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5 Cards in this Set

  • Front
  • Back

Which of the following persons may legally open an account to trade on margin?



A) A custodian of an UTMA account.


B) A minor child with approval of court-appointed guardian.


C) An open-end investment co.


D) A corporation

Answer: D



A corporation may open an account to trade on margin if provided for in the charter and authorized in the bylaws. Both UTMA & UGMA specifically prohibits custodians from either engaging in speculative trading or borrowing money or securities in the name of hte minor through trading on margin. Mutual funds are also prohibited from trading on margin.

A gift given to a minor under UTMA may be revoked under which of the following circumstances?



A) If the custodian dies before the minor reaches the age of majority.


B) Under no circumstances.


C) At any time before the minor reaches the age of majority.


D) If the minor dies before reaching the age of majority.

Answer: B



Under both the UTMA & UGMA (acts), all gifts to minors are irrevocable.

Under the UTMA (act), a custodian may invest in all of the following EXCEPT:



A) corporate bonds


B) commodity futures


C) mutual funds


D) blue-chip stocks

Answer: B



Commodity futures may not be purchased in a custodial account. Only cash and securities may be deposited.

You have decided to open an UTMA account for your daughter and have named yourself as custodian. The child's grandparents have put money into the account for the benefit of their granddaughter. As custodian, you are allowed to do which of the following?



A) Use the funds to help pay for your son's daycare so that you can better care for your daughter.


B) Return the money to the grandparents to fund their retirement.


C) Charge the account a custodial fee and withdraw monies payable in your name for that exact amount.


D) Charge the account for your own tuition payments to fund a college education so that you can better provide for your daughter.

Answer: C



If you are not the donor of the monies in a UTMA account, but are custodian, you can be paid a reasonable custodial fee.


John is the custodian of his niece's UGMA account. John places an order for 100 shares of a very speculative stock. What should the rep do?



A) Advise the custodian as to the suitability of the stock.


B) Enter the order as requested, without comment.


C) Consult with his principal before entering the order.


D) Refuse to enter the order, because it is unsuitable for an UGMA account.

Answer: A



The custodian should not place unsuitable orders in an UGMA account. The rep should inform the custodian of this.