Series 7 Quiz: Apply Supervisory Approval Requirements

What this quiz covers

This quiz focuses on Apply Supervisory Approval Requirements, giving you a quick way to practice the rules, question types, and explanations that matter most for Series 7.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

Question 1

1. Send the account information to the customer for verification within 60 days.
2. Approve the account in writing before or at the time of the first transaction. (correct answer)
3. Ensure the client has at least a 3-year history of investing in fixed income.
4. Obtain a signed letter from the client acknowledging the risks of interest rate changes.

Question 2

1. No special approval if the customer has prior investing experience and a funded balance
2. Principal approval of the margin agreement and new account form before margin privileges begin (correct answer)
3. Approval by any registered representative, with margin documents filed after the first loan occurs
4. CEO approval of all margin accounts, regardless of firm size, with no additional disclosures

Question 3

1. Conduct reviews per WSPs, document findings, and escalate red flags for supervisory action (correct answer)
2. Perform reviews only when a customer complains; periodic reviews are optional for established accounts
3. Rely solely on automated alerts and keep no review records to minimize retention obligations
4. Require each review to be approved by the firm's board of directors before any updates are made

Question 4

1. Ensure a principal reviews and approves account documents and required customer identification before use (correct answer)
2. Permit account opening if the representative completes the form; supervision occurs only after first trade
3. Rely on the clearing firm's approval as a substitute for the introducing firm's supervisory review
4. Approve accounts verbally to speed onboarding, then document approvals when time permits

Question 5

1. Confirm delivery is documented per firm procedures and approve account opening when requirements are met (correct answer)
2. Guarantee the customer reads every disclosure in full before any documentation can be accepted
3. Deliver disclosures personally to every customer and prohibit electronic delivery under any circumstance
4. Ignore disclosure delivery records because disclosures are marketing materials, not compliance documents

Question 6

1. The representative must immediately liquidate all growth-oriented securities in the account.
2. The change only needs to be noted in the representative's personal client file.
3. The updated account profile documenting the change must be reviewed and accepted by a principal. (correct answer)
4. A new account form must be completed, and the old account must be closed.

Question 7

1. Firm A must obtain prior written consent from Firm B. (correct answer)
2. Firm A must restrict the account to non-discretionary trades only.
3. Firm A is prohibited from opening the account for an employee of another member firm.
4. Firm A must require a higher minimum deposit than for a standard retail account.

Question 8

1. The Articles of Incorporation.
2. A certified copy of the Corporate Resolution. (correct answer)
3. The corporation's most recent Form 10-K filing.
4. A list of all officers and directors of the corporation.

Question 9

1. The principal's approval must be documented via a physically signed new account form stored at the branch.
2. The principal must send a signed letter of approval directly to the new customer within one week.
3. The approval must be evidenced in writing or electronically on the customer's account record as part of the firm's books and records. (correct answer)
4. A verbal approval from the principal is sufficient, provided it is documented in the representative's notes.

Question 10

1. Margin agreement and loan consent form.
2. Day trading risk disclosure statement. (correct answer)
3. Prospectus for a diversified index ETF.
4. Form detailing the tax implications of short-term capital gains.

Question 11

1. The client has a net worth exceeding the accredited investor threshold.
2. The fee-based structure is appropriate for the client's expected trading activity and investment style. (correct answer)
3. The client has previously held a commission-based account to compare costs.
4. The account is projected to generate more revenue than a commission-based account.

Question 12

1. Before the initial transaction can be executed.
2. Promptly after the account is opened. (correct answer)
3. Within 30 days of the account opening.
4. At the end of the business day on which the first trade settles.

Question 13

1. Approve the account but restrict it to solicited trades of U.S. Treasury securities only.
2. Return the form to the representative and state that the account cannot be opened without this information.
3. Approve the account for unsolicited trades only, with a signed letter from the client acknowledging the firm cannot determine suitability. (correct answer)
4. Approve the account if the representative can provide a reasonable estimate of the client's financial status.

Question 14

1. The credit agreement and hypothecation agreement. (correct answer)
2. The loan consent form and the options agreement.
3. The risk disclosure statement and the account transfer form.
4. The corporate resolution and the arbitration agreement.

Question 15

1. The client must provide verbal confirmation of the first trade to the principal.
2. A principal must review the client's authorization and approve the account in writing as discretionary. (correct answer)
3. The representative must have at least five years of industry experience to handle discretionary accounts.
4. The account must be reviewed by the firm's compliance department on a weekly basis.

Question 16

1. Immediately close the account and return any funds received from the customer.
2. Instruct the registered representative to obtain a copy of a valid government-issued photo ID from the customer. (correct answer)
3. Approve the account but place a 90-day restriction on all withdrawals.
4. File a Suspicious Activity Report (SAR) with FinCEN immediately.

Question 17

1. Allow the order to execute if the market hits the limit price.
2. Contact the deceased customer's executor to ask for instructions regarding the order.
3. Immediately cancel all open orders and mark the account as 'Deceased'. (correct answer)
4. Request the death certificate before taking any action on the account.

Question 18

1. Instruct the representative to hold the certificate in a locked file until the customer provides instructions.
2. Ensure the certificate is immediately recorded and forwarded to the firm's operations department for safekeeping and processing. (correct answer)
3. Return the certificate to the customer via certified mail, as the firm cannot accept physical certificates.
4. Direct the representative to have the customer sign a stock power so the shares can be sold immediately.

Question 19

1. The fees charged are the lowest available for the client.
2. The number of securities in the account provides adequate diversification.
3. The series of recommended transactions, even if suitable in isolation, is not excessive for the customer's account. (correct answer)
4. The client has the financial acumen to understand the quantitative aspects of the portfolio.

Question 20

1. Personally interview every customer and guarantee investment performance before approving the account
2. Review the new account form for completeness and approve opening consistent with firm procedures (correct answer)
3. Delegate all review to the registered representative if the account is cash-only and fully funded
4. Approve the account only after the first 2 trades, using confirmations as the primary documentation