SIE Customer Accounts and Suitability 2

Question 1

What is a Uniform Gifts to Minors Act (UGMA) account?

Accepted Answer

A custodial account holding assets for a minor, managed by an adult custodian

Answer

A UGMA account is a custodial account where an adult manages assets on behalf of a minor until the minor reaches adulthood.

Question 2

A margin call is issued when:

Accepted Answer

The equity in a margin account falls below the maintenance margin requirement

Answer

A maintenance margin call requires the customer to deposit additional funds when account equity drops below the maintenance requirement.

Question 3

Under FINRA's Best Execution rule, broker-dealers must:

Accepted Answer

Seek the most favorable terms reasonably available for customer orders

Answer

Best execution requires broker-dealers to use reasonable diligence to find the most favorable terms for customer order execution.

Question 4

What is a power of attorney (POA) in a brokerage account context?

Accepted Answer

A written authorization for a third party to act on the account owner's behalf

Answer

A power of attorney authorizes a designated person to make investment decisions and transactions for another person's account.

Question 5

SIPC (Securities Investor Protection Corporation) protects investors against:

Accepted Answer

Broker-dealer insolvency and missing customer assets

Answer

SIPC covers up to $500,000 (including $250,000 in cash) per customer if a member broker-dealer becomes insolvent.

SIE - Securities Industry Essentials Practice Test