Chapter 9 - Client Funds and Securities Flashcards Preview

Series 63 > Chapter 9 - Client Funds and Securities > Flashcards

Flashcards in Chapter 9 - Client Funds and Securities Deck (19):

Increased control of a client's account by a professional or firm is inherently ______ risky that otherwise.



IAs who take custody of client assets must follow these rules:

- must be segregated from each other and documented
- quarterly statements to clients about their accounts
- client accounts and records must be audited annually
- no commingling of adviser and client assets
- cannot misappropriate client funds
- client instructions must be followed
- must notify client in writing of where and how their funds are being held and of any updates to that info


To avoid taking custody, IA must

- send back securities within 3 days of receiving them
- must forward checks to 3rd parties within 3 days


When a BD does not keep their securities separate from customer's securities, they are _______ their funds



BDs cannot ________ or re-________ a customer's securities, unless previously consented to in writing by the client

hypothecate or re-hypothecate


Agents cannot take _____ of customer assets



A client can grant permission to their professional to buy a security they have already chosen with a "_________" permission

time and price


If client wants to give a professional full discretion, must provide permission in _____ and do so within _____ of when the first discretionary trade is made

writing within 10 days


A "trading authorization" gives a ______ the authority to trade in a client's account. MUST be written an outline specific authorities given.

a 3rd party


Suitability of an investment takes into account many factors, which must only be measured in comparison to a client's

financial situation, investment objectives and risk tolerance


You generally should not make a blanket recommendation. T/F

True, doesn't take into account suitability for individual investors


Under FINRA, a suitability obligation for a BD has three components:

- reasonable-basis obligation (BD must understand investment strategy and determine suitability)
- customer-specific obligation (BD must have a reasonable basis to believe rec is suitable for that client)
- quantitative suitability obligation (reason to believe recs are not excessive)


A BD can accept unsolicited orders from someone who has not provided suitability information. T/F



A BD is required to recommend a ______ investment to their client while an IA is required to recommend the ______ investment for their client

suitable, best


An order ticket contains information about what

a trade


An order ticket is filled out by an ____ and approved by a _______

an agent, a principal


An order ticket includes

- type or order
- symbol and name of security
- agent's ID #
- customer account #
- trade and settlement dates
- solicited, unsolicited, or discretionary


A trade confirmation is sent to the ______ by the ______ date

client, settlement date


For stock, bonds, munis, settlement date is ______. For treasuries and options, settlement date is _____.

Trade + 3. Trade + 1