Identify Required Account Documents - Series 7

1. Which disclosure must be provided when a customer opens a margin account?

   The margin disclosure statement. This statement explains margin risks, such as potential losses exceeding initial investment, as required by FINRA to promote informed borrowing decisions.

2. What is the Series 7 term for the legal owner of an account who must sign the new account form?

   The account title holder (customer). This individual holds legal ownership and must provide signature to verify identity and agree to account terms for compliance with regulatory requirements.

3. What is the required customer authorization to move funds or securities between firms via ACATS?

   A signed transfer instruction (ACAT form). The signed form initiates the Automated Customer Account Transfer Service (ACATS), ensuring secure and compliant transfer of assets between brokerage firms.

4. Which type of power of attorney permits trading only and not withdrawals or transfers?

   Limited power of attorney (limited POA). It restricts authority to trading decisions only, prohibiting asset distributions to safeguard customer funds under FINRA guidelines.

5. Identify the documentation required to open an account for a trust.

   Trust agreement (or certification) and trustee authority. These documents verify trust validity and trustee powers, ensuring authorized trading and compliance with fiduciary and regulatory obligations.

6. Identify the documentation required to open an account for a partnership.

   Partnership agreement and authorization for trading authority. The agreement outlines partnership structure, and trading authorization designates responsible parties, meeting FINRA requirements for entity accounts.

7. Identify the document that authorizes periodic purchases of a mutual fund or other security automatically.

   An automatic investment plan authorization (AIP form). It establishes recurring automatic investments, ensuring systematic purchases align with customer goals while complying with fund and regulatory guidelines.

8. Which documentation is required to open a joint account where each owner can bequeath their share?

   A joint account agreement specifying TIC. Specifying tenants in common (TIC) allows each owner to designate heirs for their portion, preventing automatic survivorship and aligning with estate planning needs.

9. What is the term for an account where the representative decides trades without prior customer approval?

   A discretionary account. In such accounts, the registered representative has authority to make investment decisions independently, subject to prior customer consent and principal oversight.

10. Which approval is required before a representative may exercise discretion in a customer account?

    Written approval by the appropriate principal. Principal review and written approval verify that discretionary authority aligns with customer objectives and regulatory standards to protect investor interests.

11. Identify the document that must be completed to open a new brokerage account and establish suitability.

    The new account form (new account record). It collects essential customer information, including financial details and investment objectives, to ensure suitability and meet FINRA regulations.

12. What is the required documentation to add margin borrowing privileges to an account?

    A signed margin agreement. It outlines terms for borrowing, including interest rates and risks, ensuring customer understanding and compliance with Regulation T and FINRA rules.

13. What is the required authorization to automatically reinvest cash dividends in additional shares?

    A dividend reinvestment (DRIP) election. The election directs dividends to purchase more shares automatically, facilitating compounding growth in compliance with issuer and SEC requirements.

14. What is the required customer authorization that permits a firm to hold customer mail at the firm?

    A written hold-mail (mail-hold) request. It provides explicit permission for the firm to retain mail, ensuring compliance with privacy and record-keeping regulations while accommodating customer needs.

15. Identify the required authorization that allows electronic delivery of confirmations and statements.

    Customer consent to e-delivery (written/electronic). Consent verifies customer agreement to receive documents electronically, satisfying SEC and FINRA rules for alternative delivery methods over physical mail.

16. Which document is required to open a custodial account for a minor under UTMA or UGMA?

    UTMA/UGMA custodial account agreement naming custodian and minor. It establishes the custodian's authority to manage assets for the minor's benefit until adulthood, in accordance with Uniform Transfers/Gifts to Minors Act provisions.

17. What is the authorization called that allows a third party to trade in a customer account?

    Trading authorization (power of attorney). This grants a third party legal authority to execute trades on behalf of the account owner, ensuring controlled access while maintaining regulatory oversight.

18. Which type of power of attorney permits broad authority over an account, including distributions?

    Full power of attorney (full POA). It allows comprehensive control, including trading, withdrawals, and distributions, requiring strict documentation to prevent unauthorized actions.

19. Identify the documentation required to open an account for a corporation.

    Corporate resolution and authorized signer documentation. The resolution confirms corporate authority, while signer documentation verifies individuals permitted to act, ensuring compliance with FINRA and legal standards.

20. What two approvals are required before a customer may trade options in an account?

    Customer options agreement and ROP approval. The agreement confirms customer understanding of options risks, while ROP ensures account suitability and compliance before trading commences.

21. Identify the written authorization required to send account proceeds to a third party by check or wire.

    A signed letter of authorization (LOA). The LOA provides explicit written permission for disbursements to third parties, preventing unauthorized transfers and ensuring regulatory compliance.

22. What two items are required to establish discretion in a customer account?

    Written customer authorization and principal approval. Customer authorization grants permission for discretion, while principal approval ensures suitability and compliance with FINRA rules before implementation.

23. Which principal is responsible for approving options accounts and supervising options activity?

    Registered Options Principal (ROP). The ROP reviews and approves options accounts to verify suitability and oversees all options-related activities to adhere to exchange and FINRA rules.

24. What document must a customer receive at or before options account approval?

    Options Disclosure Document (ODD). The ODD outlines the risks and characteristics of options trading, ensuring informed consent as mandated by regulatory bodies prior to account approval.

25. What documentation is required to open a joint account with rights of survivorship?

    A joint account agreement specifying JTWROS. The agreement designates joint tenancy with rights of survivorship (JTWROS), ensuring automatic transfer of ownership to survivors upon death without probate.

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