As a follow up to yesterday’s licensing exam study question, here is your question PLUS answer and rationale:
Question (Relevant to Series 7, Series 79, Series 24, Series 62, Series 99, and Series 82):
Before allowing a customer to buy shares in an IPO, the member firm must receive a representation that the account is not restricted by the account owner. How can this form be obtained initially?
I. Negative consent letter
II. Positive affirmation letter
Answers:
A: I
B: II
C: Either I or II
D: Neither I nor II
Correct Answer: B
Rationale: Before allowing a customer to buy shares in an IPO, the member firm must receive a representation declaring that the account is not restricted by the account owner. The firm must receive a positive affirmation letter in which the customer states in writing that the account is not restricted. After the initial verification is obtained, annual verifications may be obtained through a negative consent letter. A negative consent letter is a letter that states that the person is not restricted unless they inform the firm otherwise.
*Questions featured in the weekly study question series are sampled from Solomon’s industry-leading Online Exam Simulator.