FINRA SIE — Securities Industry Essentials — All Questions

What happens to a standard stop order once the market reaches the stop price?

• a.It becomes a market order and is executed at the next available price✓
• b.It is held until the end of the trading day and then executed at the close
• c.It becomes a limit order that may be filled only at the stop price
• d.It is automatically canceled unless the investor renews it

A plain stop order is a trigger: once the stock trades at or through the stop price, the order becomes a market order and executes at the best available price. This guarantees execution but not a specific price, so it may fill worse than the stop in a fast market.

An investment bank purchases an entire new issue of stock from a corporation and resells it to the public. In this primary-market role, the investment bank is acting as a:

• a.Registrar
• b.Custodian
• c.Transfer agent
• d.Underwriter✓

An underwriter helps an issuer bring new securities to market, often buying the issue and reselling it to investors in the primary market. Transfer agents and registrars handle recordkeeping, while custodians safeguard assets.

An investor who is 'long' 200 shares of a stock has which market position and outlook?

• a.Owns the shares but profits only if the price falls
• b.Owns the shares and profits if the price rises (bullish)✓
• c.Has no economic exposure to the stock
• d.Has borrowed and sold the shares and profits if the price falls (bearish)

Being long means owning the security; the investor benefits when the price rises and is considered bullish. Being short means having sold borrowed shares, profiting when the price falls (bearish).

Which statement about the risk of a short stock position is correct?

• a.There is no risk once the shares are borrowed, because the lender absorbs any price rise
• b.The maximum loss equals the total dividends the short seller must pay to the stock lender
• c.The maximum loss is limited to the amount of margin the investor deposited when selling short
• d.The potential loss is theoretically unlimited because the stock price can rise without limit✓

A short seller must eventually buy back the shares. Because a stock's price can rise indefinitely, the potential loss on a short sale is theoretically unlimited, unlike a long position, where the most an investor can lose is the amount invested.Securities Exchange Act of 1934

An investor buys 100 shares of common stock regular way on a Thursday, with no intervening holidays. On what day does the trade settle?

• a.Thursday (same day)
• b.The following Monday
• c.Saturday
• d.Friday✓

Regular-way equity settlement is T+1, so a Thursday trade settles on Friday, the next business day. Weekends and holidays are excluded when counting settlement days.

Under the Securities Exchange Act of 1934, what is the key difference between a 'broker' and a 'dealer'?

• a.A broker may transact only in the primary market, while a dealer may transact only in the secondary market
• b.A broker effects transactions for the accounts of others; a dealer buys and sells for its own account✓
• c.A broker may only sell bonds to customers, while a dealer may only sell equity securities
• d.A broker need not register with the SEC, while a dealer must register as a principal firm

The 1934 Act defines a broker as a person effecting securities transactions for the account of others (agency), while a dealer buys and sells securities for its own account (principal). Many firms are 'broker-dealers' because they act in both capacities at different times.Securities Exchange Act of 1934

Which dividend-related date is the day the corporation actually distributes the dividend to eligible shareholders?

• a.The declaration date
• b.The record date
• c.The payable date✓
• d.The ex-dividend date

The payable date is when the company actually pays the dividend to shareholders who were on record as of the record date. It comes after the declaration, ex-dividend, and record dates in the dividend timeline.

Which of the following is a primary risk of using a limit order instead of a market order?

• a.The order guarantees a fill, with the price set by the market
• b.The order must be canceled at the end of every trading day
• c.The order may never be executed if the limit price is not reached✓
• d.The order executes one tick worse than the prevailing quote

A limit order controls the execution price but does not guarantee a fill; if the market never reaches the limit, the order goes unexecuted. A market order, by contrast, guarantees execution but not a specific price.

An investor buys 100 shares of a public company from another investor through an exchange. This transaction takes place in the:

• a.Primary market
• b.Third market only
• c.Fourth market only
• d.Secondary market✓

Trading of already-issued securities among investors occurs in the secondary market, where the issuer receives no proceeds. The primary market involves the original sale of new securities by the issuer to raise capital.

A customer's trade confirmation shows a commission charge rather than a markup. This indicates the firm executed the trade in what capacity?

• a.As a dealer making a market
• b.As an underwriter in a new issue
• c.As an agent for the customer✓
• d.As a principal from inventory

A commission is charged only when a firm acts as an agent (broker), arranging a trade between the customer and a third party. When a firm acts as a principal (dealer) trading from its own inventory, it charges a markup or markdown instead.Securities Exchange Act of 1934

A stock is trading on a 'when-issued' (WI) basis. What does this indicate?

• a.The security has been delisted from all exchanges and now trades only by private appointment
• b.The security may only be sold short and cannot be purchased until it settles
• c.The security pays no dividends because its issuer has suspended them indefinitely
• d.The security has been authorized but not yet issued, so trades are conditional on issuance✓

When-issued trading occurs for securities that have been authorized but not yet formally issued, such as shares from a stock split or a new municipal issue. Trades are made on a conditional basis and settle once the securities are actually issued.

On the NYSE, which participant is assigned to a particular stock to maintain a fair and orderly market and provide liquidity when natural buyers or sellers are absent?

• a.A designated market maker (specialist)✓
• b.The lead underwriter managing the syndicate
• c.The registrar that audits the share count
• d.The transfer agent that reissues certificates

A designated market maker (historically called a specialist) is responsible for maintaining a fair and orderly market in assigned securities, quoting bids and offers and committing capital when needed. Transfer agents and registrars perform recordkeeping functions, not trading.Securities Exchange Act of 1934

A stock trades at $100. An investor places a sell stop order at $92 and a separate sell limit order at $110. Which describes the intended strategy?

• a.The $92 stop protects gains on the upside while the $110 limit protects against downside loss
• b.Neither order may be entered while the other is open, since they conflict
• c.The stop limits downside loss at around $92 while the limit takes profit at $110 or higher✓
• d.Both orders execute immediately at the $100 market price, doubling the sale

The sell stop at $92 (below the market) triggers a sale to limit losses if the stock falls, while the sell limit at $110 (above the market) sells to capture profit if the stock rises. Together they bracket the position with downside protection and an upside target.

The NSCC and the DTC are both subsidiaries of which parent organization?

• a.The Depository Trust & Clearing Corporation (DTCC)✓
• b.The Securities and Exchange Commission (SEC)
• c.The New York Stock Exchange (NYSE Group)
• d.The Board of Governors of the Federal Reserve System

The DTCC is the holding company that owns both the NSCC (which clears and nets trades) and the DTC (which holds securities in book-entry form and settles transfers). Together they provide the core post-trade clearing and settlement infrastructure for U.S. securities.

A dealer quotes a stock at $20.00 bid and $20.10 ask. If the dealer buys from one customer and sells to another at these quotes, what is the dealer's gross profit per share?

• a.$40.10, the sum of the bid and ask
• b.$0.10, the spread between the bid and ask✓
• c.$20.10, the full ask price
• d.$0.00, because dealers do not profit from quotes

The dealer buys at the $20.00 bid and sells at the $20.10 ask, earning the $0.10 spread per share as compensation for providing liquidity. The spread, not a separate commission, is how a principal dealer is typically paid.

In equity trading, a standard 'round lot' of common stock is generally how many shares?

• a.1,000 shares
• b.10 shares
• c.1 share
• d.100 shares✓

A round lot for most common stocks is 100 shares, the standard trading unit. An order for fewer than 100 shares is an odd lot, and an order such as 250 shares is a mixed lot (a round lot plus an odd lot).

A stock is trading at $48. An investor believes that if it breaks above $52 it will continue climbing, and wants to buy automatically at that point. Which order accomplishes this?

• a.A sell stop order at $52
• b.A buy limit order at $52
• c.A buy stop order at $52✓
• d.A sell limit order at $52

A buy stop order placed above the current market ($52, above $48) triggers a purchase once the stock trades at or through $52, letting the investor enter on upside momentum. A buy limit at $52 would instead try to buy at $52 or lower and would fill immediately below the market.

Which self-regulatory organization is chiefly responsible for regulating broker-dealers and the over-the-counter securities market in the United States?

• a.The Board of Governors of the Federal Reserve System
• b.The Securities and Exchange Commission (SEC)
• c.The Depository Trust & Clearing Corporation
• d.The Financial Industry Regulatory Authority (FINRA)✓

FINRA is the self-regulatory organization that oversees broker-dealers and much of the OTC market, writing conduct rules and enforcing them under SEC oversight. The SEC is the federal government regulator, not an SRO, and the Federal Reserve handles monetary policy and banking.Securities Exchange Act of 1934

How does a stock dividend differ from a cash dividend for a shareholder?

• a.A stock dividend can only be paid by bond issuers to their registered bondholders of record on the payable date
• b.A stock dividend reduces the number of shares owned and raises the cost basis per share
• c.A stock dividend pays additional shares and lowers the cost basis per share, while a cash dividend pays money✓
• d.A stock dividend is taxed as ordinary income in the year received, while a cash dividend is tax-free

A stock dividend distributes additional shares rather than cash; the shareholder owns more shares, and the cost basis per share is reduced so total basis stays roughly the same. A cash dividend distributes money to shareholders.

A dealer quotes stock XYZ at $15.20 - $15.35. At what price would a customer's market order to sell be executed?

• a.$15.20, the bid price✓
• b.$15.275, the midpoint
• c.$15.35, the ask price
• d.$30.55, the sum of the quotes

A customer sells at the dealer's bid, which is the lower quote of $15.20, and buys at the dealer's ask of $15.35. The dealer captures the $0.15 spread as compensation.

Which statement about a forward stock split is TRUE?

• a.It is paid in cash to shareholders out of the company's retained earnings
• b.It increases the total market value of an investor's holding immediately on the ex-split date
• c.It reduces the number of shares an investor owns while raising the price per share
• d.It increases the number of shares outstanding and proportionally lowers the price per share✓

A forward split increases shares outstanding and proportionally reduces the price per share, so the total market value of a holding is unchanged immediately after the split. It is not a cash payment, and it increases, not decreases, the number of shares held.

An investor enters a limit order and specifies that it should remain in effect until it executes or is canceled, even across multiple trading days. This is known as what type of order?

• a.A good-till-canceled (GTC) order✓
• b.A day order, expiring at the close
• c.A fill-or-kill (FOK) order
• d.An immediate-or-cancel (IOC) order

A good-till-canceled (GTC) order stays active across multiple trading sessions until it is executed or the investor cancels it. A day order, by contrast, expires at the end of the trading day if it is not filled.

Before executing a short sale, what must a broker-dealer generally do with respect to the shares being sold?

• a.Obtain the issuer's written consent to the short sale
• b.Wait for an uptick in the stock before entering the order
• c.Mark the order 'long' once the customer agrees to cover
• d.Locate shares that can be borrowed for delivery✓

Under Regulation SHO Rule 203(b)(1), a firm may not accept or effect a short sale unless it has borrowed the security, has a bona fide arrangement to borrow it, or has reasonable grounds to believe it can be borrowed so that it can be delivered when due, and it must document that 'locate'. The issuer's consent is not part of the rule. There is no general uptick requirement for short sales; the alternative uptick rule (Rule 201) applies only to a covered stock that has fallen 10% or more from the prior close. Because the seller does not own the shares, the order must be marked 'short', not 'long', whatever the customer plans to do later.17 CFR 242.203(b)(1) (Regulation SHO)

During a company's initial public offering, an investor pays $18 per share for newly issued stock. Who receives the $18 per share?

• a.The investors who owned the shares before the offering
• b.The transfer agent that registers the new shareholders
• c.The national exchange that lists the shares for trading
• d.The issuing company (less underwriting compensation)✓

In a primary-market transaction such as an IPO, the proceeds go to the issuing company, which is raising capital, minus the underwriters' compensation. In secondary-market trades, by contrast, the proceeds flow to the selling investor, not the issuer.

The trading of exchange-listed securities in the over-the-counter market (for example, by institutions through OTC market makers) is often referred to as the:

• a.Gray market
• b.Primary market
• c.Fourth market
• d.Third market✓

The third market refers to trading of exchange-listed securities in the OTC market. The fourth market refers to direct institution-to-institution trading without a broker-dealer, often through electronic networks.

An investor buys 100 shares at $60 (total cost $6,000). The stock later does a 3-for-1 forward split. What are the investor's new share count and adjusted cost basis per share?

• a.300 shares at $20 per share✓
• b.100 shares at $20 per share
• c.100 shares at $180 per share
• d.33 shares at $60 per share

A 3-for-1 split triples the shares to 300 and divides the price and per-share basis by three, from $60 to $20. Total cost basis remains $6,000 (300 shares x $20), so the split does not change the investor's total economic value.

A single firm sometimes arranges trades between customers and third parties for a commission, and at other times trades from its own inventory and charges a markup. This firm is best described as a:

• a.Broker only, since a firm may not also trade as a dealer
• b.Transfer agent, which records changes of ownership for the issuer
• c.Dealer only, since charging any commission would be prohibited
• d.Broker-dealer acting in both agency and principal capacities✓

A firm that acts as an agent (broker) on some trades and as a principal (dealer) on others is a broker-dealer. On any given trade it must disclose the capacity in which it acted, since that determines whether it charges a commission or a markup/markdown.Securities Exchange Act of 1934

In a fast-moving, volatile market, an investor is most concerned about certainty of execution and less concerned about the exact price. Which order best serves that priority?

• a.A market order, because it prioritizes immediate execution✓
• b.A limit order, because it locks in the execution price
• c.A good-till-canceled limit order that rests for weeks
• d.A stop-limit order, because it caps the fill price

When immediate, certain execution matters most, a market order is appropriate because it fills promptly at the best available price. Limit and stop-limit orders prioritize price and risk not executing at all if the market moves away from the limit.

Under SEC rules, when must a broker-dealer send a customer a written confirmation of a securities transaction?

• a.Only at the end of the calendar year, in an annual summary of all trades
• b.At or before completion of the transaction (generally by settlement)✓
• c.Only when the customer specifically asks the firm for a written record
• d.Within 30 calendar days after the trade date under SEC Rule 10b-10

SEC Rule 10b-10 requires a broker-dealer to send a trade confirmation at or before completion of the transaction, which is generally the settlement date. The confirmation discloses key details such as price, capacity (agency or principal), and any commission or markup.Securities Exchange Act of 1934

When handling a customer order, a broker-dealer's obligation to seek the most favorable terms reasonably available under the circumstances is known as its duty of:

• a.Diversification
• b.Best execution✓
• c.Disclosure
• d.Suitability

Best execution requires a firm to use reasonable diligence to obtain the most favorable price and terms for a customer order given current market conditions. Suitability concerns whether a recommendation fits the customer, which is a separate obligation.Securities Exchange Act of 1934

A customer sells stock to a firm that buys the shares into its own inventory. The firm lowers the price it pays below the current market to compensate itself. What is this charge called?

• a.A sales load
• b.A management fee
• c.A commission
• d.A markdown✓

When a firm acting as a principal buys securities from a customer for its own account, it pays slightly less than the prevailing market price; that difference is a markdown. A markup is the mirror image charged when the firm sells to a customer as principal, and a commission applies only to agency trades.

After a forward stock split, what happens to an individual shareholder's proportional ownership of the company?

• a.It becomes zero until the transfer agent re-registers the shares in the holder's name
• b.It increases because the shareholder ends up holding a larger number of shares
• c.It stays the same because every shareholder's share count changes proportionally✓
• d.It decreases because the total number of shares outstanding rises after the split

A forward split increases every shareholder's share count in the same proportion, so each investor's percentage ownership of the company is unchanged. The split changes the number and price of shares, not the relative stake each holder controls.

A trade is executed for 'cash' settlement on a Monday morning. When must delivery of the securities and payment occur?

• a.Wednesday (T+2), the equity default
• b.Tuesday (T+1), as cash trades require
• c.The same Monday (trade date)✓
• d.The following Monday, five days later

A cash settlement requires delivery of securities and payment on the trade date itself, the same day the trade is executed. This is faster than regular-way settlement, which is T+1 for equities.

An investor buys stock ON the ex-dividend date. With respect to the upcoming dividend, what is the result?

• a.The buyer receives the dividend because the purchase came first
• b.The company cancels the dividend for that quarter
• c.The buyer is not entitled to the dividend; the seller keeps it✓
• d.The buyer and seller split the dividend equally

Buying on or after the ex-dividend date means the trade will not settle in time for the buyer to be a holder of record, so the buyer is not entitled to the dividend. The seller, who owned the shares before the ex-date, keeps the upcoming dividend.

What is the main benefit of the multilateral netting performed by a central clearing corporation such as the NSCC?

• a.It eliminates the need for members to settle trades with the clearing house
• b.It reduces the number and value of securities and payments that must actually be exchanged✓
• c.It guarantees that every stock in the netted trades will rise in market value
• d.It replaces the SEC as the regulator of the national securities markets

Multilateral netting offsets each member's many buy and sell obligations against one another so that only the net amounts of securities and cash change hands. This dramatically reduces settlement volume, cost, and counterparty risk across the market.

Why does it matter to a customer whether a firm executed a trade as an agent or as a principal?

• a.Only principal trades are reported to the tape and to regulators, so an agency trade leaves no audit trail at all
• b.Principal trades are exempt from SEC Rule 10b-10, so no trade confirmation must be sent to the customer
• c.Agency trades cost less because FINRA Rule 2121 caps commissions at 5% while markups are uncapped
• d.It determines whether the customer pays a commission or a markup/markdown, both of which must be disclosed✓

The firm's capacity determines the form of its compensation: a commission for agency trades or a markup/markdown for principal trades. Under SEC Rule 10b-10, the capacity and related charges must be disclosed on the trade confirmation so the customer understands the cost.Securities Exchange Act of 1934

A brokerage account is registered as joint tenants with right of survivorship (JTWROS). One of the two owners dies. What happens to the account assets?

• a.The assets are split 50/50 between the survivor and the deceased's estate
• b.The account is frozen until a probate court divides the assets
• c.The deceased owner's share passes to their estate under their will
• d.The entire account passes automatically to the surviving joint owner✓

In a JTWROS account, the right of survivorship means the surviving owner automatically receives the deceased owner's interest, bypassing probate. This is the defining feature that distinguishes JTWROS from tenants in common.

Two business partners hold a joint account as tenants in common (TIC), with a 70%/30% ownership split. If the 70% owner dies, how are that owner's assets handled?

• a.The 70% interest passes to the deceased partner's estate, not to the surviving partner✓
• b.The surviving partner automatically inherits the entire 70% interest by survivorship
• c.The account is automatically re-titled 50/50 between the estate and survivor
• d.The 70% interest is forfeited to the broker-dealer holding the account

Tenants in common has no right of survivorship. Each owner's fractional interest passes to their own estate upon death. This makes TIC common for unrelated parties who want their share to go to their heirs rather than the co-owner.

In an UGMA or UTMA custodial account, who has the legal authority to make investment decisions while the beneficiary is still a minor?

• a.The custodian named on the account✓
• b.Both parents jointly, regardless of who is custodian
• c.The minor beneficiary
• d.The donor, even if someone else is custodian

The custodian manages the account for the benefit of the minor until the minor reaches the age of majority set by state law. There can be only one custodian and one minor per UGMA/UTMA account, and the assets are an irrevocable gift to the minor. The donor gave up control of the gift and has no authority unless he or she is the named custodian. The parents have no joint authority unless one of them is the custodian. The minor lacks the legal capacity to direct the account until reaching the age of majority.Uniform Transfers to Minors Act

When opening a cash account for a corporation, what document does the firm typically require to establish who is authorized to trade?

• a.A copy of the chief executive's personal tax return
• b.The corporation's annual report to shareholders
• c.A corporate resolution naming the authorized individuals✓
• d.A margin agreement signed by every shareholder of record

A corporate resolution (or its equivalent) identifies the officers authorized to act on the account. For a corporate margin account, the firm also needs to verify the corporate charter or bylaws permit margin trading.

A customer wants to open an account for a revocable living trust. What document should the registered representative obtain to determine the trustee's powers?

• a.The trustee's brokerage statements from another firm
• b.The beneficiaries' birth certificates
• c.The trust agreement (or a certification of trust)✓
• d.A power of attorney from each beneficiary

The trust agreement (or a trustee certification summarizing it) establishes who the trustee is and what investment powers they hold. The representative must ensure trades stay within the authority granted by the trust document.

Which statement best describes the tax treatment of a traditional IRA?

• a.There are no taxes at any stage because a traditional IRA is exempt from federal tax
• b.Contributions may be tax-deductible and earnings grow tax-deferred until withdrawal✓
• c.Contributions are made with after-tax dollars and all withdrawals in retirement are tax-free
• d.Contributions are nondeductible in all cases and withdrawals are fully taxable

Traditional IRA contributions may be deductible depending on income and workplace plan coverage, and earnings grow tax-deferred. Withdrawals in retirement are taxed as ordinary income, and required minimum distributions eventually apply.Internal Revenue Code

A qualified distribution from a Roth IRA is generally tax-free if the account has been open at least five years AND the owner meets which condition?

• a.Has withdrawn no contributions during the five-year holding period
• b.Rolls the entire balance into a traditional 401(k) within 60 days
• c.Is at least age 59 1/2 (or meets another qualifying event)✓
• d.Has held the account in a self-directed margin arrangement

Roth IRAs are funded with after-tax dollars, so qualified distributions of earnings are tax-free when the five-year holding period is met and the owner is 59 1/2 or older (or death, disability, or a first-home purchase applies). Contributions can always be withdrawn tax-free.Internal Revenue Code

Which of the following is a defining feature of a traditional 401(k) plan?

• a.It is a plan individuals open directly at any broker, with no employer sponsorship
• b.It is an employer-sponsored plan funded largely by pre-tax employee salary deferrals✓
• c.It may hold only shares of the employer's own stock, bought at a discount
• d.It guarantees a fixed monthly pension based on final salary and years of service

A 401(k) is an employer-sponsored defined-contribution plan. Employees defer part of their salary (traditionally pre-tax), often with an employer match, and the retirement benefit depends on contributions and investment performance rather than a guaranteed formula.

Under the Customer Identification Program (CIP), a firm must collect and verify certain minimum information before opening an account. Which set represents the four required items?

• a.Beneficiary name, spouse's name, occupation, and daytime phone number
• b.Name, date of birth, physical address, and taxpayer identification number✓
• c.Bank account number, credit score, mother's maiden name, and email
• d.Employer name, annual salary, net worth, and investment objective

CIP, mandated by the USA PATRIOT Act, requires firms to obtain a customer's name, date of birth, physical address, and identification number (such as an SSN) and to verify identity. This helps prevent money laundering and terrorist financing.USA PATRIOT Act

FINRA's Know Your Customer rule requires a firm to use reasonable diligence to know the essential facts about every customer. The 'essential facts' are primarily those needed to do what?

• a.Guarantee the customer a profit on every trade the representative recommends
• b.Sell the customer as many of the firm's products as the account can support
• c.Report the customer's spending and balances to the national credit bureaus
• d.Effectively service the account and comply with laws and firm policies✓

Rule 2090 requires knowing the essential facts to effectively service the account, act on any special handling instructions, understand the authority of anyone acting for the customer, and comply with applicable laws and regulations. It works alongside the suitability rule.FINRA Rule 2090

For a typical new cash account for an individual, whose signature is generally NOT required on the new account form itself?

• a.The supervising branch manager where required
• b.The customer opening the account✓
• c.The registered representative who introduced the account
• d.A principal of the firm approving the account

A customer signature is generally not required to open a standard cash account, though it is required for margin accounts and options accounts. The account form must, however, be approved (signed) by a principal, and it records the representative who opened it.

Before a registered representative may exercise discretion in a customer's account, what is generally required?

• a.Only a verbal okay from the customer before each individual order is entered
• b.Written approval from the transfer agent and registrar for the securities involved
• c.A signed margin agreement, regardless of whether the account ever trades on margin
• d.Prior written authorization from the customer and firm acceptance of the account as discretionary✓

Discretionary trading requires prior written authorization (a signed trading authorization or power of attorney) and the firm's written acceptance of the account. Each discretionary order must also be identified as such and the account reviewed frequently to detect churning.FINRA Rule 3260

A customer calls and says: 'Buy 500 shares of XYZ for me today, but you pick the best time and price.' The representative has no written discretionary authority. Is this order permissible?

• a.Yes, and the representative may keep making that time-and-price choice on later days until the customer cancels the order
• b.No, because a principal must approve in writing every order in which the customer leaves the time or the price to the representative
• c.No, because FINRA Rule 3260 treats a time-and-price choice as discretion requiring prior written authority
• d.Yes, because time and price alone are not considered discretionary when the customer specified the security, action, and amount✓

Rule 3260(b) requires prior written authorization for discretion, but Rule 3260(d)(1) excepts discretion as to the price or the time of an order for a definite amount of a specified security. Here the customer chose the security, the action and the quantity, so choosing only the time and price is a not-held order and no written authority is needed. That exception lasts only until the end of the business day, absent a signed and dated written instruction, so it does not carry over to later days. FINRA Rule 3260 does not treat a time-and-price choice as full discretion when the other terms are fixed, and it does not require a principal's written approval for such an order, though the exercise must be shown on the order ticket.FINRA Rule 3260(d)(1)

What is the primary difference between a cash account and a margin account?

• a.A margin account is available only to institutional customers; a cash account is available only to individuals
• b.In a margin account the customer can borrow from the broker-dealer to buy securities; in a cash account full payment is required✓
• c.Only a cash account may earn interest, since Regulation T bars credit balances in margin accounts
• d.A cash account may hold only bonds and cash; a margin account may hold only exchange-listed stock

In a cash account the customer must pay in full for purchases. A margin account lets the customer borrow a portion of the purchase price from the firm, subject to Regulation T and FINRA maintenance requirements, which introduces leverage and additional risk.Regulation T