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FINRA Series 7 General Securities Representative Exam

2. Opens Accounts and Evaluates Customer Profiles / Account types: practice questions

Our FINRA Series 7 bank has 15 questions on this topic. Here are 5 of them with answers; the full mock exam draws from every topic, like the real one.

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Question 1

In a fee-based account, which practice raises the most concern about reverse churning?

  1. Paying a wrap fee while making very few trades
  2. Paying a lower fee for a larger account
  3. Paying fees quarterly in advance
  4. Paying commissions on frequent trades
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A. Paying a wrap fee while making very few trades — Reverse churning places a low-activity customer in a fee-based account where the fee exceeds what commissions would cost; Reg BI care obligation addresses account-type recommendations.

Question 2

To give a representative discretion to choose the security and quantity for a customer's trades, the firm needs:

  1. A power of attorney signed only by the representative
  2. Approval from FINRA before the first trade
  3. Verbal authorization from the customer each day
  4. Prior written authorization from the customer
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D. Prior written authorization from the customer — Rule 3260(b): discretionary power requires prior written authorization by the customer and acceptance in writing by the firm; each discretionary order must be approved promptly by a principal.

Question 3

Which statement about an UGMA or UTMA custodial account is accurate?

  1. It may have two custodians if both are the minor's parents
  2. It has one custodian and one minor, and the minor's Social Security number is used
  3. It uses the custodian's Social Security number for tax reporting
  4. It may be opened as a margin account with the custodian's consent
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B. It has one custodian and one minor, and the minor's Social Security number is used — Custodial accounts have one custodian and one minor beneficiary; the minor owns the assets and the minor's taxpayer ID is used; margin is not permitted.

Question 4

An associated person of one FINRA member wants to open a brokerage account at another member. Under Rule 3210, the person must first obtain:

  1. Approval from FINRA's registration department
  2. A signed letter from the executing firm's compliance officer
  3. Prior written consent from the employing member
  4. Nothing, if the account will hold only mutual funds
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C. Prior written consent from the employing member — Rule 3210(a) requires prior written consent of the employer member; the executing member must send duplicate statements and confirms on the employer's request.

Question 5

For an options account, the options disclosure document must be delivered to the customer:

  1. At the end of the first calendar quarter
  2. At or before the time the account is approved for options trading
  3. Only on request after the first trade
  4. Within 15 days after the first options trade
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B. At or before the time the account is approved for options trading — Rule 2360(b)(11) requires delivery of the ODD at or before account approval for options trading.

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