Opens Accounts after Obtaining and Evaluating Customers' Financial Profile and Investment Objectives practice questions

Answer: D) The trust agreement permits margin trading

• AIncorrect. That isn't required.
• BIncorrect. Age isn't the test.
• CIncorrect. The trust document governs.
• DCorrect. Trustees act within the trust's terms.

Answer: D) Letters testamentary

• AIncorrect. That isn't required.
• BIncorrect. That's for minors.
• CIncorrect. That's for corporations.
• DCorrect. Plus a death certificate.

Answer: B) Use a custodial account

• AIncorrect. Minors can't contract.
• BCorrect. Minors can't enter binding contracts.
• CIncorrect. Minors can't contract.
• DIncorrect. A custodial account works.

Answer: B) A principal's OK

• AIncorrect. Approval is internal.
• BCorrect. The firm must approve discretionary accounts.
• CIncorrect. Approval is internal.
• DIncorrect. Principal approval is required.

Answer: C) The corporate charter or bylaws authorize the corporation to trade on margin

For a corporate margin account, the firm checks the charter or bylaws to confirm the corporation may borrow on margin. A corporate resolution identifies who may trade for the corporation.

• AIncorrect. The corporation is the customer, and authorized officers sign on its behalf. Individual shareholders do not sign margin agreements.
• BIncorrect. A corporate customer does not have to file financial statements with FINRA before opening a margin account.
• CCorrect. Margin involves borrowing and pledging securities as collateral, so the firm checks that the corporation's charter or bylaws allow it. A separate corporate resolution names the officers authorized to trade.
• DIncorrect. Private corporations can open margin accounts too. What matters is whether the corporation's governing documents permit margin trading.

Answer: C) Margin disclosure

• AIncorrect. A margin disclosure is required.
• BIncorrect. That is for offerings.
• CCorrect. It explains margin risks.
• DIncorrect. That is for voting.

Answer: B) W-9

• AIncorrect. That's for foreign persons.
• BCorrect. It certifies the TIN and backup withholding status.
• CIncorrect. That's a tax return.
• DIncorrect. That reports termination.

Answer: A) The firm may open the account, provided it made reasonable efforts to obtain the trusted contact information

For non-institutional accounts, Rule 4512 requires reasonable efforts to obtain a trusted contact person age 18 or older. If the customer declines, the firm can still open or maintain the account.

• ACorrect. Rule 4512 says the absence of trusted contact information does not prevent a member from opening or maintaining the account, as long as the member makes reasonable efforts to obtain it.
• BIncorrect. The rule expressly says a missing trusted contact does not prevent opening or maintaining the account.
• CIncorrect. The rule does not let the firm assign a trusted contact. The customer provides the name, and the firm must make reasonable efforts to obtain it.
• DIncorrect. Rule 4512 does not require any waiver or FINRA filing. It requires reasonable efforts to obtain the information, plus a disclosure that the firm may contact the trusted contact person.

Answer: A) Place a temporary hold on the disbursement, initially for up to 15 business days, and notify the authorized parties and trusted contact

Rule 2165 gives firms a discretionary safe harbor to place temporary, time-limited holds on disbursements or securities transactions for specified adults (age 65+, or 18+ with an impairment). The firm must give prompt notice and conduct an internal review.

• ACorrect. Rule 2165 permits, but does not require, a temporary hold on disbursements, or on securities transactions, for a specified adult. The initial hold lasts up to 15 business days. Within two business days, the firm must notify authorized parties and the trusted contact person, unless they are unavailable or suspected of the exploitation.
• BIncorrect. Rule 2165 provides a safe harbor for temporary holds. It does not authorize a firm to move a customer's assets to a guardian or any third party.
• CIncorrect. Holds are time-limited: an initial 15 business days, a 10-business-day extension, and a further 30-business-day extension if the matter has been reported to a state regulator or agency or a court. Open-ended freezes are not permitted.
• DIncorrect. No court order is needed. The firm may place the hold if it reasonably believes exploitation has occurred, is occurring, has been attempted, or will be attempted.

Answer: C) The court-appointed guardian or conservator, after giving the firm a copy of the court's appointment order

A legally incompetent person can't open or direct an account. Without a durable power of attorney, a court-appointed guardian or conservator acts for them and must give the firm documents proving that authority. Trusted contacts and revoked limited POAs give no authority.

• AIncorrect. A trusted contact person is someone the firm may contact about the account. Naming someone as trusted contact gives them no authority to make decisions or enter transactions, and doesn't make them a guardian or power of attorney.
• BIncorrect. A limited (non-durable) power of attorney is automatically revoked if the principal becomes incapacitated, so it no longer gives authority after the court's declaration.
• CCorrect. With no durable POA in place, a court appoints a guardian or conservator to act for the incompetent person. The firm should get the court documents that show the fiduciary's authority before opening the account and accepting instructions.
• DIncorrect. A person declared legally incompetent can't enter into a binding contract, and a co-signer or witness doesn't fix that. A legally authorized fiduciary has to act instead.