Series 7 Opening Accounts Practice Questions
Opening Accounts makes up 4 of every 50 questions on a Tigertest Series 7 practice test. Here are 10 of the 16 questions on it, each with the answer and the reason.
Updated by the Tigertest team. Based on FINRA's Series 7 content outline. Original questions; 50 per test, weighted like the real 125-question exam, 72% to pass.
1. Under the customer identification program, which item must a firm obtain before opening an account for an individual?
- A.Investment objective
- B.Date of birth
- C.Annual income
- D.Employer's name
Answer: B. The CIP rule requires name, date of birth, residential address and an identification number. Income, employment and objectives are gathered for suitability under FINRA rules, not CIP.
2. A new retail customer declines to name a trusted contact person when opening a cash account. The firm should:
- A.List the rep as the trusted contact
- B.Allow only unsolicited trades
- C.Refuse to open the account
- D.Open the account and note the request
Answer: D. FINRA Rule 4512 requires only a reasonable effort to obtain a trusted contact. A customer may decline and the account can still be opened; a rep or other associated person may not serve as the trusted contact.
3. Two spouses open a joint account and want the survivor to receive the whole account at death. They should choose:
- A.Joint tenants with right of survivorship
- B.A community property account
- C.Tenants in common with equal ownership shares
- D.A custodial account under UTMA
Answer: A. In JTWROS each owner has an undivided interest, and the survivor takes the deceased owner's share. In tenants in common the deceased's share goes to the estate.
4. Two brothers own an account as tenants in common, 70% and 30%. The 30% owner dies. His share goes to:
- A.The 70% owner's heirs
- B.A court-named custodian
- C.His estate
- D.The surviving brother
Answer: C. Tenants in common owners hold separate interests that pass through each owner's estate. Only JTWROS sends the share straight to the survivor.
5. In a UTMA account for a minor, who is the owner of the securities for tax purposes?
- A.The parent who gave the gift
- B.The firm holding the account
- C.The minor
- D.The custodian
Answer: C. Assets in a custodial account belong to the minor and are reported under the minor's Social Security number. The custodian manages them but cannot use them for personal benefit.
6. Which document is required to open a discretionary account?
- A.Written trading authorization
- B.A signed margin agreement
- C.A signed loan consent form
- D.A notarized copy of the customer's will
Answer: A. Discretion over the asset, the action or the amount requires the customer's prior written authorization and principal acceptance. A margin agreement is needed only for margin.
7. On Monday morning a customer tells a rep to buy 500 shares of a named stock, leaving only price and timing to the rep. With no other written instruction, this authority lasts until:
- A.Thirty days have passed
- B.The end of that week
- C.The order is filled, however long
- D.The close of that trading day
Answer: D. Time and price discretion needs no written authorization when the customer sets the security, action and amount, but under FINRA Rule 3260 it is limited to the day it is given unless the customer specifies otherwise in a signed, dated writing.
8. An employee of another FINRA member firm wants to open an account at your firm. Under Rule 3210, the employee must first:
- A.Deposit at least $25,000
- B.Obtain written consent from the employer
- C.Get approval from FINRA
- D.Open the new account as a discretionary account
Answer: B. Rule 3210 requires prior written consent from the employing member before an associated person opens an account at another firm. The employer may ask for duplicate statements.
9. Which agreement must a customer sign before a firm will extend credit in a margin account?
- A.The trusted contact form
- B.The credit agreement
- C.The loan consent
- D.The options agreement
Answer: B. The credit agreement explains how interest is charged. The hypothecation agreement lets the firm pledge the securities, while the loan consent, allowing the firm to lend them, is optional.
10. A principal approves a new options account on March 3. The options disclosure document had to reach the customer no later than:
- A.April 2
- B.March 10
- C.March 18
- D.March 3
Answer: D. The ODD must be delivered at or before approval of the account for options trading. The 15-day window (March 18) applies to returning the signed options agreement.
Practice all 16 opening accounts questions, and the rest of the 200-question bank, in the free Series 7 training sets. Questions you miss come back until you have mastered them.
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