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Smart Pros > Section 3 of 14 > Flashcards

Section 3 of 14 Flashcards

1
Q

Penny stock is what dollar amount and is not subject to penny stock disclosures if what?

A

$5; if unsolicited

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2
Q

Penny stock is listed or unlisted securities?

A

unlisted (Synovus exmple)

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3
Q

Penny stock disclosures requirements means what?

A

must be suitable; must sign a suitability statement; must provide a quote

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4
Q

Who is excluded from penny stock rules?

A

established customer

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5
Q

What constitutes an established customer for penny stocks?

A

3 transactions in 3 different stocks on 3 different days

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6
Q

when is a b/d exempt from penny stock rule?

A

if total commission or markups for penny stock does not exceed 5% of total commissions and mark ups

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7
Q

Who else is exempt from penny stock rules?

A

1) institutional investors; 2) private placements 3) unsolicited transactions 4) transactions with officers or directors or 5% stockholders

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8
Q

Two types of join accounts:

A

1) Tenants in common 2) Joint with Right of Survivorship

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9
Q

What happens to the assets of the deceased party in TIC?

A

transfers to the decedants estate

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10
Q

What happens to the assets in a JWROS?

A

assets transfer to the other party

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11
Q

What is TOD?

A

Transfer on death where the owner stipulates who the beneficiary is

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12
Q

UGMA

A

age of majority of the state

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13
Q

UTMA

A

custodian determines the age of transfer up to a max age of 25

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14
Q

what are principals responsibilities for a discretionary account?

A

approve and monitor

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15
Q

Wrap account holders must be given what that details the fees prior to opening the account?

A

Schedule H

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15
Q

If an employee of a FINRA member firm opens an account, what is the requirement?

A

notify the employer in writing; send duplicate statements only if requested

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16
Q

If an employee of a NYSE member firm opens an account, what is the requirement?

A

notify the employer in writing; send duplicate statements; get the employers permission to open the account

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17
Q

Who determines what securities are marginable?

A

FRB

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18
Q

Margin in controlled by FRB under what regulation and what act?

A

Reg T; Securities Exchange Act of 1934

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19
Q

The payment date for common and preferred stock and corporate and municipal bonds in a margin account is

A

T + 5

20
Q

If a customer fails to pay for a purchase within the 5 business days allowed under Reg T in a margin account, the brokerage firm can “sell out” and freeze the account for how many days

A

90

21
Q

A request for an extension for pay for a purchase must be requested by when?

A

before the expiration of the 5th business day.

22
Q

When a customer opens a margin acount, they will be r three documents. Name them. Which one does not have to be signed?

A

1) credit agreement
2) hypothecation agreement
3) loan consent agreement does not have to be signed

23
Q

Which agreement states the terms and conditions under which credit will be extended and include information about how interest is charges and information about the rates that will be charged?

A

credit agreement

24
Q

What agreement pledges the customer’s securities that were purchased on margin as collateral for the loan and allows the firm to take the same securities and repledge or rehypothecate them?

A

the hypothecation agreement

25
Q

What agreement allows the brokerage firm to lend out their securities to customers who wish to sell short?

A

loan consent agreement

26
Q

Equity =

A

Long market value - debit

27
Q

Reg T =

A

50%

28
Q

when a customer’s equity increases to voer 50% of the long market value, it creates what?

A

SMA

29
Q

Accounts with less than 50% equity are said to be

A

restricted

30
Q

To remove a restriction on a margin account, the customer must

A

deposit cash at 100% or deposit securities 2X the restricted amount

31
Q

Minimum equity of a long market account is

A

Long market value x 25%

32
Q

Short Account equity =

A

Credit Balance - Short Market Value

33
Q

Minimum equity of a short market account is

A

Short Market Value x 30%

34
Q

What is day trading strategy?

A

entering round trip orders of both a buy and a sell order on the same date for the same security

35
Q

What is a pattern day trader?

A

any account that enters 4 or more round trips in a 5 day period

36
Q

What is the minimum equity for a day trader?

A

$25,000

37
Q

Day traders can have no cross liens or guarantees from other accounts. True or False

A

True

38
Q

what is a traditional IRA?

A

a qualified account funded with pre-tax dollars

39
Q

what is the maximum contribution to a traditional IRA?

A

100% of earned income up to the annual limit

40
Q

What is the penalty for excess contribution?

A

6%

41
Q

What is the penalty for early withdrawal (before 59 1/2)?

A

10%

42
Q

What is the penalty for insufficient distributions at 70 1/2?

A

50%

43
Q

What is a ROTH IRA?

A

non-qualified account funded with after tax dollars

44
Q

The amount contributed to an IRA will reduce the amount that can be contributed to a Roth IRA by what amount?

A

by an equal amount

45
Q

How many times may an investor roll over an IRA? How many times in a year may an investor roll over an IRA?

A

as many times as they want; once per year

46
Q

How many days does an investor have to deposit funds into another qualified account before being subject to taxes and penalties?

A

60 days

47
Q

In a trustee to trustee transfer, does the investor receive the money?

A

no

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