Opens Accounts After Obtaining and Evaluating Customers' Financial Profile and Investment Objectives — Series 7 FINRA practice questions

Within 15 days of options account approval, the firm must:

1. Obtain a written options exercise instruction sheet
2. Freeze the account pending SEC confirmation letter
3. Obtain a signed options account agreement from customer
4. Wait for the customer to file Form 8949 that tax year

Answer: C — Obtain a signed options account agreement from customer

A) Exercise instructions are per-trade, not a signed form. B) SEC does not send confirmation letters. C) Correct — the signed options agreement is required within 15 days of approval. D) Form 8949 is annual tax reporting.

When an UTMA minor reaches age of majority in the state:

1. Assets transfer to the now-adult beneficiary fully
2. Assets automatically revert to the custodian estate
3. Assets are transferred to the custodian's IRA plan
4. Assets are locked until age 30 by state law default

Answer: A — Assets transfer to the now-adult beneficiary fully

A) Correct — beneficiary takes full ownership and control at majority. B) Custodian's role ends at majority. C) UTMA assets are the beneficiary's. D) No default lock exists to age 30.

A UGMA/UTMA account transfers ownership to the minor at the:

1. Signing of the account
2. First cash distribution
3. State age of majority
4. Death of the custodian

Answer: C — State age of majority

A) Signing does not transfer. B) First distribution is unrelated. C) Correct — age of majority under state law. D) Custodian death changes custodian only.

Under FINRA Rule 4512, which of the following is required on every new customer account record?

1. The names of the customer's immediate relatives
2. The customer's date of birth
3. The customer's political party affiliation
4. The stock symbol of the customer's employer

Answer: B — The customer's date of birth

B) Correct — date of birth is a required data field on the account record. A) Relatives' names are not a standard requirement. C) Political affiliation is not collected for account opening. D) Employer's stock symbol is irrelevant unless the customer holds restricted or control shares, which is a separate disclosure.

A trusted contact person designated on a customer's account:

1. May place trades on the customer's behalf
2. Automatically inherits the account upon the customer's death
3. May be contacted by the firm to address possible financial exploitation, but has no trading authority
4. Must be a currently registered representative at the firm

Answer: C — May be contacted by the firm to address possible financial exploitation, but has no trading authority

C) Correct — a trusted contact may be contacted about the account but has no trading or ownership authority. A) Trading authority requires a separate power of attorney or discretionary authorization. B) Inheritance requires a beneficiary designation or estate process, not a trusted-contact designation. D) The trusted contact is typically a family member or friend, not a firm employee.

A corporate brokerage account requires a signed:

1. Verbal officer statement
2. Personal guarantee document
3. Formal corporate resolution
4. Trust indenture agreement

Answer: C — Formal corporate resolution

A) Verbal alone is insufficient. B) Personal guarantee not required. C) Correct — resolution authorizes trading. D) Trust indenture is unrelated.

Customer asks to open an account with the neighbor holding full trading discretion. The firm must:

1. Refuse the arrangement; only spouses may hold trading power
2. Have both parties open a joint account with the neighbor
3. Obtain a written third-party trading authorization from customer
4. Route all orders through a firm principal for pre-approval each

Answer: C — Obtain a written third-party trading authorization from customer

A) Third-party trading is permitted with the right documentation. B) A joint account changes ownership; that's not what the customer wants. C) Correct — written third-party trading authorization (POA) is required plus firm review. D) Not the standard control — written authorization is.

What is a time and price discretion order?

An order where the customer specifies the security and action, but gives the rep discretion on timing and price. Does NOT require written discretionary authority.

What is a UGMA/UTMA account?

Custodial account for minors. One custodian, one minor. Custodian manages until minor reaches majority age. Irrevocable gift.

What is a 529 Plan?

Tax-advantaged education savings. Tax-free earnings and withdrawals for qualified education expenses. Account owner maintains control.