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11 Cards in this Set

  • Front
  • Back
New account form
- required for a broker/dealer to open a new account
- customer signature is not required on the new account form
- copy sent to customer w/in 30 days to verify
- firm must verify act info every 36 mths
US patriot ACT of 2001
- verify identity of any new customer
- maintain records of the info to verify identity
- determine if the person appears on any list of known terrorists
- must have customers name, DOB, address, and Social security number
types of account ownership and authority
- discretionary - registered rep or other person who has authorization to make trading decisions for the customer
- custodial - adult designated to act on behalf of a child who is the owner of the contract
- fiduciary - third party legally appointed to prudently manage account on behalf of another person
types of accounts
- cash accounts - basic investment account
- margin account - allows a customer to borrow money for investing
- corporate account - authority given to someone - must be listed in corprate charter and bylaws - for margin accts only
- fee based accounts - appropriate only for investors who engage in at least a moderate level of trading activity
- numbered accounts - accounts identified only by number - celebrities often use these
- multiple accounts - customer who has both a cash and margin account - each account guarantees the other - sometimes called guaranteed accounts
- account transfers - transfer of a customers account from one broker dealer to another - 3 days to validate the transfer
account registration
- single accounts - one beneficial owner
- transfer on death - allows the registered owner to pass all or a portion of it, upon death, to a named beneficiary - avoids probate but does not avoid estate taxes
- joint accounts - tenants in common (each party must specify a percentage interst in teh account - divided) or joint tenants with right of survivorship (all parties have an undivided interst in the account)- no probate
power of attorney
- when someone not named on the account has trading authority - two types of trading authorities:
- full power of attorney - allows someone to deposit or withdraw cash or securities and make investment decisions for the account owner - examples are custodians, trustees, guardians
- limited power of attorney - also called limited trading authorization - allows the entering of buy and sell orders but no withdrawal of assets
discretionary accounts
- authority to decide what security, number of shares or unit, whether to buy or sell
- does not apply to decisions regarding the timing of an investment or the price at which it is acquired
- an order needs discretionary authority if any one of the three As is missing:
activity(buy or sell), ammount (# of shares), and asset(the security)
- discretionary authority ends at the death of the account owner
market not held
- if an order is not discretionary it is termed market not held order
- you are not held to secure a specific price for the order
- these orders must be executed on the day received unless written authority to the contrary
three steps that apply at the death of a customer
- freeze the account and mark deceased
- cancel open orders
- await instructions and legal papers
UGMA or UTMA accounts
- indefeasible title - donor may not take back the gift no may the minor return the gift
- custodian has full control and can buy or sell, exercise rights, or liquidate, trade or hold securities until the minor reaches the age of majority
- minor can be beneficiary of more than one account but only one beneficiary per account
- donor can be custodian or appoints someone to do so
- unless custodian parents cannot control account
- minor must file an income tax return and pay taxes on income at the parents tax rate until minor reaches 18
- if minor dies the securities pass to the minors estate
- only difference b/w UGMA and UTMA is that the transfer age for UTMA can be as late as age 25 - it is the more common
- no margin accounts, short sale of stock, or uncovered options
SIPC - industry funded insurance
- coverage for bankruptcy not fraud
- coverage limits for securities - 500k per customer
- coverage limits for cash - 100k
- no commodity coverage
- excess amounts take general creditory status
- identifiable property distributed - valuated on date court appoints trustee to liquidate