Study Question of the Week: October 9, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 24, Series 62, and Series 99. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 7Series 24, Series 62, and Series 99)

Which of the following agreements allows the broker-dealer to use the customer’s securities as collateral on a loan?

Answers: 

A. loan consent agreement

B. hypothecation agreement

C. credit agreement

D. prime broker agreement

Correct Answer: B. hypothecation agreement

Rationale: The hypothecation agreement allows the broker-dealer to use the customer’s securities as collateral on a loan. The credit agreement details the terms and conditions for the credit that the broker-dealer is extending to the customer. This agreement will include how the firm will calculate the interest charged on the credit and what interest rate the loan rate it will be tied to (e.g., broker call rate). The loan consent agreement permits the broker-dealer to lend the customer’s securities to other customers wishing to execute short sales. This agreement is not required of customers opening a margin account, but strongly encouraged by the broker-dealer.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

 

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