Obtains and Verifies Customer Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions — Series 7 FINRA practice questions

A Good-Til-Cancelled (GTC) limit order:

1. Expires at the end of the trading day it was placed
2. Executes only during the opening auction window only
3. Remains open until executed or cancelled by customer
4. Automatically cancels at each month-end trading close

Answer: C — Remains open until executed or cancelled by customer

A) That's a day order. B) That's a market-on-open order. C) Correct — GTC persists until filled or the customer cancels (per firm policy). D) Cancellation is not automatic monthly.

In the primary market, proceeds from a securities sale go to:

1. The prior owner of the shares sold
2. The exchange facilitating the trade
3. The issuing company raising capital
4. The clearing corporation as fee

Answer: C — The issuing company raising capital

A) Prior owners receive proceeds only in the secondary market. B) The exchange charges fees, not receiving proceeds. C) Correct — primary offerings raise capital directly for the issuer. D) The clearing corporation clears trades, not receiving proceeds.

To open a discretionary account, the firm requires signed authorization from the:

1. Registered rep only signature
2. Compliance officer alone
3. Clearing agent only sign-off
4. Customer and firm principal

Answer: D — Customer and firm principal

A) Rep signature is insufficient. B) Compliance alone is not enough. C) Clearing agent has no such role. D) Correct — customer plus principal approval.

Accrued interest on a corporate bond is calculated from the:

1. Previous coupon date up to (not including) settlement
2. Issue date through the current trade date period
3. Last full calendar year of continuous ownership
4. Next coupon date backward for 30 days maximum

Answer: A — Previous coupon date up to (not including) settlement

A) Correct — standard accrual runs from last coupon paid up to (but not including) settlement. B) Issue date is not the reset — coupon dates are. C) Calendar year is not the accrual basis. D) Reverses the direction of accrual.

A margin agreement typically includes a:

1. Loan consent authorization form
2. Guaranteed profit clause
3. Fixed rate for account life
4. Standard waiver of Reg T

Answer: A — Loan consent authorization form

A) Correct — hypothecation and loan consent. B) No profit is guaranteed. C) Rates are variable. D) Reg T cannot be waived.

A trade confirmation under SEC Rule 10b-10 must be delivered:

1. Only when the customer specifically requests one
2. Within 5 business days after the trade settles finally
3. Annually in a bundle with the account statement
4. At or before completion of the transaction step

Answer: D — At or before completion of the transaction step

A) Confirmations are mandatory, not on request. D) Correct — Rule 10b-10 requires confirmation at or before completion, with required content. C) Annual delivery isn't the requirement. B) Later than the rule allows.

A customer requests cash settlement for an equity trade. Cash settlement occurs on:

1. T+0 (same business day as the trade date)
2. T+1 (one business day after the trade date)
3. T+2 (two business days after the trade date)
4. T+5 (five business days after the trade date)

Answer: A — T+0 (same business day as the trade date)

A) Correct — cash settlement is T+0 by agreement of buyer and seller. B) That is now regular-way equity settlement. C) That was regular-way pre-2024. D) T+5 is not a standard settlement window.

A trade confirmation must be sent to the customer no later than the:

1. Regular settlement date
2. Original trade date
3. One week after the trade
4. End of the calendar month

Answer: A — Regular settlement date

A) Correct — by settlement per FINRA. B) Trade date is impractical. C) A week is too late. D) Month-end is too late.

For a long margin account, LMV equals equity plus the:

1. Cash amount on deposit
2. Reg T buying power line
3. Debit balance owed
4. SMA account balance line

Answer: C — Debit balance owed

A) Cash is not the debit. B) Buying power is derived. C) Correct — LMV equals EQ plus DR. D) SMA is separate.

For a long margin account, LMV equals equity plus the:

1. Cash amount on deposit
2. Reg T buying power line
3. Debit balance owed
4. SMA account balance line

Answer: C — Debit balance owed

A) Cash is not the debit. B) Buying power is derived. C) Correct — LMV equals EQ plus DR. D) SMA is separate.

What is accrued interest?

Interest earned on a bond since the last coupon payment that the buyer must pay the seller. Calculated from last payment date to settlement date.

What is SMA (Special Memorandum Account)?

A credit line in a margin account representing excess equity above Reg T requirements. Can be used for additional purchases or cash withdrawals.

What is a stop order?

Becomes a market order when stop price is reached. Used to limit losses or protect profits. No price guarantee.

What is a market order?

Buy/sell immediately at best available price. Guarantees execution, not price.