Series 4

Question 1

Basic Information on Options New Account Form

Answer 1

Customer Name, Address, Cash or Margin Account, Birthdate, SS# or Tax ID or W-8 form, Occupation and Employer, Employment Status - employee of another brokerage firm, bank or insurance company, financial institution

Question 2

Independent Verification of Customer Identity

Answer 2

Rules adopted October 2003, customers identity independently verified by matching name, address, SS# &birthdate to government issued ID or database provider - Equifax

Question 3

Options Suitability information

Answer 3

Investment Objective, Investment Experience, Existing Portfolio.
May also be asked - Financial Situation, Financial Needs, Marital Status, Dependents, Net worth, Liquid Net Worth, Estimated Annual income

Question 4

Suitability to sell naked options

Answer 4

member firm must have in place written procedures governing the conduct of such business

Question 5

ROP

Answer 5

Designation of specific registered options principle responsible of approving accounts that do not meet specific criteria, and standards that would allow approval alone by ROP or BOM - also need written records for the reasons for such approval

Question 6

Special Statement for Uncovered Options Writers

Answer 6

customers approved for writing naked short positions be provided with special written descriptions of the risks inherent in naked strategies at or prior to the initial short naked option transaction

Question 7

Special Statement includes:

Answer 7

Naked Call writers have unlimited risk, Naked put writers have substantial risk, / broker can demand additional margin for market moves / broker can liquidate to without prior notice if margin payment is not received / writer subject to exercise at anytime until expiration if secondary market became unavailable / only suitable for knowledge investors who understand risks and can absorb losses

Question 8

ODD

Answer 8

Options Disclosure Document - explains the risks and uses of options, date customer receives ODD placed on new account form,

Question 9

When is account opened

Answer 9

when first trade is performed

Question 10

When is ODD Sent

Answer 10

Sent prior to opening

Question 11

CBOE rule for ODD

Answer 11

the ODD must be given to the customer at or prior to approval of the account for options trading

Question 12

Options Agreement

Answer 12

Customer must sign the options agreement appropriate to the client based on the assessment

Question 13

Options Agreement that customer signs contains

Answer 13

Customer says will not violate OCC rules such as position limits, account will be handled in accordance with OCC requirements,

Question 14

Options Agreement allows

Answer 14

close out any ITM option trades through offsetting trades in week prior to expiration,

Question 15

Options Agreement signed 15 days after

Answer 15

account is opened, CBOE requires customer must return the signed Options Agreement to firm no later than 15 calendar days after account opened. If not received no new trades can be made, only closing trades

Question 16

Material Change in Financial Status

Answer 16

CBOE requires, customer financial status changes the Options Agreement must be amended to reflect / firms include a legend on options trade confirmation and options account statements that tells clients they are required

Question 17

ODD change

Answer 17

after amendment or update clients must get new ODD in timely fashion. Must be sent no later than with the next trade confirmation, or can be mailed

Question 18

FINRA rule 2090

Answer 18

Know your customer rule

Question 19

KYC

Answer 19

Know your customer rule, rep and firm bust use reasonable due diligence to know and retain essential facts relative to every customer

Question 20

Essential facts to KYC

Answer 20

effectively service customer account, act in accordance with any special handling instructions for the account, understand the authority of each person, comply with applicable laws regulations and rules

Question 21

SEC Rule 17a-3

Answer 21

this information must be collected from a new client / name / Tax ID / address / dob / telephone / occupation and employer / annual income / net worth / Investment objective / signature of person responsible for the account / signature of customer

Question 22

CIP

Answer 22

Customer Identification Procedures, first 4 items are critical and used to verify customers identity

Question 23

Required signature on new account form

Answer 23

Registered rep is the only one required to sign a new account application, sig attest tha this is the information disclosed by the customers, this is so info can be received over the phone.

Question 24

Discretionary Account

Answer 24

Customer gives representative power of attorney over the account. Customer signature is required.

Question 25

Customer verifies account profile

Answer 25

SEC requires that the cutover be given a copy of the account profile for verification within 30 days o account opening.

Question 26

Resent customer profile every 36 months

Answer 26

customer sent the account profile every 36 months for review and update

Question 27

FINRA rule 211

Answer 27

suitability rule, must have a reasonable basis to believe that a recommended transaction or investment strategy is suitable for the customer, based on the information obtained to ascertain the customers investment profile

Question 28

FINRA investment profile information

Answer 28

Investment profile includes investment objectives, investment experience, customer age, other investments, financial situation and needs gas status, investment time horizon, liquidity needs, risk tolerance, any other info disclosed by the disclosed.

Question 29

BOM

Answer 29

Branch Office Manager, passed 9/10, also the limited Principal General Securities Sales Supervisor, Can Approve new accounts and can approve transactions in accounts, can approve correspondence prepared by representatives, but not advertising or sales literature

Question 30

ROP

Answer 30

Registered Options Principal, can do everything that a BOM can do

Question 31

Designated ROP

Answer 31

Is in the home office in compliance function, designated to the SRO, the SRO has this persons name and contact information as being responsible for creating and supervising the firms options supervisory procedures and for approval of options advertising and sales literature also approves accounts for naked options writing that do not meet the firms standards, also reviews discretionary options accounts, including reviewing the acceptance of each new discretionary account

Question 32

Approval can be delegated

Answer 32

BOM or ROP must approve accounts in writing for options transactions. If BOM is not a ROP the approval must be confirmed with a ROP within 10 business days

Question 33

Resident ROP or BOM with 4 or more Reps

Answer 33

3 or fewer reps and the supervisor does not have to quality as a ROP or BOM as long as another qualified ROP or BOM assumes this responsibility

Question 34

Margin Account

Answer 34

Customer must sign a Margin Agreement also called a customers Agreement, must be signed by the customer before the account can be opened

Question 35

Loan Consent Agreement

Answer 35

Gives Bkg firm the right to lend securities, theory customer can refuse but in practice firms will not open margin account unless its signed

Question 36

Credit Disclosure Statement

Answer 36

Customer must be provided explains how the loan balance is commuted and how interest is charged on loan balance, if changed to increase interest customer must be given 30 day advance notice. if changed to decrease no notice is needed

Question 37

Margin Risk disclosure Statement

Answer 37

Customer must be given when opening a margin account, explains that leverage in the account magnifies potential gains and losses and that if margin calls are not met the firm can sell out the securities

Question 38

Fiduciary Account

Answer 38

3rd party is acting for and in the best interest of the owner of the account, Types are, trust , guardian, conservator for incompetent, administrator of executor of estate, receiver in bankruptcy

Question 39

Trading Fiduciary account

Answer 39

only the fiduciary can trade the account, can not give trading authorization to another person

Question 40

Short Put position is the same as

Answer 40

long stock / short call

Question 41

ACATS forms must be forwred to the carrying broker

Answer 41

Immediately

Question 42

CBOE rules, options trade confirms must be sent

Answer 42

Promptly

Question 43

Obvious error panel reviews decisions amd make determination

Answer 43

same day

Question 44

responsibile for enforcement of Federal Telephone Consumer Protection Act is with

Answer 44

FTC- Federal trade commission, act established cold calling rules

Question 45

Regulations FD

Answer 45

Fair disclosure, disclosure must be made to the general public

Question 46

U4

Answer 46

prior 10 years of employment, prior 5 years residence, if change amendemnt must be filed, deficiency myst be filed, Marital status is not asked.

Question 47

Opening rotation begins

Answer 47

each day after the underlying security strats trading in primary market

Question 48

Options trade confirmation

Answer 48

must disclose commission charge, whether the executing roker received a payment for order flow fromthe market where routed, complete descripiton of option contract, including underlying securtiy, type of options, expiration month, exercise price and premium

Question 49

Paper needed to transfer assets for a TOA account

Answer 49

copy of death cert