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Series 7 Flashcards: Apply Settlement And Delivery Rules

Study Apply Settlement And Delivery Rules in Series 7 with focused flashcards that help you recognize the idea, recall the key rule, and apply it in practice-style prompts.

QUESTION

Which term describes settlement through electronic records without paper certificates for most securities?

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ANSWER

Book-entry settlement. Book-entry uses electronic records for efficiency, eliminating the need for physical certificates in modern trading.

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Series 7: Function 4: Processes Transactions

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This deck focuses on Apply Settlement And Delivery Rules, giving you a quick way to review the definitions, rules, and examples that matter most for Series 7.

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Work through these flashcards in short sessions. Try to answer each prompt before flipping the card, then revisit any cards you miss until the explanation feels automatic.

Practice questions

1 of 26Practice questions for this set
Scenario (Equity Trade Settlement): On Monday (T), a customer buys 300 shares of ABC at $40 in a cash account. The trade is executed at 10:15 a.m. and confirmed the same day. ABC is a regular-way equity trade with standard settlement. On settlement date, the customer's payment is due and the seller must deliver shares through the clearing system. The customer asks what "good delivery" means if paper certificates are involved. The registered representative explains that good delivery requires negotiable form: the certificate must be properly endorsed (or accompanied by a stock power), signatures must match registration, and any required medallion signature guarantee must be obtained. If the certificate is in the wrong name, it must be transferred through the transfer agent before it can be delivered as good delivery. The firm also reminds the customer that partial deliveries are generally not acceptable unless agreed to, and the certificate must be in acceptable denominations and free of restrictions that would prevent transfer. The customer plans to mail a certificate to the firm and asks whether the firm can accept it if it is unsigned, has a missing stock power, or is endorsed to a different person. The representative notes that improper endorsement or missing transfer documents can cause a "fail to deliver," delaying settlement and potentially creating additional charges. Based on this trade, the customer wants to know the standard settlement cycle for the stock purchase so they can ensure funds are available by the deadline.
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