Chapter 7 - Customer Accounts Flashcards Preview

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Flashcards in Chapter 7 - Customer Accounts Deck (20)
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1
Q

Opening a customer account

A

A P.O. box is not allowed.

We collect employer information because we need to know if they are associated with a bank or a broker-dealer. That may preclude them from purchasing certain investments.

Customer profile information must be sent within 30 days and be signed and returned by the customer within 30 days. If not returned, it is deemed approved.

No customer signature is required to open a cash account.

Customer information must be verified every 36 months.

2
Q

Customer Agreement

A

Firms have clients sign a customer agreement to enter into a pre-dispute agreement.

3
Q

Holding Customer Securities

A

DVP/RVP: 35 days to settle the transaction.

4
Q

5 Types of Accounts

A
  1. Individual
  2. Joint
  3. Corporate
  4. Trusts
  5. Partnership
5
Q

Accepting new accounts

A

All new accounts must be accepted and signed by a principal of the firm.

6
Q

Transfer and ship

A

Securities that are to be transferred and shipped will be registered in the customer’s name and the certificates will be sent to the customer’s address of record.

7
Q

Transfer and hold in safe-keeping

A

Customers may now elect to hold security is registered in their names electronically in book-entry form through the direct registration system (DRS).

8
Q

Hold in street name

A

Securities that are held in street name or registered in the name of the brokerage firm as the nominal owner of the securities and the customer is the beneficial owner.

9
Q

Individual account

A

An individual account is an account that is owned by one person. That person receives all of the distributions from the account.

10
Q

Joint Account

A

A joint account is an account that is owned by two or more adults. All parties must endorse all securities, and all parties must be alive. Checks drawn from the account must be made out in the name of all of the parties.

11
Q

Joint tenants with rights of survivorship (JTWROS)

A

All assets are transferred into the name of the surviving party in the event of one tenant’s death.

12
Q

Joint tenants in common (JTIC)

A

The assets of the tenant who has died become the property of the decedent’s estate. They do not become the property of the surviving tenant. Assets may be owned and divided unequally.

13
Q

Testamentary trusts

A

Trusts established under the terms of a Will or known as testamentary trusts.

14
Q

Operating a discretionary account

A

Must have the 3 A’s:

  1. Asset to be purchased or sold
  2. Amount of the securities to be purchased or sold
  3. Action to be taken: buy/sell

The principle of the firm is except the account and review it more frequently to ensure against abuses. The customer is required to sign a limited power of attorney that awards discretion to the registered representative good up to three years.

15
Q

Uniform Gift to Minors Act (UGMA)

A

All UGMA accounts must have:

  • One custodian
  • One minor
  • UGMA in the account title
  • State in the account title
16
Q

Uniform Transfer to Minors Act (UTMA)

A

In a UTMA, the custodian may determine when the assets become the property of the child. The maximum age is 25 years old.

17
Q

FINRA rule 3210

A

Regulates the opening of brokerage accounts by employees of broker-dealers. This rule requires an employee of a broker-dealer who wishes to open an account at another broker-dealer to obtain the employer’s written permission prior to opening the account.

18
Q

Prime brokerage account

A

The client must have at least $500,000 in equity. If the account is managed by a registered investment advisor, the minimum account equity is $100,000.

19
Q

Opening Margin accounts

A

The investor is required to deposit a portion of the securities’ purchase price and may borrow the rest from the broker-dealer. Regulation T of the securities exchange act of 1934 gives authority to regulate the extension of credit for securities purchases.

The customer will be asked to sign the following:

  • Credit agreement
  • Hypothecation agreement
  • Loan consent
20
Q

Regulation S-P

A

Requires that the firm maintain adequate procedures to protect the financial information of its customers. Firms must guard against unauthorized access to customer financial information and must employ policies to ensure its safety.

Regulation S-P also states that a firm may not disclose non-public personal information to non-affiliated companies for clients who have opted out of the list. (not applicable to sharing with an affiliated company)