Account Features

Question 1

For cash accs what’s the settlement expectation

Answer 1

regular way t+2

Question 2

What are the payment expectations for cash accs

Answer 2

by 2 days after settlement (4 days after purchase)

Question 3

What accs can only be cash accs

Answer 3

accs with contribution limits like IRAs/retirement accounts and cust accs

Question 4

What is the most common source of stock for someones margin acc

Answer 4

another customers margin acc

Question 5

What is hypothecation

Answer 5

pledging your secs as collateral for margin trading

Question 6

Where does the BD get the money for margin trades

Answer 6

loan from a bank where they rehypothecate the secs the customer pledged

Question 7

What Reg oversees rehypothecation

Answer 7

Fed Reserve Reg U

Question 8

What can a BD do and not do with customer secs in margin accs

Answer 8

cannot commingle customer secs with BD secs
can commingle two customers secs if they have signed a hypothecation agreement

Question 9

If a partnerships/corps documents dont mention margin then

Answer 9

its okay

Question 10

If the trust or other fiduciary docs are silent on margin then

Answer 10

its NOT allowed

Question 11

What are the two forms needed for margin accounts

Answer 11

credit agreemnet
hypothecation

Question 12

What is an optional form for margin accs

Answer 12

loan agreement

Question 13

Whats required from the BD to the cust on margin accounts

Answer 13

risk disclosure yearly

Question 14

What are the risks with margin accounts

Answer 14

cannot choose what secs get sold if maintennace call is not met
can lose more money than deposited
not entitled to an extension of time to meet a margin call
firms can increase margin requirements without advance notice

Question 15

What Reg oversees what Secs can be pruchased with margin and which can be used as collateral

Answer 15

Reg T

Question 16

What secs can be purchased with margin AND used for collateral

Answer 16

exchanged listed stocks and bonds
NASDAQ stocks
Approved OTC issues
warrants

Question 17

What secs cannot be purchased with margin BUT can be used as collateral

Answer 17

mutual funds
New issues if they meet the normal Reg T reqs

Question 18

Whats an additional requirement for using mut funds or new issues for collateral

Answer 18

must be held for 30 days

Question 19

What secs cannot be purchased with margin AND cannot be used as collateral

Answer 19

options
rights
non-listed secs
insurance contracts

Question 20

What secs are exempt from Reg T margin reqs

Answer 20

any kind of gov secs

Question 21

What does marginable mean

Answer 21

secs that can be used as collateral

Question 22

What is the current Reg T req on initial deposits in margin accounst

Answer 22

50% val of the purchase

Question 23

What is the current FINRA req on initial deposits in margin accounts

Answer 23

2k or 100% whichever is less

Question 24

Do you need to follow the Reg T or Finra reqs for initial deposit

Answer 24

whichever is greater

Question 25

What is a maintenance call

Answer 25

if a customers equity in their margin accs drops below 25% of the acc val, asked to deposit to bring back to 25%

Question 26

Normal time frame for maintenance calls

Answer 26

by end of the day

Question 27

Whats FINRAs maintenance %

Answer 27

30%

Question 28

When would you recommend a fee based account and why

Answer 28

freq traders bec set monthly fee regardless of amount of trades

Question 29

Long term buy and hold investor should have what payment structure and why

Answer 29

commission based bec little trades so less transactions to be charged

Question 30

What is a solicited trade

Answer 30

something that a BD or RR did led to the customer buying

Question 31

What is reqd for solicited trades

Answer 31

marked as solicited

Question 32

When the RR has a POA to make trades without the preauth from the customers its a

Answer 32

discretionary trade

Question 33

What are the three A's of discretion

Answer 33

the action the amount the asset

Question 34

For a trade to not be discretionary, what is needed

Answer 34

cust needs to OBJECTIVELY provide all A's

Question 35

do time and price need a discretionary auth

Answer 35

no

Question 36

Whats needed for a discretionary trade to be entered

Answer 36

auth for discretionary trading in writing principal of the firm approves the discre auth in writing principal of the firm promptly approves trades after entry

Question 37

Discretionary auth can be given to

Answer 37

the representative not the BD

Question 38

What happens to dis auth when the RR leaves the BD

Answer 38

ends

Question 39

How can a customer revoke dis auth

Answer 39

in writing

Question 40

What are wrap accs

Answer 40

mult services provided for a single fee like asset allocation, portfolio man

Question 41

Wrap accs are usu

Answer 41

investment advisory accs

Question 42

Investment advisory accs have a

Answer 42

fiduciary resp

Question 43

What is a disclosure req for investment advisory accs

Answer 43

client may be able to get all our services for less if all on a separate basis