SIE Exam Prep Questions And 100%
Correct Answers
The main risk one could face with an ETN is a risk of default. The other common risks
related to ETNs deal with liquidity. Due to its name, very few are exchange traded and
have been listed on an exchange.
Joint Accounts
1. Tenants in Common(TIC) - A deceased tenant's fractional interest in the account is
kept by the tenant's estate and does not pass to the surviving tenant
2. Joint tenants with right of survivorship (JTWROS) - upon death of a tenant, that
tenant's interest in the account transfers to the remaining tenant(s). Tenants are equal
owners of the account
JTWROS: All parties must have an undivided interest in the account
TIC: Each party must identify a percentage of interest in account
Transfer on Death (TOD)
-provides for the account owner to transfer all or partial proceeds upon their death to
named beneficiary.
-account avoids probate because the estate is bypassed
-the assets in the account do not avoid estate tax, if applicable
Power of Attorney (POA)
legal document in which one person appoints another person to act as an agent on his
or her behalf
- The POA is granted to a person such as a representative or an attorney, not a firm
,POA does not divest the owner of the account of his/her authority over the account.
Types of power of attorney
1. Full Power of Attorney: Has almost the same authority over the account just like the
account owner
2. Limited Power of Attorney: The level of access is spelled out in the document. Can
place buy and sell orders but cannot withdraw any assets
3. Durable Power of Attorney: Most POAs have language that allows the power to
continue if the owner is incapacitated. If a POA has this language it is called durable
POA.
All POAs end with the death of either the person who granted the power - account owner
- or the person so appointed - the "attorney". This includes durable powers
Sole Proprietor Accounts
Is effectively the property of the business owner
-sometimes referred to as d/b/a accounts "doing business as"
Partnership Accounts
-the partnership must have a written partnership agreement along with an authorization
from the partners stating which of the partners may make transactions for the account
Corporate Accounts
When opening an account for a corporation, a firm must obtain a copy of the corporate
charter as well as a corporate resolution. The charter serves as proof the corporation
does, in fact, exist, while the resolution provides authorization for both the opening of
the account as well as the officers designated to enter orders
,Living and Decedent's Trusts
Living(revocable): A trust that is created and funded by the grantor during the grantor's
lifetime
Descendent(irrevocable): A trust that is funded by a will or some other estate process
where the assets are placed in the trust after the owner has passed away.
Revocable Trust
A trust that the grantor may change or revoke.
Assets in trust are still considered part of the grantor's assets and will be included in the
estate
The assets in a revocable trust remain part of his estate as do the assets in a TOD
account and a will. Also, a will must be probated.
Irrevocable Trust
A trust that, once set up, the grantor may not modify
Grantor may not service as the trustee or beneficiary
- The trustee of a trust has a fiduciary duty to manage the trust for the benefit of the
beneficiary of the trust.
e margin must be specifically permitted in the trust for an account to be opened
with margin.
Custodial Account
Account set up for a minor, typically with a bank, brokerage firm, or mutual fund. A
minor is not permitted to enter into securities transactions unless the custodian
approved. It holds cash and other property gifted to minors under the UNIFORM GIFTS
TO MINORS ACT or the Uniform Transfers to Minors Act.
, - Minor is the beneficial owner, therefore any tax liability is that of the minor
- Must be opened as cash accounts only
- Custodian may lend money to an account but cannot borrow from it
- Custodial accounts are under the minor's SSN and taxed at the minor's tax rate
Only one custodian is allowed
UTMA vs UGMA - 2 types of custodial accounts
- UTMA accounts allow for real estate to be titles in custodial name; UGMA accounts do
not
-UTMA accounts may be held in custodial name until the beneficiary turns 25 (21 in some
states); UGMA accounts are available to the minor at age of majority for the state
Coverdell Education Savings Account (Education IRA)
Like 529 plans, a Coverdell is another tax-advantaged investment account to save for
education. The tax treatment is exactly like that of a 529 plan. However, 529 plans are
the much more popular of the two plans, since a Coverdell has a much lower maximum
contribution limit: $2,000 per year per child. Moreover, a Coverdell may be created for
any student who is under the age of 18 but the assets must be withdrawn or transferred
by the time the student attains the age of 30.
Accounts with a Fiduciary
An account opening for a fiduciary may be contingent on receipt of a court certification
evidencing the appointment and authority of the fiduciary. An account for a trustee must
include a trust agreement that reflects the restrictions imposed on the fiduciary
Numbered Accounts
When customer requests that their account have a number in place of the name on the
account. These "numbered accounts" are granted for privacy, and only under
extraordinary circumstances. Numbered accounts are normally held by celebrities and
politicians. Member firm allowing the practice must maintain a record of the actual
identities of owners for these accounts.
Correct Answers
The main risk one could face with an ETN is a risk of default. The other common risks
related to ETNs deal with liquidity. Due to its name, very few are exchange traded and
have been listed on an exchange.
Joint Accounts
1. Tenants in Common(TIC) - A deceased tenant's fractional interest in the account is
kept by the tenant's estate and does not pass to the surviving tenant
2. Joint tenants with right of survivorship (JTWROS) - upon death of a tenant, that
tenant's interest in the account transfers to the remaining tenant(s). Tenants are equal
owners of the account
JTWROS: All parties must have an undivided interest in the account
TIC: Each party must identify a percentage of interest in account
Transfer on Death (TOD)
-provides for the account owner to transfer all or partial proceeds upon their death to
named beneficiary.
-account avoids probate because the estate is bypassed
-the assets in the account do not avoid estate tax, if applicable
Power of Attorney (POA)
legal document in which one person appoints another person to act as an agent on his
or her behalf
- The POA is granted to a person such as a representative or an attorney, not a firm
,POA does not divest the owner of the account of his/her authority over the account.
Types of power of attorney
1. Full Power of Attorney: Has almost the same authority over the account just like the
account owner
2. Limited Power of Attorney: The level of access is spelled out in the document. Can
place buy and sell orders but cannot withdraw any assets
3. Durable Power of Attorney: Most POAs have language that allows the power to
continue if the owner is incapacitated. If a POA has this language it is called durable
POA.
All POAs end with the death of either the person who granted the power - account owner
- or the person so appointed - the "attorney". This includes durable powers
Sole Proprietor Accounts
Is effectively the property of the business owner
-sometimes referred to as d/b/a accounts "doing business as"
Partnership Accounts
-the partnership must have a written partnership agreement along with an authorization
from the partners stating which of the partners may make transactions for the account
Corporate Accounts
When opening an account for a corporation, a firm must obtain a copy of the corporate
charter as well as a corporate resolution. The charter serves as proof the corporation
does, in fact, exist, while the resolution provides authorization for both the opening of
the account as well as the officers designated to enter orders
,Living and Decedent's Trusts
Living(revocable): A trust that is created and funded by the grantor during the grantor's
lifetime
Descendent(irrevocable): A trust that is funded by a will or some other estate process
where the assets are placed in the trust after the owner has passed away.
Revocable Trust
A trust that the grantor may change or revoke.
Assets in trust are still considered part of the grantor's assets and will be included in the
estate
The assets in a revocable trust remain part of his estate as do the assets in a TOD
account and a will. Also, a will must be probated.
Irrevocable Trust
A trust that, once set up, the grantor may not modify
Grantor may not service as the trustee or beneficiary
- The trustee of a trust has a fiduciary duty to manage the trust for the benefit of the
beneficiary of the trust.
e margin must be specifically permitted in the trust for an account to be opened
with margin.
Custodial Account
Account set up for a minor, typically with a bank, brokerage firm, or mutual fund. A
minor is not permitted to enter into securities transactions unless the custodian
approved. It holds cash and other property gifted to minors under the UNIFORM GIFTS
TO MINORS ACT or the Uniform Transfers to Minors Act.
, - Minor is the beneficial owner, therefore any tax liability is that of the minor
- Must be opened as cash accounts only
- Custodian may lend money to an account but cannot borrow from it
- Custodial accounts are under the minor's SSN and taxed at the minor's tax rate
Only one custodian is allowed
UTMA vs UGMA - 2 types of custodial accounts
- UTMA accounts allow for real estate to be titles in custodial name; UGMA accounts do
not
-UTMA accounts may be held in custodial name until the beneficiary turns 25 (21 in some
states); UGMA accounts are available to the minor at age of majority for the state
Coverdell Education Savings Account (Education IRA)
Like 529 plans, a Coverdell is another tax-advantaged investment account to save for
education. The tax treatment is exactly like that of a 529 plan. However, 529 plans are
the much more popular of the two plans, since a Coverdell has a much lower maximum
contribution limit: $2,000 per year per child. Moreover, a Coverdell may be created for
any student who is under the age of 18 but the assets must be withdrawn or transferred
by the time the student attains the age of 30.
Accounts with a Fiduciary
An account opening for a fiduciary may be contingent on receipt of a court certification
evidencing the appointment and authority of the fiduciary. An account for a trustee must
include a trust agreement that reflects the restrictions imposed on the fiduciary
Numbered Accounts
When customer requests that their account have a number in place of the name on the
account. These "numbered accounts" are granted for privacy, and only under
extraordinary circumstances. Numbered accounts are normally held by celebrities and
politicians. Member firm allowing the practice must maintain a record of the actual
identities of owners for these accounts.
