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11 Cards in this Set
- Front
- Back
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New account form
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- 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 |
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US patriot ACT of 2001
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- 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 |
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types of account ownership and authority
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- 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 |
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types of accounts
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- 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 |
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account registration
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- 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 |
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power of attorney
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- 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 |
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discretionary accounts
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- 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 |
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market not held
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- 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 |
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three steps that apply at the death of a customer
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- freeze the account and mark deceased
- cancel open orders - await instructions and legal papers |
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UGMA or UTMA accounts
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- 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 |
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SIPC - industry funded insurance
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- 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 |
