Client Relations and Account Management Flashcards

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

Answer: Joint tenants with right of survivorship (JTWROS)

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.

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

Answer: Know Your Customer (KYC) maintenance obligation

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

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

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

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

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

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

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.

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

Answer: At or before the time of the confirmation of sale

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

A registered representative is handling an account for an elderly customer who appears confused and may be a victim of financial exploitation. The representative should first:

Answer: Contact a trusted contact person on file and place a temporary hold on disbursements if permitted

FINRA Rule 2165 allows broker-dealers to place a temporary hold on disbursements and contact a trusted contact person when there is a reasonable belief of financial exploitation of a senior or vulnerable adult.