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Series 7 > Suitability > Flashcards

Flashcards in Suitability Deck (17):

Which of the following will decrease the debit balance in a customers margin account?
A. Cash dividends received
B. Stock dividends received
C. Sale of securities
D. Purchase of securities

The best answers are A and C


Under FINRA rules, "suitability" means that:
A. Securities that are delivered on settlement are in "good" form.
B. Investment recommendations made to a customer are appropriate for the investor
Accounts that are opened at the firm are of a similar nature to existing
D. Registered Representatives hired by the firm have passed all appropriate licensing examinations

The correct answer is B


Call loans made by banks to broker-dealers are secured by what?
A. Cash deposits made by the broker-dealer
B. Proprietary security positions of the broker-dealer held in the firms trading account
C. Customer security positions in margin accounts held by the firm
D. Customer security positions in cash accounts held by the firm

The correct answer is C


The determination of which over-the-counter stocks are marginable is made by who?
A. The FRB
D. the member firm

The correct answer is A


A customer receives an initial Reg. T call for $10,000 and wishes to pay it by depositing fully paid marginable stocks, currently trading at $50 per share. The customer must deposit:
A. 50 shares
B. 100 shares
C. 200 shares
D. 400 shares

The correct answer is D


A firm must follow special procedures for accounts being opened by all of the following persons except:
A. The spouse of an employee of another broker dealer
B. The child of an employee of another broker-dealer
C. An employee of the firm
D. Employees of other broker-dealer firms

The correct answer is C


Regulation T applies to transactions in which of the following securities?
A. Convertible corporate bonds
B. US government bonds
C. American depository receipts
D. Warrants

The correct answer is A C and D
Regulation T applies to transactions in nonexempt securities US government bonds are exempt corporate bonds American depository receipts and warrants are not exempt


A firm holds a joint cash account for a husband and wife. The wife calls registered representative and says "sell 500 shares of ABC out of the account immediately and send me a check for the proceeds made out to my name." The representative should inform the wife that:
A. Her instructions will be followed exactly
B. The transaction requires approval of the husband since it is a joint account
C. The trade can be performed but the check must be made out to both names on the account
D. A written power of attorney must be on file to perform the trade

The correct answer is C


Which of the following are types of fiduciary accounts?
A. Custodian account
B. Partnership account
C. Joint account
D. Trust account

The correct answer is a and D


An Individual is declared incompetent in a court proceeding. What type of account give me open for this person with appropriate documentation?
A. Cash account
B. Guardianship account
C. Joint account
D. Anna count may not be opened

The correct answer is B


Customer has a restricted margin account with $5000 of SMA. If the customer wishes to buy $10,000 of marginable common stock, the customer must deposit:
A. Zero
B. $5000
C. $10,000
D. $20,000

The correct answer is A


Mr. Jones, a New York resident is a widower with a six-year-old son. He opens an account for the sun under the uniform gifts to minors act. Three years later, Mr. Jones remarries, and moved to California, a community property state. Under what conditions can Mrs. Jones enter orders into the UGMA account?
A. Only if a power of attorney is granted by the son
B. Only if a power of attorney is granted by Mr. Jones
C. Mrs. Jones can enter orders without restriction because California is a community property state
D. Mrs. Jones cannot enter orders into the account under any circumstances

The correct answer is D


A married couple opens a joint margin account. The brokerage firm will send the Internal Revenue Service form 1099, report of interest and dividends earned, to the:
A. Husband only
B. wife only
C. Husband on one report and wife on another report
D. person who Social Security number was given on the account form

Correct answer is D


If a registered representative leaves his or her brokerage firm for another broker dealer, the customer accounts of the departing registered representative:
A. Are considered to be the property of the carrying broker-dealer
B. Are considered to be the property of the registered representative
C. Will be distributed to other registered representatives at the carrying firm
D. Will be closed and transferred to any new broker-dealer with whom the registered representative affiliates

The correct answer is a and D however if existing customers wish to transfer with their registered representative to the new broker-dealer firm, as long as they close positions and open new accounts they can do so


A customer account is not required to be frozen and closed upon the customers:
A. Written instruction
B. Death
C. Legal incapacitation
D. Medical disability

The best answer is D


Brokerage firm offers the following for product to a customer.
The first is flat commission rate of $80 per equity trade that includes the service of a dedicated representative.
The second a $30 commission per equity trade without a dedicated representative.
The third $3000 per year fee-based account that includes unlimited trading with the services of a dedicated representative
The fourth $1000 per year fee-based account that includes unlimited trading without the dedicated representative
The best choice for a customer that is new to investing who needs heavy guidance and who trades 2 to 3 times per month would be which?

Correct answer is a


And unmarried couple wishes to open a new account as JTWROS. What should the registered representative do?
A. open an account without making any further inquiries
B. Explain the risks involved with opening such an account
C. Ask why they wish to open this type of account
D. Refused to open the account

The correct answer is c.
Joint tenants with rights of survivorship is the account ownership option usually chosen by a married couple. Legally each 100% owns the account, if one dies the other automatically 100% owns the account. Transfer bypasses the estate and cannot be challenged. If you count is titled as tenants in common then each tenant owns a stated percentage of the account. If one dies that percentage goes to that that person's estate and is passed by will. Registered representative should inquire as to why this unmarried couple ones ROS ownership. The big question is do they understand how it all works