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57 Cards in this Set

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Which of the following would NOT require additional documentation to transfer stock?
a. Partnership account signed by a general partner
b. Corporate account signed by an authorized officer
c. Custodial account signed by the custodian
d. Executor signing for an estate
C
The only authorized signature for a custodial account is that of the custodian. There would be no further documentation required. In each of the other choices, the transfer agent would require documentation showing that the person signing the certificate was authorized to do so. (2-9)
Relative to a custodian account, which of the following are TRUE?
I. The minor is responsible for tax consequences.
II. The custodian is responsible for tax consequences.
III. Income generated in the account is taxed as it is received.
IV. Income generated in the account is taxed when the minor becomes an adult.
a. I and III
b. I and IV
c. II and III
d. II and IV
A
The minor is responsible for any tax consequences in the account. Income is taxed as it is received, not when the minor becomes an adult. (2-9)
When a gift of securities is purchased for a minor in a custodian account, the gift becomes the property of the minor:
a. When the custodian releases the account
b. When the donor approves the transaction
c. When the minor reaches the age of majority
d. At the time of the execution of the order
D
According to the Internal Revenue Code, the gift becomes the property of the minor at the time of the execution of the order. (2-8)
A registered rep holding limited discretionary authority over a customer's account may:
a. Buy or sell securities in the account without consulting the customer
b. Withdraw money from the account
c. Receive a fee for using his discretion in trading the account
d. Borrow assets from the customer's account
A
A registered representative holding limited discretionary authority over a customer's account can buy or sell securities in the account without consulting the customer. Only full discretionary authority allows a registered representative to withdraw money from a client's account. A registered representative cannot receive a fee for using his discretion in trading a customer's account. Borrowing client assets is never allowed. (2-9)
An investor is interested in investing in a stock with growth potential. He instructs his broker to use the firm's research and buy $10,000 worth of a stock of the broker's choosing. Which of the following statements is correct?
a. The broker can buy the stock for the customer with approval from a manager.
b. The broker can buy the stock for the customer since it is a stock the firm recommends.
c. The broker can buy the stock for the customer provided that the broker has first obtained a written power of attorney from the customer.
d. The broker can buy the stock for the customer based on the verbal authorization.
C
An order where the registered representative has the power to determine what stock to buy must be done in a discretionary account. The registered representative must first obtain written authorization (power of attorney) from the customer. (2-9)
A registered representative opens a joint options account for three brothers. According to the rules of the options exchanges, the registered representative would be required to obtain background and financial information from:
a. One of the brothers
b. A majority of the brothers
c. All of the brothers
d. The Options Clearing Corporation
C
According to the rules of the options exchanges, background and financial information must be obtained from all participants of the account. All of the brothers must provide information concerning their background and financial information. (2-7)
An account executive has limited discretion over a customer's account. The account executive can:
a. Remove money freely from the account
b. Have the account reviewed by a supervisor
c. Not enter buy stop orders
d. Have all confirmations of transactions sent only to himself
B
Limited discretion does not permit free withdrawal of funds. The account owner must receive confirmations. Buy stop orders are permitted. (2-9)
Under the know your customer rule, when a registered representative opens a new account for a customer, the registered representative should determine, among other things, the customer's:
I. Financial condition and needs
II. Objectives
III. Ability to assume risk
a. I and II only
b. I and III only
c. II and III only
d. I, II, and III
D
According to the know your customer rule, the registered representative should determine all of the items listed. (2-2)
Which of the following would be acceptable as a custodian on a UGMA account?
a. Ajax Corporation
b. John and Mary Doe
c. John Doe
d. ABC Partnership
C
Only an individual (not a corporation or partnership) is an acceptable custodian. There can only be one custodian for one minor. Joint custodians or joint minors are not permitted. (2-8)
All of the following are true regarding discretionary accounts EXCEPT:
a. All discretionary orders must be marked as a discretionary order
b. Written power of attorney must be on file
c. Orders must be verbally approved by the customer prior to execution
d. Orders must not be excessive in terms of size or frequency
C
When transacting business for a discretionary account, the registered representative must have written power of attorney authorizing him to act for the customer. Each order in which the registered rep exercises discretion must be marked discretionary. The registered representative should not enter orders which are excessive in size or frequency (in order to churn the account to generate commissions). The registered representative makes the investment decisions and does not have to receive the customer's approval for each order being executed. (2-9)
Which of the following are needed to open a corporate margin account?
I. Corporate charter and resolution
II. New account form
III. Hypothecation Agreement
IV. Trust Agreement
a. I and II only
b. I and IV only
c. III and IV only
d. I, II, and III only
D
When a corporation opens a margin account, all of the documents listed are needed except a trust agreement. A trust agreement is needed when opening an account for a retirement plan or trust account. (2-8)
An uncle is a custodian for his nephew's account. The account receives rights to subscribe to additional stock held in the account. As custodian the uncle can:
I. Sell the rights
II. Subscribe to the stock
III. Buy additional rights to subscribe if additional rights are needed
IV. Do whatever he considers to be in the best interest of the minor
a. I and IV only
b. II and III only
c. III and IV only
d. I, II, III, and IV
D
The uncle may sell the rights, subscribe to the stock, or buy additional rights to subscribe if additional rights are needed. The uncle may do whatever he considers to be in the best interest of the minor. (2-9)
Two brothers open a joint account to trade options. Who will be required to sign the option agreement?
a. The brother with the larger contribution to the account
b. The brother with the smaller contribution to the account
c. Either brother
d. Both brothers
D
In a joint options account, it is necessary for both parties to sign theoption agreement. It is also necessary to record financial information for both parties. (2-7)
An aunt wishes to give her niece some securities as a gift. The niece's parents have recently died and a court has appointed a guardian other than the aunt. The aunt:
a. Must register the securities in the guardian's name
b. May give the securities without the permission of the guardian
c. May give the securities only if they would qualify under the State's legal list requirements
d. May give the securities only if the guardian is also appointed the custodian
B
The aunt may give securities to the minor as a gift. There are no restrictions on a donor giving a gift. (2-8)
A client's wife calls and wants to purchase 200 shares of XYZ in her husband's personal account. The registered representative handling the account knows that a favorable earnings report is about to be issued. The registered representative:
a. Cannot accept the order because the wife does not have trading authorization to enter orders for the husband's personal account
b. Can enter the order because the husband had previously mentioned he would like to establish a position in XYZ
c. Can enter the order in the husband's account if the wife also has a joint account with her husband
d. Cannot enter the order because the earnings report has not been released
A
The registered representative cannot accept the order because the wife does not have trading authorization to enter orders for her husband's personal account. (2-9)
Which of the following persons cannot delegate power of attorney to a third party for the purpose of making securities transactions?
a. A husband
b. A wife
c. A corporation
d. A custodian for a minor
D
Of the choices given, the only one that cannot delegate power of attorney to a third party for the purpose of making securities transactions is a custodian for a minor. (2-9)
Which of the following would be considered a fiduciary?
I. A trustee
II. A guardian
III. An administrator of an estate
IV. An executor of an estate
a. I only
b. I and II only
c. I, II, and III only
d. I, II, III, and IV
D
A fiduciary is an individual or organization acting in a position of trust. All of the choices listed would be considered fiduciaries. (2-8)
FIDUCIARY (S7) : A person who is acting for another person and is therefore in a position of trust.
TRUST (S7) : A fiduciary relationship in which a person (the trustee) holds title to property for the benefit of another party(ies).
A husband and wife have a joint account. If the husband instructed his RR to sell securities and send a check, the check could be made payable to:
a. The husband only
b. The wife only
c. Either the husband or the wife
d. The husband and wife jointly
D
An order may be accepted from either party to a joint account, but the payment check can only be drawn in joint names (as the account is titled). (2-7)
Which of the following are TRUE when a corporation opens a cash account with a brokerage firm?
I. A new account form must be completed.
II. A corporate resolution must be filed with the brokerage firm.
III. Stock purchases for the corporation must be registered in the corporation's name.
IV. Stock purchases for the corporation must be registered in the name of the president of the corporation.
a. II and III only
b. II and IV only
c. I, II, and III only
d. I, II, and IV only
C
When a cash account is opened in the name of a corporation, a new account form must be completed. In addition, a corporate resolutionmust be filed. This identifies those officers authorized to buy and sell securities on behalf of the corporation and it must be signed by the secretary of the corporation. This form certifies that the corporation is legally incorporated in a specific state, and allows the board of directors to authorize specific persons to act on behalf of the corporation. Any time stock is purchased for a corporation, it may not be registered in the name of a corporate officer. (2-8)
All of the following are TRUE about discretionary accounts EXCEPT:
a. Accounts must be approved by a Principal
b. Orders must be reviewed on the day they are entered
c. Written power of attorney signed by the customer must be kept on file by the firm
d. Orders must be confirmed with the customer before being entered
D
All of the choices listed about discretionary accounts are true except orders must be confirmed with the customer before being entered. (2-9)
Advertisements regarding options:
I. Must be submitted to the exchange 15 days prior to initial use
II. Must be submitted to the exchange 10 days prior to initial use
III. Must be kept on file by the member firm for six years
IV. Must be kept on file by the member firm for three years
a. I and III
b. I and IV
c. II and III
d. II and IV
D
Advertisements must be submitted to the exchange for approval at least 10 days prior to initial use. All advertisements must be maintained on file by the member firm for three years. (2-1, 16-12)
Which of the following statements is true regarding a custodian account?
a. Margin transactions are permitted.
b. Taxes are a liability of the minor.
c. The minor and the custodian must both endorse all certificates.
d. A custodian may give a registered representative discretion over the account.
B
In a custodian account, the tax liability on interest and dividends received is paid by the minor. Margin transactions are not permitted in the account. A minor's signature is not valid; all endorsements are made by the custodian. The custodian may not give a third party discretion over the account. (2-9)
A customer would like to open an account designated by number. The registered representative should:
a. Open the account
b. Not open the account because it is a violation of SEC rules
c. Open the account if the customer signs a written statement acknowledging the account is the customer's account
d. Not open the account because it is a violation of industry rules
C
A customer can open a numbered account for reasons of confidentiality. However, the registered representative should open the account only if the customer signs a written statement acknowledging the fact that the account is the customer's account. This must be kept on file at the brokerage firm. (2-3)
The number of custodians allowed for each minor under the Uniform Gifts to Minors Act may not be more than:
a. One
b. Two
c. Four
d. Five
A
Only one custodian is allowed for each minor under the Uniform Gifts to Minors Act. (2-8)
Which of the following would be a benefit of an account that is designated Transfer on Death (TOD)?
a. The ability for joint owners to each trade the account
b. The avoidance of estate taxes
c. The avoidance of probate costs
d. The opportunity for proportional ownership
C
Transfer on Death is not a designation for a joint account, but is rather the instruction to transfer ownership of an account to a beneficiary upon the death of the account holder. Although such a designation would avoid probate, estate taxes may still be levied against the decedent's estate. (2-8)
All of the following should be obtained by a registered representative when opening a new account for a customer EXCEPT:
a. Street address
b. Tax identification number
c. Occupation
d. Education
D
When opening a new account for a customer, education is not required information. (2-2)
All of the following are TRUE regarding accounts established under the Uniform Gifts to Minors Act EXCEPT the:
a. Taxes are the responsibility of the minor
b. Custodian makes all investment decisions in the account
c. Custodian can use account positions to cover short sales in his own personal account
d. Account must reflect the minor's Social Security number
C
The custodian cannot use securities in the custodian account to cover a short sale in his own personal account. All securities in the custodian account must only be used for the benefit of the minor. (2-8)
Which of the following would be considered advertising?
a. A 15-second radio spot by a broker-dealer announcing an interview session for prospective reps
b. A form letter sent to 30 prospects giving advice on asset allocation strategies
c. An invitation to a seminar on tax-free investing
d. The script of a seminar on 529 plans
A
Advertising denotes a broadly based announcement such as television, radio, billboard or newspaper advertisements. Although a recruitment ad would be exempt from filing with an SRO, it is still considered advertising. The other three choices would be considered sales literature. (2-1)
Which TWO of the following must a principal approve prior to use?
I. An advertisement concerning the appointment of new managing directors
II. An advertisement promoting a new type of CMO
III. An advertisement regarding covered call writing
IV. An e-mail from an RR to a client concerning a security in her account
a. I and III
b. I and IV
c. II and III
d. II and IV
C
All advertising concerning options and CMOs must be approved before initial use by a principal of the member firm. In addition, CMO and options advertising must be submitted to FINRA 10 days prior to use. Advertising concerning a change in the firm's personnel does not need to be approved. Correspondence, such as e-mail and instant messaging needs to be reviewed periodically by the firm, but does not require prior principal approval. (2-1)
All of the following are TRUE regarding the Uniform Gifts to Minors Act EXCEPT:
a. Only one custodian is allowed for each account
b. The minor is responsible for all taxes due on dividends and interest received from securities held in the account
c. Only an adult can be a custodian
d. Securities must be held in the name of the brokerage firm
D
All of the choices regarding the Uniform Gifts to Minors Act are true except securities must be held in the name of the brokerage firm (street name). This is not true. All securities can be registered in the name of the custodian for the minor. (2-9)
A customer gives a registered representative the following instructions: Buy 1,000 shares of General Electric "whenever you think the price is right." Under current regulations:
a. The order can be executed by the RR only on the same trading day
b. The order must be marked "discretionary" and approved by a branch manager
c. The order can be executed by the RR any trading day
d. The RR is not permitted to accept this type of order
A
The order can be executed by the RR, but only on the same trading day. It is not a discretionary order, which requires written power of attorney. The customer indicated to the registered representative which stock (GE), the action (to buy), and the amount (1,000 shares). Allowing the RR to make decisions limited to price and time does not constitute discretion. Absent any written instructions from the client, this type of time and price discretion is only valid the same trading day. (2-10)
Which of the following statements is TRUE concerning the responsibilities of a principal at a broker-dealer?
a. The principal must approve all trades prior to being entered.
b. The principal must approve all advertising prior to use.
c. The principal must approve all sales literature within 10 days of use.
d. The principal must approve all outside employment by a RR.
B
Principal approval is required of all advertising and sales literature prior to use. All trades must be reviewed by a principal promptly. Any RR who has outside employment must notify the employer; however, principal approval is not required. (2-1,1-9)
An uncle is the custodian for a nephew's account. When the nephew reaches majority, the uncle:
a. May continue to be the custodian
b. Must compensate the nephew for any losses incurred in the account during the time the uncle was the custodian
c. Must transfer all the securities in the account to the nephew
d. Must sell all securities at current market prices
C
When the nephew reaches majority, the uncle must transfer all the securities in the account to the nephew. (2-9)
Which of the following are types of joint accounts?
I. UTMA
II. Rights of survivorship
III. Tenants in common
IV. Transfer on death
a. I and II only
b. I, II, and III only
c. II and III only
d. II, III, and IV only
C
Joint Tenants with Right of Survivorship (JTWROS), and Tenants in Common are two types of joint accounts. Transfer on Death (TOD) is an individual account used to avoid probate if the account owner dies. Uniform Transfers to Minors Act (UTMA) accounts are established by a custodian for the benefit of a single minor child. (2-7)
JOINT TENANTS (JT) (S7) :
An account with more than one owner.
(1.) WROS: With Right of Survivorship: In the event of the death of one party, the survivor receives total ownership.
(2.) TIC: Tenants in Common: In the event of the death of one party, the survivors receive only their portion of the account. The remaining assets go to the deceased's estate.
Which two of the following are TRUE when opening new customer accounts?
I. A P.O. box may be shown as the customer's address on the new account form.
II. A street address must be reflected on the new account form.
III. Customer correspondence may be sent to a P.O. box.
IV. Customer correspondence may not be sent to a P.O. box.
a. I and III
b. I and IV
c. II and III
d. II and IV
C
A customer must list a legal street address on the new account form. However, a broker is allowed to mail correspondence, including account statements, to a P.O. box at the customer's request. (2-2)
A corporation wishes to open a cash account. Which of the following is required?
a. A corporate resolution
b. A copy of the corporate charter
c. A hypothecation agreement
d. A risk disclosure document
A
A corporate resolution authorizing a person to trade for the account would be necessary to open a corporate cash account. A risk disclosure document may be required but only if options or penny stocks are going to be traded in the account. A hypothecation agreement and corporate charter would be required to open a margin account (2-8)
A registered representative wants to open a joint account for the dentists in his office building. Dr. White and Dr. Enamel will each contribute equally to the account but each dentist wants his portion of the account to pass to his own estate. Which two of the following are correct?
I. The account should be established as Joint Tenants with Right of Survivorship
II. The account should be established as Tenants in Common
III. All dividends and capital gains in the account will be reported by the brokerage firm under one social security number
IV. All dividends and capital gains in the account will be reported by the brokerage firm on a percentage of ownership basis
a. I and III only
b. I and IV only
c. II and III only
d. II and IV only
C
The dentists should open a Tenants in Common account. If a Joint Tenants with Right of Survivorship account is used, all assets pass to the surviving owner upon death of one of the participants. All joint accounts use only one Social Security number for tax reporting purposes. The dentists must indicate the percentage of dividends, bond interest, and capital gains they are responsible for on their individual returns. (2-7)
Supplemental documentation would be required when opening all of the following types of accounts EXCEPT:
a. Guardian
b. Partnership
c. Uniform Transfers to Minors
d. Account for an estate
C
A copy of the court appointment of the guardian is necessary for choice (A). To open a partnership account, a copy of the partnership articles should be obtained. In the case of an account for an estate, documentation should be obtained that shows the executor or administrator is properly authorized. Many new account forms contain UTMA/UGMA as one of the standard ownership choices, making additional documentation unnecessary. (2-8)
According to SRO rules, which of the following must be obtained when an RR opens an account in which mutual fund shares will be purchased?
a. The customer's date of birth
b. Whether the customer is subject to IRS backup withholding rules
c. Written acknowledgment that the customer has received the fund's prospectus
d. The signatures of the RR opening the account and the manager who approved the account
D
Under industry rules, the following items MUST be obtained when opening an account.
1. The customer's name and residence
2. Whether the customer is of legal age (but the customer's birth date is not required)
3. The signature of the registered representative introducing the account and the signature of the member or partner, officer, or manager who accepted the account
4. If the customer is a corporation, partnership, or other legal entity, the names of any persons authorized to transact business on behalf of the entity (2-2)
An investment adviser opens an account for one of his clients. The registered representative opening the account would need all of the following EXCEPT:
a. Written authorization from the client
b. A listing of all the investment adviser's clients
c. The client's name
d. The client's Social Security number
B
Since the account is being opened for the investment adviser's client, the account executive would require the client's name and Social Security number. Since a person other than the account holder (the adviser) will be entering orders, the registered representative would require written authorization from the client granting the adviser the right to enter orders. The client list of the investment adviser is not required by the registered representative. (2-10, 2-2, 2-8)
Which of the following statements is TRUE regarding numbered accounts?
a. An account may never be identified by a number.
b. Only a cash account may be identified by a number, provided the customer's name is on file.
c. Only a margin account may be identified by a number, provided the customer's name is on file.
d. Any type of account may be identified by a number, provided the customer's name is on file.
D
As long as the customer's name is on file with the broker-dealer, the account may be identified by number in all other broker-dealer records. (2-3)
Which of the following could not be accomplished in a cash account?
a. Covered call or put writing
b. The sale of preferred stock
c. Selling short
d. The purchase of options
C
Selling short can only take place in a margin account. (2-10)
If a registered representative is opening an account for an investor, the registered representative would need to know all of the following information EXCEPT:
a. The investor's tax identification number
b. If the investor is a U.S. citizen
c. The investor's investment objectives
d. The investor's educational background
D
A registered representative does not need to know the customer's educational background to open an account. A reasonable attempt should be made to obtain all the other information when opening an account for a customer. (2-3)
Under what circumstances may a husband and wife both be custodians for a minor's account?
a. Under no circumstances
b. If the minor gives written consent
c. If the husband and the wife both agree
d. If the account has a market value of at least $14,000
A
There may only be one custodian for a minor's account. Either the husband or the wife may be the custodian. However, they cannot both be custodians for the minor's account. (2-8)
Which of the following would be an invalid endorsement on a stock certificate?
a. The signature of an appointed representative for an estate
b. A minor's signature under UGMA
c. The signature of one of several partners in a partnership account
d. The signature of a person authorized by a corporate resolution
B
A minor cannot endorse a stock certificate. The signature of the custodian for the minor's account must be on the stock certificate. (2-9)
Which of the following would NOT be considered a joint account?
I. Two unrelated individuals as tenants in common
II. Husband and wife as tenants with right of survivorship
III. An investment club managed by an investment adviser
IV. A mother and her minor child in an account under the UGMA
a. III only
b. I and II only
c. III and IV only
d. I, III, and IV only
C
Only individuals are permitted to have joint accounts. The account may be established as tenants in common or tenants with right of survivorship. A custodian account may be established for the benefit of only one minor. An account for an investment club would not be a joint account. (2-7)
A customer wants to open a cash account. All of the following are required on the new account form EXCEPT:
a. The registered representative's signature
b. Whether the customer is of legal age
c. The customer's signature
d. The branch manager's approval
C
The registered representative and office manager must always sign the new account form. The customer's signature would be required for a margin account but not a cash account. The registered representative must determine whether or not the customer is of legal age. (2-2)
Which of the following communications must be filed with FINRA ten days prior to use?
I. Options advertising
II. Mutual fund advertising
III. CMO advertising
IV. Unit Investment Trust advertising
a. I and II only
b. I and III only
c. II, III, and IV only
d. I, II, III, and IV
B
Advertising for most products, including options and CMOs, must be filed with FINRA 10 days prior to use. However, investment company ads, including ads for mutual funds and unit investment trusts, must be filed within 10 days following initial use. (2-1, 7-19, 16-12)
COLLATERALIZED MORTGAGE OBLIGATION (CMO) (S7) : A type of security that attempts to customize the amount of prepayment risk associated with investments in mortgage-backed securities. The CMO creates bonds collateralized by a pool of mortgages or agency Pass-Through Securities. Each bond (called a Tranche) has a different rate of interest, repayment schedule, and priority level for receiving principal payments
UNIT INVESTMENT TRUST (S7) : A type of investment company in which a portfolio is purchased and held with little or no change to the investments. Commonly used with municipal bond investments.
A customer does not have a discretionary account with his brokerage firm. The firm may decide which of the following factors for the customer?
a. Whether to buy or sell
b. Quantity if the customer specifies security and price
c. Security if the customer specifies quantity and price
d. Price if the customer specifies security and quantity
D
If a customer indicates the specific stock and amount that he wishes to buy or sell, the registered representative is permitted to choose the time and price of execution. This would not be considered a discretionary order and written trading authorization would not be necessary. (2-10)
Under industry rules, the final approval to open a new account is given by a(n):
a. Registered Representative
b. Operations Manager
c. Partner or Principal
d. Financial Principal
C
Final approval must be given by a partner or principal of the firm. (2-2)
Why would a new account be designated TOD?
a. To allow for joint trading on the account.
b. To designate a pattern day trading account
c. To avoid probate
d. To prevent freeriding
C
TOD (Transfer on Death) is a form of account ownership that allows for the transfer of the account to a beneficiary upon the death of the primary owner. Such an account enables the transfer of assets without probate. (2-8)
Which of the following statements are TRUE concerning custodian accounts?
a. A donor can give gifts of cash only.
b. A donor can give gifts of securities only.
c. A donor can give gifts of cash and securities.
d. An individual cannot be both the custodian and donor.
C
The only true statement given about custodian accounts is a donor can give gifts of cash and securities. (2-8)
Discretionary accounts require:
a. Written authorization from the customer
b. Oral authorization from the customer
c. Written authorization from the client for each trade the registered representative executes
d. The registered representative to send the client a letter detailing the proposed transaction
A
Discretionary accounts require written authorization from the customer. In addition, each discretionary order must be approved on the day the order is entered by a manager, partner, or authorized person. (2-9)
To open an account and determine suitability for a new client who would like to invest in an exploratory drilling oil and gas direct participation program, the RR must obtain all of the following information EXCEPT the customer's:
a. Address
b. Social Security or tax ID number
c. Number of dependents
d. Net worth
A
When opening a new account, the RR should need to obtain the customer's address and Social Security or Tax ID number, among other items. To determine suitability the RR would obtain the customer's income and net worth. (2-2, 20-18)
Which of the following transactions may be executed in a cash account?
a. Short 100 shares of XYZ stock
b. Long 500 shares of ABC stock and short 500 shares of ABC stock
c. Short 10 DEF May 50 calls
d. Long 5 GHI Jan 15 puts
D
A purchase of options may be transacted in a cash or margin account. Selling short stock and short option positions must be executed in a margin account. (2-10)
A husband and wife have a joint account with right of survivorship. If one of the parties places an order, the RR:
a. Should contact the other party prior to placing the order
b. Must have the order approved by a principal prior to execution
c. May accept the order
d. May accept the order only if the other party has granted trading authorization
C
Joint accounts have more than one owner of record. In most cases, any joint owner may initiate activity in the account (e.g., enter orders to buy or sell securities). There is no requirement to contact the other party prior to placing an order. Trading authorization is required if a person who is not the owner of the account is going to enter orders. (2-7)
A client would like to open a numbered account. An RR may open the account:
a. Under no circumstances
b. Provided the broker-dealer has a written statement on file signed by the client
c. Provided the broker-dealer has a written statement on file signed by the client that is also filed with the appropriate SRO
d. Provided the broker-dealer has a written statement on file signed by the client and the client is an accredited investor
B
Any client may open a numbered account for reasons of confidentiality. However, the registered representative should open the account only if the customer signs a written statement acknowledging ownership of the account. This document must be kept on file at the brokerage firm, but does not need to be filed with an SRO. (2-3)