Chapter 8 Practice Question Answers
1. Answer: C. FINRA requires that the representative learn about a new customer’s identity, investment experience, financial status, and investment objectives. The customer’s educational background is not particularly relevant here and is not required information for a new account form.
2. Answer: A. A new customer account form requires the customer’s name and address, and whether the customer is of legal age. The customer’s signature is not required.
The account may be opened before the customer’s Social Security number (or Tax ID number) is obtained by the firm. However, in most cases the broker-dealer must make reasonable efforts to obtain the number before the first transaction settles. Additionally, the broker-dealer must attempt to obtain the number as part of its Customer Identification Program (CIP).
3. Answer: B. The SEC sets a minimum of three years for requesting updated suitability information. In addition, the Know Your Customer Rule may require updating information more often than the three-year minimum if the customer’s circumstances change.
4. Answer: C. Parties to a joint tenants in common, or JTIC, account specify a percentage split among them when opening the account, and they have no rights of survivorship. So if William were to die, his percentage would be passed on to his estate in accordance with his will; however, that percentage would only be half of the account’s assets if that percentage had been specified. If William and Ruth want the assets in the account to go to each other should one die, then they want a joint tenants with rights of survivorship (JTWROS) account.
5. Answer: D. A joint tenants in common account provides that the deceased owner’s interests in the account pass to his estate. In a joint tenants with rights of survivorship account, those assets pass to the surviving owner. Tenancy by the entirety is only available to married couples and usually inv