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On settlement date, a customer is unable to pay for a purchase in his cash account. His position is liquidated. Which of the following statements is true according to Federal Reserve Regulation T?
Federal Reserve Regulation T mandates that customers must pay for purchases in a cash account within two business days of settlement (T+4). If payment is not made, the brokerage firm must liquidate the securities and place the account on a 90-day restriction.
C is correct because the customer's account is frozen for 90 days, during which all trades must be paid for in advance.
A is incorrect as closing transactions are still permitted but require prepayment.
B is incorrect because the restriction lasts for 90 days, not 30.
D is incorrect as only the delinquent account, not related accounts, is frozen.
A grandfather establishes a Uniform Transfers to Minors Act (UTMA) custodial account for his grandson and appoints an attorney as custodian. Which of the following individuals owns the account?
In a UTMA account, the minor is the legal owner of the account. The custodian (in this case, the attorney) manages the account until the minor reaches the age of majority specified by state law.
C is correct because the grandson (the minor) is the account's legal owner.
A is incorrect because the attorney is the custodian, not the owner.
B is incorrect because the grandfather established the account but does not own it.
D is incorrect because the parent does not have ownership unless explicitly named as the custodian.
An associated person at a member firm receives a complaint from a customer involving allegations of forgery. Once the complaint is received, which of the following actions is required?
Step by Step Explanation:
FINRA Rule 4530: Requires member firms to report certain events, including allegations of forgery, to FINRA promptly.
Incorrect Options:
Option B: Maintaining a record does not substitute for required reporting.
Option C: Arbitration isn't required before reporting.
Option D: Reporting is mandatory irrespective of internal investigations.
FINRA Rule 4530 (Reporting Requirements): FINRA Rule 4530.
An investor sells shares of a closed-end fund at the market. Which of the following responses best describes the net proceeds to be received?
Step by Step Explanation:
Closed-End Funds: Trade on exchanges like stocks, and the investor receives the bid price (market price) minus any applicable commissions.
Incorrect Options:
A & B: NAV applies to open-end mutual funds, not closed-end funds.
D: POP applies to initial sales of mutual fund shares.
SEC Guidance on Closed-End Funds: SEC Closed-End Funds.
When exercised, an option written on which of the following items must be settled in cash?
Step by Step Explanation:
Equity Index Options: These are cash-settled because the underlying asset is not a physical security but a theoretical value representing the index.
Incorrect Options:
Preferred Stock, Master Limited Partnerships, and ETFs: These involve physical delivery of the underlying asset upon exercise.
Options Clearing Corporation (OCC) Guidelines: OCC Cash-Settled Options.
