What type of joint account allows for a specified percentage of ownership of each party in the account?
Tenancy in Common
What is the FINRA "know your customer" rule?
This rule states that the registered representative and the member firm must use reasonable due dilligence to discover and maintain essential facts about every customer. Name, Social Security Number, Address, and DOB are required. Beyond that, a customer can refuse to provide more information and the firm is under no obligation to try to obtain more.
Whose signature is required on the new account form?
Only the principal's
The customer's signature isn't required at account opening (so accounts can be opened over the phone).
Suitability Rule
States that the firm or registered representative must have a "reasonable basis" to recommend a strategy or investment.
discretionary account
An account where the investor gives the broker power to make investment decisions for the account holder. Specifically, the registered rep has the authority to choose the asset, action (buy or sell) and/or amount. To establish a discretionary account, a written power of attorney is required.
How does a full power of attorney differ from a limited power of attorney?
A limited power of attorney allows the holder to trade (buy and sell securities) on behalf of the account owner, whereas a full power of attorney allows the holder to trade as well as withdraw cash from the account.
durable power of attorney
A type of power of attorney that continues even if a grantor is declared legally or mentally incompetent by a court.
What type of joint account allows for each party to own an undivided interest in the account - if one person dies the other party owns the entire account.
Joint Tenancy with Rights of Survivorship
An individual wants to establish an account and have a named beneficiary. They should open a
Transfer on Death (TOD) account
What is a customer account that allows the broker to trade but not to withdraw funds?
Limited power of attorney
What type of joint account is a divided account?
Tenants in Common (TIC)
In what type of joint account do all parties have an undivided interest in the account?
Joint Tenants with Rights of Survivorship (JTWROS)
In a joint account, who must checks be made out to?
All registered account owners
What is the system created after 9/11 for customer identification?
CIP - Customer Identification plan
Required Post-9/11, all customers' identification must be verified through this system promptly after account opened. If a customer cannot be identified, the account is not closed, but identification must ultimately be verified.
When securities are held in street name, to whom do companies send dividends?
"Street name" refers to securities held for customers, but in the name of the dealer. In this situation, the customer is still the beneficial owner of the security and retains all ownership rights inclduing dividends.
How are corporations taxed on dividends received from other corporations?
If a company owns stock of another company and receives a dividend, 50% of the dividends received are tax-free and the remaining 50% are taxed at the company's corporate rate.
wrap account
An account, offered by a broker-dealer, that charges a single fee for both advisory and execution services. Usually charged as a percentage of assets.
adjusted gross income
Used in the calculation of personal income tax and is calculated before deductions or exemptions are made.
Regulation that requires sheltering of private customer information and privacy notices
Regulation S-P
When principal approval is required for a new customer account
At or promptly after the first transaction in the account
Type of trading authorization granted to permit a third party to make trades but not withdraw cash or securities
Limited trading authorization
Type of trading authorization granted to permit a third party to make trades and withdraw cash or securities
Full trading authorization
Two types of custodial accounts established for minors
UGMAs and UTMAs
Joint account that passes assets to surviving owner at death with no probate
Joint tenancy with rights of survivorship (JTWROS)
Type of account that passes assets at death by will to the heirs
Joint tenants in common (JTIC)
Type of joint account that permits unequal ownership interests
Joint tenants in common (JTIC)
Type of joint account that requires equal ownership interests
Joint tenancy with rights of survivorship (JTWROS)
Type of account that authorizes registered representatives to make trades on behalf of the customer
Discretionary
Type of individual account that passes assets to a named beneficiary at death and avoids probate
Transfer on death (TOD)
Three trading restrictions for a custodial account
Short sales, uncovered options, margin accounts
Prohibited practice of trading frequently to boost commissions
Churning
The number of days a firm has to validate positions when an account transfer is requested
One business day
The number of days a firm has to transfer the securities after the account has been frozen
Three business days
Two order instructions that are not considered discretionary
Time and price
Length of time mail can be held for customers that are traveling in the U.S.
3 months
Length of time mail can be held for customers that are traveling outside of the U.S.
3 months
Minimum frequency for sending customer account statements
Quarterly
Frequency with which account statements are sent to customers in an active account
Monthly
Minimum frequency statements are sent to customers if penny stocks are held in the account
Monthly
When a principal must approve an order ticket
Promptly after execution
The number of days after account opening a firm has to furnish a copy of the account record to the customer
30 days
Two required documents for opening a corporate account
Corporate charter and corporate resolution
Account charge that is appropriate only for persons who engage in moderate to active trading
Fee-based
Account charge that is appropriate for persons who engage in little trading activity
Commission
Accounts that provide a group of services such as asset allocation and portfolio management, and are generally available through investment advisors
Managed accounts
Document that must be obtained when opening a partnership account
Partnership agreement
Type of responsibility that applies to persons named to manage custodial accounts
Fiduciary
Series of steps that a firm must follow at the death of an individual account owner
Cancel all open orders, freeze the account, await instructions
The party that can buy, sell or liquidate securities in an UGMA account
Custodian
