S-12 Client Relations and Account Management 3

Question 1

A married couple opens a joint account where each owns an undivided interest and ownership passes to the survivor upon death. This is called:

Accepted Answer

Joint tenants with right of survivorship (JTWROS)

Answer

In a JTWROS account, each co-owner has an equal undivided interest and the surviving owner automatically inherits the full account upon the other's death.

Question 2

Under FINRA rules, a registered representative must update customer account information when the information becomes 'materially inaccurate.' This obligation is known as:

Accepted Answer

Know Your Customer (KYC) maintenance obligation

Answer

FINRA's KYC rules require registered representatives to maintain current, accurate customer information and update it when material changes occur.

Question 3

A customer calls and verbally instructs a representative to sell all shares in the account. The representative should:

Accepted Answer

Execute the trade and document the verbal instruction in the account records

Answer

Verbal instructions from customers are generally permissible, but the representative must document the instruction and execution in the account records.

Question 4

Which of the following best describes a 'fiduciary' standard versus a 'suitability' standard?

Accepted Answer

A fiduciary must act in the client's best interest; suitability only requires recommendations be appropriate for the client

Answer

Fiduciaries (such as investment advisers) must place the client's interests first, while the suitability standard (historically applied to broker-dealers) only requires recommendations be appropriate for the customer.

Question 5

When must a broker-dealer deliver a prospectus to a customer purchasing shares in a mutual fund?

Accepted Answer

At or before the time of the confirmation of sale

Answer

Federal securities laws require that customers receive a prospectus at or before the time of the confirmation of sale for mutual fund purchases.

S-12 Test Practice Test

S-12 Test Practice Test

S-12 Client Relations and Account Management 3