Series 7 Quiz: Identify Required Account Documents
20 questions · exam conditions
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Identify Required Account DocumentsQuestion 1 of 20

A client grants his son a durable power of attorney over his brokerage account. This authorization is unique because it:

must be renewed annually by the client.
remains in effect even if the client becomes legally incapacitated.
only allows the son to make unsolicited trades.
automatically terminates if the account value drops by 25% or more.
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Series 7 Quiz

Series 7 Quiz: Identify Required Account Documents

Practice Identify Required Account Documents in Series 7 with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Identify Required Account Documents, 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.

All questions

Question 1

A client grants his son a durable power of attorney over his brokerage account. This authorization is unique because it:

  1. must be renewed annually by the client.
  2. remains in effect even if the client becomes legally incapacitated. (correct answer)
  3. only allows the son to make unsolicited trades.
  4. automatically terminates if the account value drops by 25% or more.
Explanation: A key feature of a durable power of attorney is that it survives the legal incapacitation or disability of the grantor. A non-durable power of attorney would terminate upon the grantor's incapacitation.

Question 2

A court has appointed a guardian to manage the financial affairs of an individual who has been declared legally incompetent. To open a brokerage account for this individual, the firm must obtain:

  1. a power of attorney from the incompetent individual.
  2. a certified copy of the court order appointing the guardian. (correct answer)
  3. a signed statement from the individual's next of kin.
  4. the individual's most recent tax return.
Explanation: When an individual is declared legally incompetent, they can no longer grant a power of attorney. A court appoints a guardian to manage their affairs. The brokerage firm must obtain a certified copy of this court appointment to verify the guardian's legal authority to act on behalf of the incompetent individual (the ward).

Question 3

Which of the following is necessary for a corporate account setup to permit trading by a non-officer employee?

  1. A certificate of deposit pledged as collateral
  2. A customer's passport and driver's license only
  3. A Regulation T extension request filed with the Fed
  4. A corporate resolution or written authorization naming that employee (correct answer)
Explanation: This question tests Series 7 candidates' understanding of required account documentation and authorizations necessary for opening various account types. Identifying the correct documents and authorizations is crucial for compliance with regulatory standards and proper account management. In the specific scenario presented, understanding the role of documents like corporate resolutions for non-officer trading is essential. The correct answer is based on standard regulatory requirements for account types, illustrating compliance with FINRA and SEC regulations. A common misconception is choosing an incorrect or irrelevant document type, which can lead to compliance issues. To help candidates, emphasize the importance of familiarizing with account-specific documentation and maintaining up-to-date knowledge of regulatory changes. Practice identifying key documents and understanding their purpose in account management.

Question 4

A registered representative is opening a cash account for a domestic corporation. Which of the following documents is essential for authorizing specific individuals to trade on the corporation's behalf?

  1. The articles of incorporation
  2. A certified copy of the corporate resolution (correct answer)
  3. The corporation's most recent annual report
  4. A list of all shareholders holding 5% or more of the company's stock
Explanation: To open a corporate account, the firm must obtain a certified copy of the corporate resolution. This document, issued by the board of directors, specifies which officers are authorized to enter orders and act on behalf of the corporation for the account.

Question 5

A client wishes to grant her registered representative discretionary authority over her account. Which of the following must occur before the representative can place the first discretionary trade?

  1. The client must provide verbal consent to a principal of the firm.
  2. The firm must receive a written power of attorney from the client. (correct answer)
  3. The first trade must be pre-approved by the client via email.
  4. The representative must complete an updated suitability form for the client.
Explanation: FINRA rules require that no discretionary transaction can be executed unless the customer has given prior written authorization (e.g., a power of attorney) to the representative, and the account has been accepted as discretionary by the firm.

Question 6

A registered representative places a trade in a discretionary account. According to FINRA rules, what is the supervisory requirement for this trade?

  1. It must be approved by a principal prior to execution.
  2. It must be reviewed and approved by a principal promptly after execution. (correct answer)
  3. It must be verbally confirmed with the client by the end of the day.
  4. It requires no special supervisory review beyond that of a non-discretionary trade.
Explanation: Each discretionary order must be identified as such at the time of entry, and a principal must review and approve all discretionary trades, typically by the end of the trading day. Prior approval is not required.

Question 7

A customer wishes to open a numbered account to maintain a degree of privacy. Under FINRA's Know Your Customer (KYC) rule, the brokerage firm must:

  1. refuse to open the account as it violates anti-money laundering regulations.
  2. obtain a written statement from the customer attesting to ownership of the account. (correct answer)
  3. waive the Customer Identification Program (CIP) requirements for this type of account.
  4. require a higher minimum deposit than for a standard account.
Explanation: Firms are permitted to open numbered accounts. However, they are still required to identify the customer and must obtain a signed written statement from the client attesting to the ownership of the account. All standard KYC and CIP requirements apply; the number or symbol is simply used on statements and confirmations.

Question 8

An elderly client's daughter contacts the registered representative with instructions to sell a security to pay for her father's medical expenses. She states that her father is ill and has given her verbal permission. The representative's firm does not have a power of attorney on file. The representative should:

  1. execute the trade as instructed and have the daughter sign the trade ticket.
  2. inform the daughter that a written power of attorney is required before they can accept her instructions. (correct answer)
  3. place the trade and then immediately send a power of attorney form to the client for signature.
  4. contact the client directly in the hospital to confirm the verbal instruction.
Explanation: A registered representative cannot accept trading instructions from a third party, including family members, without a written power of attorney on file for the account. The representative must explain that proper legal authorization is required before any action can be taken.

Question 9

A client calls her representative and says, 'Please buy 100 shares of ABC for me sometime today if you think the price is good.' For the representative to accept this order, which of the following is required?

  1. A full power of attorney
  2. A limited power of attorney
  3. A verbal confirmation from a principal
  4. No special authorization beyond the new account form (correct answer)
Explanation: This is a 'not-held' order. The client has specified the asset (ABC), the action (buy), and the amount (100 shares). The discretion is limited to time and/or price of execution for that day only. Not-held orders do not require written discretionary authority and can be accepted on a standard account.

Question 10

An established client calls their registered representative and says, "I'm going to be unreachable for the next week, but I'd like you to use about $$$20,000 from my money market fund to buy a promising technology stock if an opportunity arises." Which of the following is required before the representative can act on this instruction?

  1. A signed and approved limited power of attorney authorizing the representative to make trades.
  2. A signed discretionary authorization from the client and prior approval of the account for discretionary status by a principal. (correct answer)
  3. Verbal confirmation from the client on a recorded line, followed by written confirmation within 15 days of the first trade.
  4. An amended new account form designating the account as "Trading-Authorized," signed by both the client and the representative.
Explanation: When a client gives you instructions that involve choosing specific securities or timing trades, you're dealing with discretionary authority. The key question is whether the representative has the power to make investment decisions on the client's behalf. In this scenario, the client is asking the representative to select "a promising technology stock" and decide when to buy it. Even though the client specified an approximate dollar amount and asset class, the representative must still choose which specific security to purchase and determine the timing. This constitutes discretionary trading because the representative will be making the "what, when, and how much" decisions. For any discretionary trading, you need two things: a signed discretionary authorization from the client AND prior approval of the account for discretionary status by a principal. Both requirements must be in place before any discretionary trades can occur. This makes answer B correct. Answer A is incorrect because a "limited power of attorney" is too vague and doesn't specifically address the discretionary trading requirements under securities regulations. Answer C is wrong because verbal authorization with written follow-up isn't sufficient for discretionary authority – you need the proper documentation upfront, not after the fact. Answer D is incorrect because there's no such thing as a "Trading-Authorized" designation on account forms in securities regulations. Remember: Any time a client asks you to choose specific securities or timing (beyond their explicit instructions), you're in discretionary territory. Always look for both client authorization AND principal approval before any discretionary trading can begin.

Question 11

The Chief Financial Officer of a corporation wants to open a new account to write covered calls against a large stock position held by the company. What documentation must the registered representative obtain from the corporation before the account can be approved for this strategy?

  1. A certified copy of the corporate charter and a signed margin agreement from an authorized officer.
  2. A corporate resolution authorizing the account and a signed options agreement from the CFO.
  3. A certified copy of the corporate charter and a corporate resolution specifying which individuals are authorized to trade. (correct answer)
  4. An affidavit of corporate domicile and a list of all members of the board of directors.
Explanation: When a corporation wants to open an options trading account, you're dealing with entity account documentation requirements, which are more complex than individual accounts. The key principle is that corporations need proper legal authorization and clear identification of who can act on behalf of the entity. For corporate options accounts, broker-dealers must obtain two critical documents. First, a certified copy of the corporate charter establishes the corporation's legal existence and basic powers. Second, a corporate resolution is essential because it specifically identifies which individuals have authority to trade options on behalf of the corporation. This resolution protects both the firm and the corporation by clearly defining who can make trading decisions. Answer C is correct because it includes both required documents: the certified copy of the corporate charter and the corporate resolution specifying authorized traders. Answer A is wrong because while the corporate charter is needed, a margin agreement alone isn't sufficient documentation for options trading authority. Answer B fails because although corporate resolutions and options agreements are important, the corporate charter is the foundational document that must be obtained first. Answer D is incorrect because an affidavit of domicile and board member list don't establish trading authority or the corporation's legal powers. Remember this pattern: corporate accounts always require both proof of legal existence (charter/articles of incorporation) and proof of trading authority (corporate resolution). The resolution must specifically name authorized individuals, not just reference titles like "CFO," since corporate officers can change.

Question 12

An elderly client's adult son, who is named as an agent in a durable power of attorney document on file with the firm, calls a registered representative. He requests that $$$10,000 be wired from his father's account to his own personal bank account. To proceed with this transaction, the power of attorney on file must be:

  1. A limited power of attorney, and the son must provide a notarized letter of instruction for the withdrawal.
  2. A full power of attorney, but such a transfer to the agent's personal account is strictly prohibited by FINRA.
  3. A limited power of attorney, which is sufficient for third-party fund transfers but not for trading decisions.
  4. A full power of attorney, and the firm must perform heightened scrutiny for potential conflicts of interest before processing. (correct answer)
Explanation: When you encounter questions about power of attorney in securities transactions, focus on the distinction between limited and full powers, plus the compliance requirements for self-dealing transactions. A durable power of attorney that allows an agent to wire funds from the principal's account to the agent's personal account requires full power of attorney. This broad authority is necessary because the transaction involves a potential conflict of interest - the agent is directing funds to benefit themselves rather than making routine account management decisions. However, FINRA doesn't prohibit such transfers outright when proper authorization exists. Instead, firms must implement heightened scrutiny procedures to detect potential elder abuse or unauthorized self-dealing. This includes additional documentation, supervisory review, and compliance checks before processing the wire transfer. Answer A is incorrect because limited power of attorney typically covers only specific, routine transactions like trading securities, not broad financial decisions involving fund transfers to third parties. Answer B wrongly states that FINRA strictly prohibits these transfers - while heavily regulated, they're not automatically forbidden with proper full power of attorney. Answer C reverses the authority levels, incorrectly suggesting limited power of attorney suffices for fund transfers but not trading. Study tip: Remember that power of attorney questions often test two key points: the scope of authority needed (limited vs. full) and the compliance obligations that follow. Full power of attorney enables broader transactions but triggers stricter oversight requirements, especially when the agent stands to benefit personally from the transaction.

Question 13

A new client wishes to open a brokerage account in the name of her revocable living trust. She is both the grantor and the sole trustee. To properly open the account and understand the scope of the trustee's powers, the firm is required to obtain:

  1. A copy of the trust agreement or a certificate of trust outlining the trustee's investment powers. (correct answer)
  2. A court order appointing the client as trustee and a copy of her personal will.
  3. A signed affidavit from the client stating she is the sole beneficiary and trustee of the trust.
  4. The Social Security numbers of all named remainder beneficiaries in addition to the trustee's information.
Explanation: When a trust wants to open a brokerage account, the firm must verify the trustee's authority and understand what investment powers they possess. This is a fundamental compliance requirement to protect both the firm and the trust beneficiaries. The correct answer is A because brokerage firms are required to obtain documentation that proves the trustee's identity and spells out their specific investment powers. A trust agreement is the foundational document that establishes the trust, names the trustee, and defines their authority. A certificate of trust serves as an abbreviated version that provides the same essential information without revealing sensitive details about beneficiaries or distributions. Either document gives the firm the legal verification it needs to open the account and understand any investment restrictions. Answer B is incorrect because court orders are only required for court-appointed trustees (like in estate administration), not for trustees of revocable living trusts. Personal wills are separate documents that don't govern trust operations. Answer C is wrong because a simple affidavit from the client isn't sufficient legal documentation—firms need official trust documents, not self-declarations. Answer D is incorrect because while the trustee's Social Security number is needed, remainder beneficiaries' information isn't required to open the account, and this information would typically be confidential. Remember this pattern: Trust accounts always require official documentation of the trustee's powers, not just their word. Look for questions that test whether you understand the difference between self-declaration and proper legal documentation in account opening procedures.

Question 14

Four physicians form a general partnership and wish to open a brokerage account in the partnership's name. The partners have agreed that only two of the four will be authorized to enter trades. Which document is essential for the firm to obtain to verify this specific trading authorization?

  1. A corporate resolution signed by all four partners.
  2. A new account form signed by all four partners that lists the two authorized individuals.
  3. A copy of the partnership agreement detailing which partners have trading authority. (correct answer)
  4. A limited power of attorney signed by the two non-trading partners in favor of the two trading partners.
Explanation: When brokerage firms open accounts for partnerships, they must verify who has authority to make trading decisions. This is crucial for compliance and protecting all parties involved. The partnership agreement is the foundational legal document that governs all aspects of the partnership, including who can make investment decisions on behalf of the entity. Since this document was created when the partnership was formed and signed by all partners, it serves as the definitive source for trading authorization. Any limitations on trading authority would be spelled out in this agreement, making it the most reliable verification tool for the brokerage firm. Looking at the wrong answers: Choice A is incorrect because partnerships don't use corporate resolutions—that's a corporate governance tool. Choice B might seem logical, but a new account form is an application document, not a legal verification of existing authority. The firm needs to see the underlying legal authorization, not just the partners' word on an application. Choice D creates an unnecessary extra step—if the partnership agreement already grants trading authority to specific partners, there's no need for additional powers of attorney between the partners themselves. Study tip: Remember that brokerage firms always want to see the source legal document that establishes authority, not secondary applications or unnecessary additional paperwork. For partnerships, that source document is always the partnership agreement. When you see partnership account questions, think "partnership agreement first" for authority verification.

Question 15

A married couple maintains a Joint Tenants with Rights of Survivorship (JTWROS) account at a brokerage firm. One of the spouses passes away. To remove the deceased spouse's name from the account and have it re-titled in the surviving spouse's name, the firm requires the survivor to provide:

  1. A copy of the deceased's will and an affidavit of domicile.
  2. A certified copy of the death certificate and an inheritance tax waiver, if applicable. (correct answer)
  3. A court order from probate court authorizing the transfer of assets.
  4. A new account form for an individual account and a letter signed by the executor of the estate.
Explanation: When you encounter questions about Joint Tenants with Rights of Survivorship (JTWROS) accounts, remember that this ownership structure automatically transfers the deceased's interest to the surviving owner(s) without going through probate. This is the key distinction that determines what documentation is needed. For a JTWROS account, the surviving spouse automatically inherits full ownership of the account upon the other spouse's death. Since this transfer happens by operation of law rather than through probate, the brokerage firm needs only basic proof that the death occurred and verification that any required taxes have been addressed. A certified copy of the death certificate provides legal proof of death, while an inheritance tax waiver (required in some states) confirms that tax obligations have been met or waived. Choice A is incorrect because a will and affidavit of domicile are used for assets that pass through probate, but JTWROS assets bypass probate entirely. Choice C is wrong for the same reason—no court order from probate court is needed since the account doesn't go through probate. Choice D incorrectly suggests involving an executor, but executors only handle probate assets, and JTWROS accounts aren't part of the probate estate. Remember this pattern: JTWROS accounts require minimal documentation because they transfer automatically. Look for death certificate plus any applicable tax documentation. Avoid answers that mention probate court, executors, or wills when dealing with joint tenancy with rights of survivorship—these ownership structures are designed to avoid the probate process entirely.

Question 16

A registered representative employed by Firm A wants to open a personal securities account with your firm, Firm B. Under FINRA rules, before executing the first transaction for this individual, what is Firm B's primary obligation regarding account documentation and approval?

  1. Firm B must notify Firm A in writing of its intention to open the account and obtain Firm A's prior written consent. (correct answer)
  2. Firm B must require the representative to close all accounts at Firm A before opening the new account.
  3. Firm B must obtain a list of all securities held by the representative and pre-approve all intended trades for 90 days.
  4. Firm B must inform FINRA's Department of Member Regulation about the opening of the outside account.
Explanation: When a registered representative from one firm wants to open a personal account at another firm, FINRA Rule 3210 creates specific notification and approval requirements to prevent conflicts of interest and ensure proper supervision. Answer A is correct because FINRA Rule 3210 requires that before executing any transactions, the receiving firm (Firm B) must provide written notice to the representative's employing firm (Firm A) and obtain prior written consent. This ensures Firm A can properly supervise their employee's trading activities and identify potential conflicts of interest or insider trading concerns. Answer B is incorrect because representatives are not required to close existing accounts at their employing firm. In fact, many firms encourage or require employees to maintain accounts with their own firm for certain types of investments. Answer C is wrong because while the receiving firm must send duplicate confirmations and statements to the employing firm if requested, there's no requirement to obtain a complete holdings list or pre-approve trades for any specific time period. The ongoing supervision remains with the employing firm. Answer D is incorrect because FINRA's Department of Member Regulation doesn't need to be notified about individual account openings. The notification requirement is strictly between the two member firms involved. Study tip: Remember the acronym "NCA" - Notify the employing firm, obtain Consent, then Allow trading. This sequence is mandatory under Rule 3210 whenever a registered person opens an outside securities account. Questions about inter-firm account relationships often test whether you know the proper notification chain.

Question 17

A client opens a Uniform Transfers to Minors Act (UTMA) account for his 10-year-old nephew, naming himself as the custodian. Which piece of information is most critical for the firm to obtain for tax reporting purposes on this account?

  1. The Social Security number of the minor. (correct answer)
  2. The investment objectives of the custodian.
  3. A signed statement from the minor's parents authorizing the account.
  4. A certified copy of the minor's birth certificate to verify age.
Explanation: When you encounter UTMA account questions, focus on the fundamental tax principle: the account belongs to the minor, not the custodian. This means all tax reporting must be tied to the minor's identity. The IRS requires accurate tax reporting for all investment accounts, and UTMA accounts are no exception. Since the assets legally belong to the minor beneficiary (even though the custodian manages them), all dividends, interest, and capital gains must be reported under the minor's Social Security number. Without this critical piece of information, the brokerage firm cannot fulfill its tax reporting obligations, including issuing proper 1099 forms. Answer A is correct because the minor's Social Security number is absolutely essential for tax compliance. Looking at the wrong answers: Answer B is incorrect because while investment objectives matter for suitability, they're not required for tax reporting purposes. The IRS doesn't need to know investment goals to process tax documents. Answer C is wrong because parental authorization, while often good practice, isn't legally required for UTMA accounts since any adult can serve as custodian, and it's not needed for tax reporting. Answer D is incorrect because while age verification might be useful for account management, a certified birth certificate isn't required for tax reporting purposes. Study tip: Remember that UTMA/UGMA accounts always belong to the minor for tax purposes, regardless of who contributes money or serves as custodian. When you see custodial account questions, immediately ask yourself "What does the IRS need?" The answer usually centers on the minor's identification.

Question 18

A client's account is approved for options trading on May 1st. The client's first trade, an opening purchase of 10 calls, is executed on May 2nd. As of May 20th, the firm has not yet received the client's signed options agreement. Which of the following actions is the firm now permitted to take in this account?

  1. Accept new opening purchase or sale orders.
  2. Accept orders to exercise the existing call options.
  3. Accept only closing sale transactions. (correct answer)
  4. Accept a deposit of stock to cover potential writing strategies.
Explanation: Options trading regulations require clients to return their signed options agreement within 15 days of account approval. When this deadline passes without the signed agreement, the firm must restrict the account to closing transactions only. In this scenario, the account was approved May 1st, so the 15-day deadline expired on May 16th. Since it's now May 20th and the firm still hasn't received the signed agreement, they can only accept orders that reduce the client's existing options positions. Choice C is correct because closing sale transactions are specifically permitted during this restriction period. The client owns 10 call options from their opening purchase, so they can sell these calls to close their position and exit the trade. Choice A is wrong because new opening transactions (whether purchases or sales) are prohibited once the 15-day period expires without the signed agreement. Choice B is incorrect because exercising options would actually increase the client's commitment by converting the calls into a stock position, which regulators treat similarly to opening new positions. Choice D is wrong because depositing stock to facilitate writing strategies would be preparing for additional options activity, which isn't allowed under these restrictions. Remember this key pattern for Series 7 options questions: missing options agreements always lead to "closing only" restrictions after 15 days. The firm must limit activity to transactions that reduce existing exposure, not increase it. Watch for questions that test whether you understand the difference between truly closing a position versus taking actions that create new obligations.

Question 19

When opening a Uniform Transfers to Minors Act (UTMA) account, the new account form must include the Social Security number of the:

  1. custodian only.
  2. minor only. (correct answer)
  3. custodian and the minor.
  4. parent or legal guardian.
Explanation: In an UTMA or UGMA account, the account is for the benefit of the minor, and all tax consequences are the minor's responsibility. Therefore, the minor's Social Security number must be used for account registration and tax reporting purposes.

Question 20

An investment club that is structured as a partnership wants to open a brokerage account. In addition to a new account form, the firm would most likely require which document?

  1. A copy of each member's personal tax return.
  2. A corporate charter from the state.
  3. A copy of the club's partnership agreement. (correct answer)
  4. An affidavit of domicile for the club's president.
Explanation: For an investment club organized as a partnership, the firm must obtain a copy of the partnership agreement. This document identifies the partners who are authorized to transact business on behalf of the club.