BD acting in a principal capacity correct answers BD is the contra party to the trade (the BD is involved in the transaction as a buyer or seller)
BD acting in an agency capacity correct answers BD puts the buyer and the seller together, earning a commission doing so
BDs must always disclose ...
Series 63 || with Complete Solutions.
BD acting in a principal capacity correct answers BD is the contra party to the trade (the BD is
involved in the transaction as a buyer or seller)
BD acting in an agency capacity correct answers BD puts the buyer and the seller together,
earning a commission doing so
BDs must always disclose what capacity they filled on the trade confirmation no later than the
completion of the trade correct answers If acting as a broker, they disclose the amount of
commission.
Offering a proprietary product, such as a house fund correct answers Conflict of interest
Offering a limited partnership offering where the sponsor is an affiliate of the broker-dealer
correct answers Conflict of interest
Program sponsors, such as investment companies or insurance companies, providing incentives
or rewards to agents for selling the sponsors' products correct answers Conflict of interest
A securities professional having a financial interest in any security being recommended correct
answers Conflict of interest
A broker-dealer going public and placing shares of its own stock into discretionary accounts
correct answers Conflict of interest
A broker-dealer publishing a favorable research report after underwriting the issuer's stock
offering correct answers Conflict of interest
Fees not included in the fee-disclosure documents correct answers commissions, markups and
markdowns, advisory fees
Guaranteed security correct answers When a party other than the issuer guarantees the payment
of principal and interest (on a debt security) or dividend (on an equity security).
Guarantee against loss correct answers PROHIBITED - Guaranteeing a client that a specific
result will be achieved (gain or no loss) with advice which will be rendered
New account agreement (opening an account with a BD) correct answers Does the client have
the legal capacity to enter into agreements? Employee information, CIP notice to verify and
record information that identifies each person who opens an account, citizenship or visa details,
financial information about the client
Margin accounts correct answers Allow investors to leverage their investment dollars by
borrowing money from brokerage firms by pledging the purchased stock as collateral. Involves
mandatory signing of the Credit Agreement, and Hypothecation Agreement
, Credit Agreement (margin account) correct answers REQUIRED - Discloses the terms of the
credit extended by the broker-dealer, including the method of interest computation and situations
under which interest rates may change
Hypothecation Agreement (margin account) correct answers REQUIRED - Gives permission to
the broker-dealer to pledge customer margin securities as collateral. The firm hypothecates
customer securities to the bank, and the bank loans money to the broker-dealer on the basis of the
loan value of these securities
Loan consent form (margin account) correct answers OPTION - Gives permission to the firm to
loan customer margin securities to other customers or broker-dealers, usually for short sales
Risk disclosure document (FINRA rules on a margin account, not NASAA) correct answers
Given upon opening a margin account and the first trade has been made in the account. Must be
provided on an annual basis. Discusses the risks associated with margin trading.
Options Disclosure Document (FINRA rules on opening of options accounts) correct answers
Given because trading options involves a higher degree or risk than stocks, bonds, or mutual
funds. Includes questions intended to deduce essential facts about the customer.
IMPORTANTLY - their investment experience and knowledge of options, stocks and bonds, etc.
After this document is filled out, the supervisor can approve or disapprove in writing the opening
of the options account.
Within 15 days of this approval, the customer must report in writing to the BD that they received
the ODD.
Discretionary account (BD) correct answers An account where the customer grants the power to
a BD or investment advisor to make buy and sell decisions in the account without the need to
have prior contact with the customer.
IMPORTANT - Before a BD or agent can exercise discretion, a written discretionary
authorization permitting such discretion must be received by the firm, and the account must be
approved by a designated supervisor.
Discretionary account (Investment advisory) correct answers Oral authorization may be relied on
for the first 10 business days after the initial discretionary trade in the account. After that time,
without a written authorization, no further discretion may be advised.
Promises of high return with no risk correct answers Online red flag for investors
Offshore operations correct answers Online red flag for investors
E-currency sites correct answers Online red flag for investors
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