Unit 3 Questions wrong Flashcards
(25 cards)
Tate and Sidney have a joint tenants account with your firm. The account is under Tate’s Social Security number. In order to bring the assets under Sidney’s Social Security number, what forms will the firm require?
They will need to open a new joint account and both authorize a journal transfer to the new account.
They will need to open a new joint account and then both authorize the transfer.
Which of the following retirement plans would have to conform to the requirements of the Employee Retirement Income Security Act?
A) A corporate deferred compensation plan
Incorrect Answer
B) A payroll deduction plan
Incorrect Answer
C) A retirement plan for county employees
Incorrect Answer
D) A corporate defined benefit plan
A corporate defined benefit plan
The Employee Retirement Income Security Act of 1974 (ERISA) is aimed at private sector qualified plans. Deferred compensation and payroll deduction plans are not qualified, and a county employee plan is not private sector. A defined benefit plan, on the other hand, is a corporate qualified plan.
For which of the following would you have to open a cash account?
I. IRA
II. Woman opening a trading account and naming her brother as the beneficiary via a TOD designation
III. UGMA
IV. Trust account
I and III
I. IRA
III. UGMA
Corporate and personal retirement accounts and custodial accounts must be opened as cash accounts. A trust account will usually be opened as a cash account but may allow margin if specifically provided for in the trust agreement. Material from LO 3.c is also covered in this question.
Peyton has recently married and would like to add their spouse as a joint tenant to their brokerage account (currently in individual registration). What documents will your firm need to fulfill this request?
I. Letter of Authorization (LOA) from Peyton adding their spouse to the account
II. Letter of Authorization from the new spouse requesting they be added to the account
III. New account form completed by Peyton’s spouse
IV. New account form completed by Peyton
I and III
Peyton would need to sign a LOA to add on the new spouse, and the spouse would need to complete a new account form.
When opening a new account for an individual investor, FINRA asks its member to make a reasonable effort to obtain certain information about the account. Included information would be all of the following except
A) the occupation of the customer and name and address of the employer.
B) the customer’s tax identification or Social Security number.
C) whether the customer is an associated person of another member.
D) the name(s) of the customer’s dependents.
the name(s) of the customer’s dependents.
Nowhere in the FINRA rules on account opening does it require or suggest obtaining personal information about family members. That information becomes important when we look at the suitability rules. Please note that the tax ID or Social Security number is required under the customer identification program (CIP), but not FINRA rules.
At what age is an individual required to begin taking distributions from a Roth IRA?
A) 65 years old
B) 72 years old
C) No required age
D) 59½ years old
C) No required age
Unlike traditional IRAs that require distributions to begin at 72, there is no age at which distributions are required in a Roth IRA. Distributions may begin, tax free, at age 59½ if the money has been in the account for at least five years, beginning with the first tax year for which a contribution was made to any Roth IRA established for the individual.
Employee Retirement Income Security Act (ERISA) rules on participation include which of the following requirements?
One year of service (1,000 hours)
Participation rules require all employees with one year or more of service (1,000 hours) who are age 21 or older must be included in ERISA plans.
Which of the following statements correctly describe a Roth IRA?
I. The maximum annual contribution is 100% of earned income or a maximum allowable dollar limit, whichever is greater.
II. The maximum annual contribution is 100% of earned income or a maximum allowable dollar limit, whichever is less.
III. Contributions are tax deductible.
IV. Contributions are not tax deductible.
II and IV
The maximum annual contribution to a Roth IRA is 100% of earned income, not to exceed a maximum allowable dollar limit. Contributions are made with after-tax dollars.A transfer of assets between accounts at different firms generally takes place through which of the following systems?
A)
Automated Customer Transfer System (ACATs)
A transfer of assets between accounts at different firms generally takes place through which of the following systems?
Automated Customer Transfer System (ACATs)
Most transfers of this type will go through the ACATs system. We refer to this type of transfer as a TOA, but that is not the system name. Clearing corporations may handle some of the work, but the system is called ACATs. The NYSE doesn’t do this.
The rules concerning a person from a FINRA member firm opening an account with another member are applicable to which of the following?
I. Registered representative of a member
II. Uncle of one of the officers of a member firm
III. Employee of a member selling only government securities
IV. Close friend of an officer of a member firm
I and III
Everyone associated with a member firm in any capacity is governed by the rules on opening accounts with other member firms. Every associated person must inform the transacting company of his affiliation and must expect that firm to inform the employer. Uncles and friends of associated persons do not come under the rule.
All the following are benefits of a traditional IRA except
A)
earnings accumulate on a tax-deferred basis.
B) no penalty tax is charged for failing to withdraw funds after age 73.
C) funds may be withdrawn without penalty for certain exemptions.
D) contributions may be tax deductible.
no penalty tax is charged for failing to withdraw funds after age 73.
Required minimum distributions must begin the year after the account owner reaches age 73.
A guardian is appointed
A) at the time an account is opened.
B) prior to the account opening.
C) after the time an account is opened.
D) by the beneficiary.
prior to the account opening.
Guardians are appointed by courts to manage the affairs of an adult who is unable to do so. This appointment must be in place prior to the account opening.
All of the following must meet the nondiscrimination provisions of the Employee Retirement Income Security Act (ERISA) except
A) 401(k) plans.
B) deferred compensation plans.
C) profit-sharing plans.
D) defined benefit plans.
Deferred compensation plans are nonqualified and therefore do not have to meet the nondiscrimination provisions of ERISA.
Excess IRA contributions are subject to a penalty of
6%.
Excess IRA contributions are subject to a yearly penalty of 6% until they are either withdrawn together with associated growth or applied to the following year’s contribution limit.
ERISA allows the fiduciary of a corporate retirement plan to write covered calls on the securities in the portfolio
if this strategy is consistent with the objectives of the plan.
ERISA allows the fiduciary of a corporate retirement plan to write covered calls on securities in the portfolio if the strategy is prudent and consistent with the objectives of the plan.
An account opened under the rules of the Uniform Transfer to Minors Act (UTMA) must include which of the following?
One adult custodian and one minor beneficiary
A custodial account may have one adult custodian and one minor beneficiary when opened. The beneficiary may reach the age of majority after the account is opened, but a new custodial account requires that the beneficiary be a minor.
Dewey, Cheatham, and Howe, a law partnership, has selected new managing partners. The existing authorized parties for the account will need to be removed and the new managing partners added as authorized to manage the account. What does the firm need to provide to accomplish this change?
A resolution of the partners removing the prior authorized parties and appointing the new authorized parties
D,C, & H is a partnership, not a corporation. Because no ownership change is required, a resolution of the partners is all that is required.
Discretionary authority is not required for a registered representative to choose which of the following order instructions?
I. Security to be bought or sold
II. Number of shares to be bought or sold
III. Time of execution
IV. Price of execution
Time of execution
Price of execution
If a registered representative chooses price or timing of an order only, that order is not a discretionary order and a power of attorney is not required. The order is a not held order. To be discretionary, the representative must choose one or more of the following: the action (buy or sell), the security, or the amount (number of shares).
Which of the following actions would normally require the opening of a new account?
A) Removing a living tenant from a joint tenants account
B) Replacing a trustee of a trust
C) Replacing an authorized person on a corporate account
D) Removing a decedent tenant from a joint tenants account
Removing a living tenant from a joint tenants account
Removing a living tenant is normally not allowed (though a court order may require it). Normally, the assets would be moved to a new account via a letter of authorization and the old account closed. A trustee or an authorized person may be replaced with the appropriate authorization, but the account remains the same. Removing a decedent from a joint account does not require that the account be closed.
An individual retirement account (IRA) is an example of
a self-sponsored retirement plan.
Though an IRA requires that contributions come from earned income, the employer is not required to sponsor the IRA, or even know about it. IRA rules are part of the tax code; however, because an IRA does not require an employer sponsor, it is legally a nonqualified retirement plan.
If two customers are tenants in common in a joint account, which of the following statements regarding this arrangement are true?
I. If one of the tenants dies, the survivor will automatically assume full ownership.
II. They need not make equal investments in the account.
III. They need not have equal interests in the property in the account.
IV. If one of the tenants dies, the account need not be frozen.
II and III
II. They need not make equal investments in the account.
III. They need not have equal interests in the property in the account.
Under tenants in common, the tenants may make unequal investments in the account and may own a disproportionate interest in the property in the account. If one of the tenants dies, their assets are passed to their estate, not to the surviving joint tenant. The account must be frozen until this is carried out.
If an investor wishes to open a cash account in her name only and allow her spouse to make trading decisions, as well as withdraw cash and securities, she must instruct her broker-dealer to open
a cash account with full power of attorney.
For a person other than the account owner to be able to withdraw assets, a full power of attorney is required. A limited power of attorney allows someone other than the account owner to trade in the account, but not withdraw assets.
If a firm and its associated persons are unable to acquire some points of a customer’s suitability information, which of the following is allowed?
The firm may narrow the range of recommendations it makes to that customer.
The firm may narrow the recommendations made to that customer within the scope of the information it has available. The rules do not prohibit the firm from making recommendations within that scope of information, nor is it required to close the account. The firm must still ensure recommendations are suitable based on the information it has.
Which of the following statements is true for a joint tenants in common (TIC) account but not for a joint tenants with rights of survivorship (JTWROS) account?
A) The account may have a transfer on death designation.
B) The account owners may not have equal ownership interest in the account.
C) The account may have more than two owners.
D) A tenant’s interest passes to the survivors upon death.
The account owners may not have equal ownership interest in the account.
Ownership interest may be unequal in a TIC account, but interest in a JTWROS account is always equal. In a TIC account, the decedent owner’s interest passes to the decedent’s estate. TIC accounts may not have a transfer on death (TOD) designation; a JTWROS may have a TOD designation. Both accounts may have two or more owners, so the statement is true for both TIC and JTWROS, not just TIC.
