S-12 Client Relations and Account Management 2

Question 1

In a margin account, the initial margin requirement set by Regulation T for purchasing most equity securities is:

Accepted Answer

50%

Answer

Regulation T, established by the Federal Reserve Board, requires customers to deposit at least 50% of the purchase price when buying securities on margin.

Question 2

A customer complaint alleging forgery or misappropriation of funds must be reported to FINRA within:

Accepted Answer

5 business days

Answer

FINRA Rule 4530 requires broker-dealers to report certain customer complaints involving theft, misappropriation, or forgery within 5 business days.

Question 3

Which account type is established under the Uniform Transfers to Minors Act (UTMA) and is managed by a custodian for a minor beneficiary?

Accepted Answer

UGMA/UTMA custodial account

Answer

UTMA accounts allow adults to transfer assets to a minor, managed by a custodian until the minor reaches the age of majority.

Question 4

If a customer has a 'cash account' and fails to pay for a purchase within the required settlement period, the broker-dealer must:

Accepted Answer

Liquidate the position and restrict the account from free-riding

Answer

Under Regulation T, failure to pay in a cash account results in liquidation of the position and a 90-day restriction preventing the customer from buying and immediately selling without settled funds.

Question 5

A registered representative who recommends excessive trading in a customer's account to generate commissions is engaging in:

Accepted Answer

Churning

Answer

Churning is the practice of excessively trading a customer's account primarily to generate commissions, which violates FINRA rules and constitutes a breach of fiduciary duty.

S-12 Test Practice Test

S-12 Test Practice Test

S-12 Client Relations and Account Management 2