Conduct and Practices Handbook Course (CPH) Quiz 45

Many investors are not sure how much risk they should be taking, and it is the broker’s job to help them figure this out. Various nonfinancial factors in making this determination include:

I. Investor previous investment experience
II. Investor employment situation
III. Investor household income
IV. Investor net worth

Which of the following are the customer-specific factors which affect the selection of his securities for investment purposes:

I. Risk tolerance
II. Investment time horizon
III. Investment objectives
IV. Expected Rate of Return

The following term refers to possession of several varied types of securities, usually so that different parts of one’s portfolio offset risks in other parts:

I. Diversification
II. Concentration
III. Asset allocation
IV. Volatility

The following theory that seeks to maximize the return and/or minimize risk for a given portfolio is:

I. Portfolio theory
II. Diversification theory
III. Capital budgeting theory
IV. Asset Valuation theory

Following is (are) brokerage accounts where, instead of paying his own cash, the customer is lent cash from the broker, with various securities and cash being used as collateral.

I. Cash Accounts
II. Margin Accounts
III. Options Accounts
IV. Day trading Accounts

Which of the following can serve as a lesser substitute for power of attorney:

I. Corporate Resolution
II. Trading authorization
III. Discretionary accounts
IV. Estate accounts

Which of the following statement is (are) true about the purpose of Know Your Customer (KYC) forms:

I. To assess client’s willingness to take risk
II. To assess client’s knowledge of investments and finance
III. To assess client’s actual assets
IV. To assess client’s qualification as bona fide foreign resident

Which of the following appliers when concerning to corporate insiders:

I. Individuals who are privy to corporation’s inside information
II. Includes directors and officers
III. Those who have access to material but non-public knowledge
IV. Owning less than 10% of the voting shares

Which of the following statement is true about money market funds:

I. Money market funds are not insured by FDIC
II. They can be invested in short term securities
III. They can be invested in both short term and long term securities
IV. The average maturity of the portfolio cannot exceed 120 days

Which of the following is false about transferring accounts between broker dealers
I. Account transfer form states whatever securities the customer had with old broker dealer
II. the old broker-dealer has three business days to confirm or else make an exception for some information in the request
III. The old-broker dealer has five business days to execute the account transfer
IV. Using ACATS requires membership in National Securities Clearing Corporation (NSCC)

Accounts can be registered under different categories, such as:
I. individual
II. Joint
III. Custodial
IV. Dealers

Customer making transfer between or among their own accounts or accounts with which they are closely associated are known as:

I. internal transfer
II. Transfer on death
III. Divorce transfers
IV. External transfers

Following is the deliberate concealment of the source of illegally-obtained funds:

I. Specially Designated Nationals
II. Currency transaction reports
III. Money laundering
IV. Bank Secrecy Act

Which of the following is made by financial institutions to the U.S detailing Information about suspicious individuals or transactions:

I. Currency transaction reports
II. Suspicious activity reports
III. Bank Secrecy Act
IV. Money laundering

Bank Secrecy Act (BSA), passed in 1970, established responsibilities for:

I. U.S. Treasury
II. Federal government agencies
III. Financial institutions
IV. Economic and trade sanctions

OFAC has compiled a list of people or groups of people with whom U.S. citizens and institutions are prohibited from doing business are:

I. Specially Designated Nationals
II. Office of Foreign Asset Control
III. Currency transaction reports
IV. Bank Secrecy Act

Brokerage firms will also have restrictions on what kind of accounts:

I. margin accounts
II. Stock market
III. Long and short margin accounts
IV. Short sale accounts

There are two different courses of action either he can borrow money with which he will buy securities, or he can borrow securities directly which is following as:

I. long margin account
II. Short margin account
III. Short sale accounts
IV. Special memorandum accounts

Which are the following is (are) true for long margin accounts?

I. the customer uses money lent to him by the broker
II. To purchase a security
III. Hoping to make a profit on the security
IV. Pay back the broker

In the following marginal account, customer will generally sell the security (or set of securities) he has just borrowed from the broker, hope for the price to decrease, purchase the security at a lower price:

I. long margin account
II. Short margin account
III. Portfolio margin accounts
IV. Day trading accounts

In the following lines of credit, an investor is permitted to take out more on margin if he has more equity in his margin account:

I. Portfolio margin accounts
II. Day trading accounts
III. Special memorandum accounts
IV. Credit balance

If the margin requirement is 50% (that is, if the financial institution does not raise the requirement above the minimum 50%), then what will be the buying power of Special memorandum accounts (SMA):

I. Single
II. Double
III. Triple
IV. Half

Following is the type of margin account where the initial margin requirement differs according to the particular risk of the portfolio:

I. Customer Portfolio Margin system
II. Day trading accounts
III. Portfolio margin accounts
IV. Margin calls

The following type (types) of accounts are most risky margin accounts:

I. Day trading accounts
II. Customer Portfolio Margin system
III. Short sale accounts
IV. Special memorandum accounts

Which of the following statements are true for credit brokerage?

I. How much has the customer borrowed from the brokerage firm?
II. How much the customer has contributed to or received in his account.
III. The practice of using stocks as collateral for loans.
IV. The current value of the stocks the investor bought on margin.

The difference between the margin requirement for an account and the total cost refers to the following:

I. Margin
II. Margin calls
III. Hypothecation
IV. Loan value

The brokerage house may not pledge by more than of following percent of a customer’s debit balance:

I. 140 percent
II. 145 percent
III. 150 percent
IV. 155 percent

Which of the following is (are) prohibited activities for brokers?

I. They are not permitted to spread market rumours
II. They are not permitted to engage in front-running
III. They are not permitted to pay for referrals
IV. They are not permitted to make prearrange trades

TRACE is a program developed by:

I. NASDAQ
II. Rating agencies
III. FINRA
IV. EMMA

Which of the following documents are prepared by investment research teams for brokerage firms or investment banks?

I. TRACE
II. Research reports
III. Product-specific periodicals
IV. NASDAQ