SIE Customer Accounts & Prohibited Activities Practice Questions
Customer Accounts & Prohibited Activities makes up 8 of every 50 questions on a Tigertest SIE practice test. Here are 10 of the 32 questions on it, each with the answer and the reason.
Updated by the Tigertest team. Based on FINRA's Securities Industry Essentials content outline. Original questions; 50 per test, weighted like the real 75-question exam, 70% to pass.
1. Joint tenants with right of survivorship means that when one owner dies:
- A.The firm becomes the custodian
- B.The survivor owns the whole account
- C.The deceased's share goes to the estate
- D.The account must be liquidated
Answer: B. In JTWROS the deceased owner's interest passes to the surviving owner. In tenants in common it goes to the deceased's estate.
2. In a tenants in common account, a deceased owner's share passes to:
- A.The broker-dealer
- B.The state
- C.The surviving owners in equal shares
- D.The deceased owner's estate
Answer: D. Tenants in common own separate, undivided interests, and each owner's share passes through that owner's estate.
3. A custodial account under UTMA or UGMA may have:
- A.One custodian and one minor
- B.Joint minors as owners
- C.Two custodians and one minor
- D.One custodian and several minors
Answer: A. Each custodial account has exactly one custodian and one minor. The assets belong to the minor and the minor's Social Security number is used.
4. Whose taxpayer ID is used on an UTMA account?
- A.The parent's
- B.The firm's
- C.The minor's
- D.The custodian's
Answer: C. The minor owns the assets, so the minor's Social Security number is used and the minor is responsible for the taxes.
5. Before a representative may exercise discretion in a customer account, the firm needs:
- A.Approval from FINRA
- B.A margin agreement
- C.The customer's written authority
- D.A recorded verbal OK from the customer
Answer: C. Discretion over the security, amount or buy/sell requires prior written power of attorney, and a principal must accept the account.
6. A customer tells a rep to buy 100 shares of ABC today at a good price. This is:
- A.Time and price discretion
- B.Unauthorized discretionary trading
- C.A limit order
- D.Full discretion
Answer: A. Choosing only the time and price for an order the customer specified is not discretion requiring written authority, though it is limited to that business day.
7. Opening a corporate account usually requires:
- A.A partnership agreement
- B.A trust agreement
- C.A power of attorney
- D.A corporate resolution
Answer: D. A corporate resolution names who may trade for the corporation. A corporate charter is also needed if the account will use margin.
8. A contribution to a traditional IRA may be:
- A.Made only after age 59 1/2
- B.Deductible, depending on income
- C.Made only by the account owner's employer
- D.Withdrawn tax-free at any age
Answer: B. Traditional IRA contributions may be deductible depending on income and workplace plan coverage. Withdrawals are taxed as ordinary income.
9. Qualified withdrawals from a Roth IRA are:
- A.Taxed only on contributions
- B.Tax-free
- C.Taxed as ordinary income
- D.Taxed as capital gains
Answer: B. Roth contributions are made after tax. Qualified withdrawals, generally after age 59 1/2 and five years, come out free of federal income tax.
10. Early withdrawals from a traditional IRA before age 59 1/2 generally incur:
- A.No tax or penalty
- B.A 50% penalty
- C.Only the 10% penalty, no income tax
- D.A 10% penalty plus income tax
Answer: D. Most early withdrawals are taxed as ordinary income and also carry a 10% additional tax, unless an exception applies.
Practice all 32 customer accounts & prohibited activities questions, and the rest of the 200-question bank, in the free SIE training sets. Questions you miss come back until you have mastered them.
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