Chapter 3 Practice Question Answers
1. Answer: A. The Office of Foreign Assets Control maintains and publishes the Specially Designated Nationals list (SDN list), which is a compilation of names people who are suspected or known terrorists. Every covered financial institution must run new customers’ names through this list under the USA PATRIOT Act’s “Know Your Customer” regulations.
2. Answer: C. Regulation S-P protects investors from potential identity theft by placing strict requirements on how their private information may be used.
3. Answer: C. 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 involves real estate.
4. Answer: C. A sale is judged to be complete when the securities are delivered on the settlement date. A purchase is judged to be complete when the securities are paid for on the settlement date. Payment may occur in cash, by debiting the customer’s account, or by reducing the customer’s separately managed account. Payment must be paid in full, or 50% if the security was bought on margin. Purchases and sales will be judged complete before the settlement date if the securities are delivered and paid for before the settlement date.
5. Answer: C. By the Fed’s Regulation T, a broker-dealer is allowed to lend a client up to 50% of a security’s market value.
6. Answer: A. In order to open a margin account, customers are required to sign a credit agreement and a hypothecation agreement. Although the customer is not required to sign the loan consent, he is asked to because a signed loan consent form permits the broker-dealer to lend his securities to customers wishing to execute short sales.
7. Answer: A. The FINRA minimum maintenance requirement on long positions is 25% (30% on sh