Series 7 Quiz: Identify Account Restriction Scenarios

What this quiz covers

This quiz focuses on Identify Account Restriction Scenarios, 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. The account must be immediately liquidated and the proceeds sent to the court.
2. All open orders must be canceled and the account frozen pending instructions from a court-appointed guardian. (correct answer)
3. The registered representative is granted limited power of attorney to manage the account.
4. The account may continue to operate normally, but all trades must be approved by a principal.

Question 2

1. Continue processing wires to avoid tipping off the customer
2. Share SAR intentions with the customer to obtain cooperation
3. Restrict transactions and escalate for AML review under BSA obligations (correct answer)
4. Ignore AML questions if the customer has no prior disciplinary history

Question 3

1. Permit all wires if each is under $100,000 and no one transaction appears unusual
2. Allow activity because the customer is non-U.S. and AML rules do not apply
3. Restrict transfers and initiate enhanced due diligence and AML escalation, updating beneficial ownership and source of funds (correct answer)
4. Restrict only purchases of penny stocks while allowing all cash movements

Question 4

1. Close the account immediately without internal review because money orders are prohibited
2. Accept deposits because each is under $10,000 and therefore cannot be suspicious
3. Allow deposits if the customer provides a verbal explanation to the registered representative
4. Restrict suspicious deposits and escalate for AML investigation, refreshing KYC and monitoring for structuring behavior (correct answer)

Question 5

1. Approve the options strategy because the customer requested it and accepts the risk
2. Execute the strategy as unsolicited without any further review
3. Lower the customer's margin requirement to help them maintain the strategy
4. Refrain from recommending or approving unsuitable strategies and document efforts to update KYC and objectives (correct answer)

Question 6

1. Allow activity if the customer provides a handwritten note stating funds are legitimate
2. Continue processing because the customer has no prior complaints and is polite
3. Restrict transfers and escalate to AML compliance for enhanced due diligence and possible SAR consideration (correct answer)
4. Restrict only mutual fund purchases while permitting all wires and withdrawals

Question 7

1. Continue recommending higher-risk products because the customer reports a higher net worth
2. Limit recommendations and document refusal, escalating to compliance and updating KYC as required (correct answer)
3. Change the customer's risk tolerance internally to aggressive to match the new net worth
4. Transfer the account to an online-only platform to avoid suitability obligations

Question 8

1. Allow new purchases to average down and reduce the likelihood of future calls
2. Keep the account open because house maintenance requirements are not enforceable
3. Waive the calls if the customer's positions are in blue-chip stocks
4. Restrict or close the account after repeated unmet margin calls and firm risk exposure, consistent with margin rules and firm policy (correct answer)

Question 9

1. Open the account and request documents only if deposits exceed $25,000
2. Permit trading but block withdrawals until documents arrive
3. Accept a handwritten address note because the customer is a U.S. resident
4. Restrict or refuse account opening until required CIP documentation is obtained (correct answer)

Question 10

1. Allow disbursements if the customer signs a statement that the activity is lawful
2. Allow withdrawals because the funds arrived by wire and therefore are already verified
3. Restrict disbursements and escalate for AML review, documenting KYC updates and considering a SAR (correct answer)
4. Ignore the pattern because prepaid cards are not considered monetary instruments

Question 11

1. Close the account immediately and notify all third parties that the activity is suspicious
2. Allow withdrawals because ATM activity is routine and not subject to AML monitoring
3. Allow activity if the customer keeps each withdrawal under $10,000
4. Restrict disbursements and escalate for AML review, updating KYC and investigating source of funds and third-party involvement (correct answer)

Question 12

1. Open the account if the customer agrees to a higher commission schedule
2. Open the account using the closest matching name and correct it after the first trade settles
3. Open the account if the customer makes an initial deposit by ACH from any bank
4. Restrict account opening and transactions until identity discrepancies are resolved and verification is completed per CIP (correct answer)

Question 13

1. Restrict only equity sales while permitting all cash transfers to avoid customer complaints
2. Allow activity because wires are traceable and therefore cannot indicate money laundering
3. Allow outgoing wires if incoming wires exceed $50,000 to demonstrate capacity
4. Restrict wire activity and escalate for AML review, including KYC refresh, monitoring, and potential SAR filing (correct answer)

Question 14

1. Ignore the requests because checks are less risky than wires
2. Issue the checks because the customer has sufficient settled funds
3. Allow disbursements if the customer agrees to keep a minimum $5,000 balance
4. Restrict disbursements and escalate for AML review, updating KYC and documenting red flags for potential SAR filing (correct answer)

Question 15

1. Restrict only equity trading while allowing all cash movements to continue
2. Allow wires because the incoming funds cleared and are therefore not suspicious
3. Allow wires if each recipient is outside the U.S. and amounts are split evenly
4. Restrict outgoing wires and escalate for AML review, including source-of-funds verification and potential SAR consideration (correct answer)

Question 16

1. Approve the leveraged ETF purchases because they are exchange-traded and therefore always suitable
2. Limit recommendations and document refusal, escalating to compliance and reassessing suitability with current information (correct answer)
3. Change the account objective to speculation to match the requested product
4. Execute the trades and note that joint accounts are exempt from suitability updates

Question 17

1. The account will be immediately liquidated by the firm.
2. The investor must deposit $3,000 to continue any trading.
3. The account will be restricted to closing transactions only until the minimum equity is restored.
4. The investor will receive a day trading margin call and will be restricted from day trading until it is met. (correct answer)

Question 18

1. The absence of a corporate resolution authorizing the opening of a margin account. (correct answer)
2. The corporation's status as a C-Corporation rather than an S-Corporation.
3. The CEO is not listed as the chairman of the board in the articles of incorporation.
4. The articles of incorporation do not explicitly prohibit margin trading.

Question 19

1. The custodian retains full trading authority for an additional 90 days.
2. The custodian's trading authority is terminated. (correct answer)
3. The custodian may only place orders to liquidate positions.
4. The custodian and the beneficiary now have joint trading authority.

Question 20

1. Execute the trade and obtain the signed statement within 15 days.
2. Refuse to execute the transaction until the signed suitability statement is received. (correct answer)
3. Execute the trade but flag the account for supervisory review.
4. Obtain verbal confirmation from the customer and note it in the trade records.