Series 24 - Customer and Margin
Accounts Exam-Graded A
What is the difference between limited and full discretion with regard to an account
where the representative has trading authority? - ANS-Limited: the ability to buy and sell
securities.
Full: same as limited, but includes the ability to extract funds.
What additional authorizations and forms are required for full discretion for a
representative as compared to limited discretion? - ANS-Written authorization from
client.
Written acceptance by a registered principal (Series 24).
Full power of attorney (POA).
Must trades in an account with full discretion be reviewed and approved? If so, what is
the primary focus? - ANS-Trades must be reviewed/approved promptly (not in advance)
by a principal to determine whether trading is excessive (churning) or meets a client's
investment objective.
What is a not held order? - ANS-Orders that allow for time and/or price discretion, but
specify whether to buy or sell, a certain quantity, and a specific security. Written
authorization is NOT required.
Only valid for the trading day. For a longer time frame, written authorization is required.
What are the three sections of a margin agreement? - ANS-Credit section - discloses
the terms of the loan. 30-day advance notice is required if B/D changes loan terms, but
NOT for changes to in-house maintenance requirements.
Hypothecation (pledge) section - stock may be hypothecated (pledged) as collateral by
the B/D.
Loan consent section (not mandatory) - Lenders retain ownership rights (except voting).
A client who signed the hypothecation agreement has a $12,000 debit balance. What
amount of stock may be hypothecated (pledged) as collateral by the B/D? - ANS-140%
of debit balance, or $16,800.
To what securities do penny stock regulations apply? - ANS-Apply to securities traded
on the OTCBB/OTC Pink Markets and have a bid price below $5.00.
What is required before a client can begin trading penny stocks? - ANS-Client must be
approved for penny stock trading and receive a risk disclosure statement.
Accounts Exam-Graded A
What is the difference between limited and full discretion with regard to an account
where the representative has trading authority? - ANS-Limited: the ability to buy and sell
securities.
Full: same as limited, but includes the ability to extract funds.
What additional authorizations and forms are required for full discretion for a
representative as compared to limited discretion? - ANS-Written authorization from
client.
Written acceptance by a registered principal (Series 24).
Full power of attorney (POA).
Must trades in an account with full discretion be reviewed and approved? If so, what is
the primary focus? - ANS-Trades must be reviewed/approved promptly (not in advance)
by a principal to determine whether trading is excessive (churning) or meets a client's
investment objective.
What is a not held order? - ANS-Orders that allow for time and/or price discretion, but
specify whether to buy or sell, a certain quantity, and a specific security. Written
authorization is NOT required.
Only valid for the trading day. For a longer time frame, written authorization is required.
What are the three sections of a margin agreement? - ANS-Credit section - discloses
the terms of the loan. 30-day advance notice is required if B/D changes loan terms, but
NOT for changes to in-house maintenance requirements.
Hypothecation (pledge) section - stock may be hypothecated (pledged) as collateral by
the B/D.
Loan consent section (not mandatory) - Lenders retain ownership rights (except voting).
A client who signed the hypothecation agreement has a $12,000 debit balance. What
amount of stock may be hypothecated (pledged) as collateral by the B/D? - ANS-140%
of debit balance, or $16,800.
To what securities do penny stock regulations apply? - ANS-Apply to securities traded
on the OTCBB/OTC Pink Markets and have a bid price below $5.00.
What is required before a client can begin trading penny stocks? - ANS-Client must be
approved for penny stock trading and receive a risk disclosure statement.
