to approve

Back 23

Options Acccount

Front 24

This agreement is required from a client in order to obtain the proper information required and to ensure that the client is aware of the risks involved, when opening an options account

Back 24

options agreement.

Front 25

This type of power of attorney permits an authorized person to withdraw money and securities from the account in addition to placing by and sell orders:

Back 25

Full Power of Attorney (AKA full trading authorization)

Front 26

This type of power of attorney permits an authorized person to only place orders for the account, and does not allow the person to make withdraws:

Back 26

Limited Power of Attorney (AKA limited Trading authorization)

Front 27

This type of power of attorney gives someone else the power to manage the grantors financial affairs if that individual becomes incapacitated.

Back 27

Durable POwer of Attorney

Front 28

When a Registered Rep is authorized as a third party, the account is generally refereed to as:

Back 28

a discretionary account.

Front 29

This reception allows a registered rep to accept verbal authorization to make certain decisions without being considered a discretionary account:

Back 29

Time/Price exception

Front 30

Under what conditions can a Registered Rep make a not-held order.

Back 30

the customer:

1. selected the security

2. decides whether to buy or sell the security

3. determines the number of shares or other units to be bought and sold

4. can only last for a day otherwise required to be in writing.

Front 31

What are the three stages of money laundering

Back 31

1. Placement

2. Layering

3. Integration

Front 32

This stage of money laundering occurs when the launder places illegal cash into the flow of a broker dealer business, most often through the purchase of securities.

Back 32

Placement

Front 33

This stage of money laundering occurs when the launder executes a transaction in several layers in order to avoid detection or trigger reporting requirements.

Back 33

Layering

Front 34

This stage of money laundering occurs when the launderers put the proceeds of from the transactions back into the stream of commerce, making them appear to be from a legitimate source.

Back 34

Integration

Front 35

This report is required when a customer makes any number of cash transactions in one day that, in total, exceeds $10,000.

Back 35

Currency Transaction Reports (CTRs)

Front 36

When a customer executes several small transaction sin amounts that are below reporting thresholds, in an attempt to avoid reporting, this is known as:

Back 36

Structuring.

Front 37

This must be filed whenever anyone physically transports, sends, or receives cash,, cash equivalents, or monetary instruments in an aggregated amount of more than $10,000 into or out of the United States.

Back 37

International Transportation of Currency or Monetary Instruments (CMIR)

Front 38

This report must be filed when a transaction (or a group of transactions) exceeds $5,000 and the firm suspects illegal activity:

Back 38

Suspicious Activity Report (SAR)

Front 39

What are the activities that would trigger a SAR to be filed?

Back 39

That the transaction or group of transactions is equal to or exceeds $5000 and the firm suspects one or more of the following:

1. the client is violating federal criminal laws

2. the transaction involves funds related to illegal activity

3. the transaction is designed to evade the reporting requirements (structuring transaction).

4. The transaction has no apparebt

Front 40

What information is a Broker-Dealer required to acquire from a client in order to have a valid CIP program?

Back 40

1. Clients Name

2. Clients Date of birth (for non-entities)

3. Clients address (for individual, for entities, they must supply a principal place of business or a local office)

4. Identification Number

Front 41

This regulation requires all broker-dealers, investment companies, and investment advisers to adopt policies and procedures reasonably designed to protect the privacy of the confidential information they collect from their clients.

Back 41

SEC Regulation SP

Front 42

In the context of regulation SP, this person is someone who has an ongoing relationship with the firm.

Back 42

Customer

Front 43

In the context of regulation SP, this person is someone who provides information to a firm in connection with a potential transaction.

Back 43

Consumer

Front 44

In the context of regulation SP, when must a firm furnish a customer with a privacy notice?

Back 44

When the relationship is first established and then an updated version of this notice yearly.

Front 45

In the context of regulation SP, when must a firm furnish a privacy statement to a consumer?

Back 45

Before it discloses nonpublic, personal information to any affiliated and non-affiliated third party.

Front 46

In the context of regulation SP, what must a privacy notice contain?

Back 46

1. The type of personal information that the firm collects
   
2. the categories of affiliated and non-affiliated third parties to whom the information may be potential disclosed
3. a disclaimer that tells the client they have the right to opt out of such disclosure
4. the means of opting out of the disclosure

Front 47

In the context of regulation SP, what does non-public information include?

Back 47

1. Information obtained from the customer

2. customer lists put together from personally identifiable information (ie account numbers)

Front 48

This type of account is opened for one person, and that person is the only one who may direct activity in the account unless a third party is authorized

Back 48

Individual Account

Front 49

This type of account has more than one owner of record, and only the join owner may initiate activity on this account.

Back 49

Joint Account

Front 50

In what situation do all owners of a joint account normally have to authorize activity?

Back 50

1. When signatures are required

2. Checks must be made payable to the account must be drawn in join names.

Front 51

Types of Join Accounts

Back 51

1. Join Tenancy with Rights of Survivorship (JTWROS)
   
2. Tenancy in common (TEN COM)
3. Tenants by entirety (TEN ENT)
4. Life Tenancy (LIFE TEN)

Front 52

In this type of joint account, if one of the tenant dies, the ownership of the account passes to the remaining tenants without being subject to probate.

Back 52

Joint Tenancy with Rights of Survivorship

Front 53

In this joint account, a deceased owner's remaining interest in the account passes to the deceased's estate.

Back 53

Tenants in Common

Front 54

Available in some states, this type of account permits a form of ownership that allows the account assets to be transferred to a beneficiary at death without passing through probate

Back 54

Transfer on Death

Front 55

In a fiduciary account, this standard dictates that the investment decisions made by the fiduciary should be consistent with decisions that a person of discretion and intelligence would would choose for income and preservation of capital

Back 55

Prudent Person Standard

Front 56

What are the two approaches to opening up an account for minors?

Back 56

1. Uniform Gifts to Minors Act/Uniform Transfer to Minors Act

2. Trust Accounts

Front 57

When opening up a UGMA or UTMA account, whose Social Security number should be included on the account?

Back 57

The minors

Front 58

Upon the death of the minor, who becomes the owner of the funds in a UGMA/UTMA account?

Back 58

If the child is over 14 the child has the ability to designate the beneficiary, otherwise generally the parents but varies from state to state

Front 59

This type of Investment Adviser account has a fee arrangement where one fee, usually ranging from one to three percent annually, is charged by the broker-dealer. The fee usually covers administrative, portfolio management, and transactions costs

Back 59

Wrap Account

Front 60

What re the two ways that an investment manager may manage their clients money?

Back 60

1. One account that contains all advisory clients's assets

2. Separate accounts that provide the adviser with third-party trading authorization.

BOTH CASES require written authorization for the adviser to transact business in the account.