Series 99 Customer Account Handling & Documentation 3 — Questions and Answers
Question 1: Which form is used to transfer customer accounts between broker-dealers under the ACATS system?
- Form U4
- Transfer Initiation Form (TIF) (Correct answer)
- Form BD
- New Account Application
Correct answer: Transfer Initiation Form (TIF)
The Transfer Initiation Form (TIF) is submitted to initiate an ACATS account transfer between broker-dealers.
Question 2: A customer requests that their account statements be sent to a third-party address. What is the primary compliance concern?
- It is prohibited under all circumstances
- It may facilitate fraud or unauthorized account activity (Correct answer)
- It requires SEC approval
- It is only permitted for institutional accounts
Correct answer: It may facilitate fraud or unauthorized account activity
Third-party address requests raise red flags for potential fraud and require heightened scrutiny and documentation.
Question 3: Under SEC Rule 17a-3, which record must a broker-dealer create for each customer?
- A daily trade blotter
- A customer account record including investment objectives (Correct answer)
- A quarterly suitability assessment
- An annual credit report
Correct answer: A customer account record including investment objectives
SEC Rule 17a-3 requires broker-dealers to create and maintain a customer account record that includes investment objectives and personal financial information.
Question 4: A customer designates a Trusted Contact Person (TCP) on their account. The firm may contact the TCP to:
- Obtain trading authority for the account
- Address concerns about the customer's health or potential financial exploitation (Correct answer)
- Discuss the customer's account balance without restriction
- Transfer account assets at the TCP's request
Correct answer: Address concerns about the customer's health or potential financial exploitation
The TCP may be contacted to address concerns about the customer's wellbeing or potential financial exploitation, not to take account action.
Question 5: When a customer dies, which document typically authorizes the estate representative to access and manage the account?
- Death certificate alone
- Letters Testamentary or Letters of Administration (Correct answer)
- A notarized letter from next of kin
- The customer's original new account form
Correct answer: Letters Testamentary or Letters of Administration
Letters Testamentary (for testate estates) or Letters of Administration (for intestate) legally authorize the representative to act on behalf of the estate.
Question 6: A JTWROS (Joint Tenants with Right of Survivorship) account differs from a Tenants in Common account in that:
- JTWROS requires equal ownership percentages
- Upon death, a JTWROS owner's share passes automatically to the surviving owner(s) (Correct answer)
- Tenants in Common accounts cannot be margined
- JTWROS is only available to married couples
Correct answer: Upon death, a JTWROS owner's share passes automatically to the surviving owner(s)
In a JTWROS account, a deceased owner's interest passes automatically to the surviving owner(s), bypassing probate.
Question 7: A broker-dealer receives a legal order to freeze a customer account. Operations staff should:
- Notify the customer immediately before taking action
- Follow the legal order and consult compliance/legal counsel (Correct answer)
- Refuse until the customer provides consent
- Transfer assets to a suspense account and continue trading
Correct answer: Follow the legal order and consult compliance/legal counsel
Legal orders such as court judgments or regulatory freezes must be followed; staff should consult compliance and legal counsel for proper handling.
Series 99 Customer Account Handling & Documentation 3
Which form is used to transfer customer accounts between broker-dealers under the ACATS system?