Client Relations and Account Management Flashcards

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

Answer: 50%

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

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

Answer: 5 business days

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

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

Answer: UGMA/UTMA custodial account

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

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

Answer: Liquidate the position and restrict the account from free-riding

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.

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

Answer: Churning

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.

When a customer provides 'investment objectives' during account opening, which of the following is typically the most conservative objective?

Answer: Capital preservation

Capital preservation focuses on protecting principal with minimal risk, making it the most conservative of standard investment objectives.