Chapter 5 Practice Question Answers
- 1. Answer: C. A broker-dealer’s written supervisory procedures must include the prompt review and written approval by an appropriate principal of the opening of a customer account. The written supervisory procedures may designate a General Securities Principal, Municipal Securities Principal, or Municipal Securities Sales Principal to review and approve of the opening of a customer account in which transactions in municipal securities may be effected.
- 2. Answer: D. Prior to recommending any transaction to a retail customer, a broker-dealer must seek to obtain information concerning the customer’s financial status, tax status, investment objectives, and any other information pertinent to making suitable recommendations on the customer’s behalf. This is generally referred to as suitability information, or that information necessary to be able to recommend suitable transactions to a particular client. Suitability information may be obtained while opening a customer account, but additional information is required to open the account.
- 3. Answer: A. An investment brochure describes MSRB’s customer protection rules and advises customers on how to file a complaint with an appropriate regulatory authority. The statement advising of its availability must be delivered each year as long as the relationship lasts. Municipal advisors must also provide this information to its clients promptly upon establishing a municipal advisory relationship.
- 4. Answer: A. A complaint is defined as any written statement alleging a grievance involving the activities of the broker-dealer or associated person and related to any matter involving a customer’s account. The record of the complaint must also include any actions taken by the broker-dealer in response to the complaint. Broker-dealers are required to maintain records of customer complaints for not less than six years.
- 5. Answer: C. A client’s signature is not required