SIE Customer Accounts and Suitability 3

Question 1

Reg BI (Regulation Best Interest) requires broker-dealers to:

Accepted Answer

Act in the best interest of retail customers when making recommendations

Answer

Reg BI requires broker-dealers to place retail customers' best interests first when making investment recommendations.

Question 2

A tenants in common (TIC) account differs from JTWROS in that:

Accepted Answer

Each TIC owner's share passes to their estate upon death, not to co-owners

Answer

In a TIC account, each owner's interest passes to their heirs through their estate, unlike JTWROS where it passes automatically to survivors.

Question 3

What information is required on a new account form under FINRA rules?

Accepted Answer

Customer's name, address, tax ID, investment objectives, financial situation, and risk tolerance

Answer

FINRA requires firms to collect comprehensive customer information including personal details, financial profile, and investment objectives for suitability purposes.

Question 4

A churning violation occurs when a broker:

Accepted Answer

Excessively trades a customer's account primarily to generate commissions

Answer

Churning is the unethical practice of excessive trading in a customer's account primarily to generate commissions for the broker.

Question 5

What must occur before a broker-dealer executes an options trade in a customer's account?

Accepted Answer

Options agreement must be signed and account must be approved for options trading

Answer

Options accounts require separate approval based on the customer's financial profile, and a signed options agreement before trading.

SIE - Securities Industry Essentials Practice Test

SIE - Securities Industry Essentials Practice Test

SIE Customer Accounts and Suitability 3