FINRA Series 7 — All Questions

Regarding required minimum distributions (RMDs), a Roth IRA:

• a.Requires all IRAs to be emptied by age 59 1/2
• b.Is not subject to RMDs during the original owner's lifetime✓
• c.Requires that required minimum distributions begin at age 50 for the original account owner without exception
• d.Begins RMDs as soon as the account is opened

Unlike traditional IRAs, Roth IRAs are not subject to required minimum distributions during the original owner's lifetime, allowing the funds to keep growing tax-free. RMD rules can apply to beneficiaries who inherit a Roth.

Form CRS (the client or customer relationship summary) is:

• a.A federal income tax reporting form that details the retail investor's realized gains, realized losses, and total advisory fees paid for the year
• b.A brief relationship summary disclosing the firm's services, fees, conflicts, and standard of conduct, delivered to retail investors✓
• c.The options disclosure document
• d.A margin agreement

Form CRS is a short relationship summary that broker-dealers and investment advisers must deliver to retail investors, describing services, fees and costs, conflicts of interest, the applicable standard of conduct, and disciplinary history. It complements Regulation Best Interest.

Regulation Best Interest (Reg BI) is built on how many core obligations for broker-dealers?

• a.Four obligations: disclosure, care, conflict of interest, and compliance✓
• b.Three obligations: disclosure, suitability, and supervision
• c.Two obligations: disclosure and care, leaving conflicts to Form CRS
• d.Five obligations: disclosure, care, conflict of interest, compliance, and ongoing account monitoring

Rule 15l-1(a)(2) satisfies the best-interest standard through four component obligations: the disclosure obligation, the care obligation, the conflict-of-interest obligation, and the compliance obligation. It is not a three-part test built from suitability and supervision, it does not leave conflicts to Form CRS, and it has four components rather than five, with no separate ongoing monitoring obligation. Together they require a broker-dealer to act in a retail customer's best interest when making a recommendation.17 CFR 240.15l-1(a)(2)

The suitability obligation to an institutional customer:

• a.Never applies to institutions
• b.Is prohibited
• c.May be met when the institutional customer affirmatively indicates it is exercising independent judgment and is capable of evaluating investment risks✓
• d.Requires exactly the same customer-specific documentation and full investment-profile analysis as an individual retail account in every single case, without any exception

For institutional customers, the customer-specific suitability obligation can be satisfied if the firm reasonably believes the customer is capable of independently evaluating the risks and the customer affirmatively states it is exercising independent judgment. The firm still must have a reasonable basis for believing the recommendation is suitable in general.

To meet the care obligation under Regulation Best Interest, a broker-dealer recommending a security to a retail customer must consider the customer's investment profile, which includes the customer's:

• a.Investment objectives, financial situation, risk tolerance, and time horizon✓
• b.Stated investment objective alone, with nothing else required
• c.Net worth and annual income only, with no need to consider time horizon, liquidity needs, or risk tolerance
• d.The firm's current inventory needs and its goal of reducing unwanted proprietary positions

Under Regulation Best Interest the retail customer investment profile includes, but is not limited to, the customer's age, other investments, financial situation and needs, tax status, investment objectives, investment experience, time horizon, liquidity needs and risk tolerance, and the recommendation must be in the customer's best interest in light of that profile. A single stated objective, or net worth and income alone, leaves out required factors. The firm's own inventory or desire to move proprietary positions is a conflict of interest to be managed and cannot drive the recommendation. (FINRA Rule 2111 suitability does not apply to recommendations covered by Reg BI.)17 CFR 240.15l-1(a)(2)(ii), (b)(2)

Under FINRA Rule 4210(d)(2), which replaced the day trading margin rules effective June 4, 2026, what must a member do when a customer's margin account has an intraday margin deficit after a transaction that reduces the account's intraday margin level?

• a.Require the deficit to be satisfied as promptly as possible✓
• b.Count day trades: four or more in five days needs $25,000
• c.Liquidate every position opened that day by the next close
• d.Freeze the account for 90 days after any single deficit, whatever the customer's history

Rule 4210(d)(2) requires the member to require an intraday margin deficit to be satisfied as promptly as possible (FINRA Regulatory Notice 26-10, effective June 4, 2026; members that need more time may phase in until October 20, 2027). The old test of four day trades in five business days and the $25,000 pattern day trader minimum were eliminated, so a deficit is not tied to a day-trade count. The rule does not require automatic liquidation. The 90-day freeze applies only when a customer makes a practice of failing to satisfy deficits and misses the fifth-business-day deadline, not after any single deficit.FINRA Rule 4210(d)(2); Regulatory Notice 26-10

A short margin account in a stock priced above $5 has a credit balance of $45,000. A maintenance call would be triggered when the short market value rises to approximately:

• a.The credit balance divided by 1.30, about $34,615✓
• b.The credit balance divided by 1.50, or $30,000, the initial short market value
• c.The credit balance divided by 1.25, or $36,000, the long-account 25% rule
• d.The credit balance times 0.70, or $31,500, applying 30% to the credit balance

A short account reaches the 30% maintenance minimum when equity = 30% of short market value, i.e., short market value = credit balance / 1.30 = $45,000 / 1.30 = about $34,615. Dividing by 1.50 gives the initial short market value of $30,000, where equity is still 50% and no call exists. Dividing by 1.25 applies a 25% requirement, the long-account figure. Multiplying the credit balance by 0.70 applies the 30% to the wrong base. Above $34,615, equity falls below 30% and a call is issued.

A long margin account has a market value of $50,000 and a debit balance of $20,000. Under Regulation T at 50%, how much excess equity (the amount that can be credited to SMA) does the account have?

• a.$10,000
• b.$5,000✓
• c.$25,000
• d.$30,000

Equity = $50,000 - $20,000 = $30,000. The Regulation T requirement is 50% x $50,000 = $25,000. Excess equity, which can be credited to the special memorandum account (SMA), = equity - Reg T requirement = $30,000 - $25,000 = $5,000. $30,000 is the equity before subtracting the requirement, $25,000 is the requirement itself, and $10,000 is 50% of the debit balance, which is not part of the calculation.Regulation T, 12 CFR 220.12 (50 percent initial margin)

Under Regulation T and FINRA margin rules, standard listed options with nine months or less to expiration:

• a.Must be paid for in full because such options are not marginable✓
• b.Must be paid in full only when out of the money; in-the-money options may be margined
• c.Require only a 25% deposit, with the broker-dealer lending the balance
• d.May be purchased on 50% margin, the same as the underlying stock

Listed options with nine months or less until expiration are not marginable and must be paid for in full; Regulation T leaves option margin to the self-regulatory rules, and those rules do not allow financing of short-dated long options. Moneyness makes no difference. A 25% deposit and 50% margin are the requirements for other instruments. Only longer-dated options (more than nine months) may be carried on margin.

Under FINRA's intraday margin rule, a customer makes a practice of failing to satisfy intraday margin deficits as promptly as possible and does not satisfy one by the close of business on the fifth business day after it occurs. For how long must the member enforce procedures preventing the customer from creating or increasing a short position or debit balance?

• a.90 calendar days, or until the deficit is satisfied✓
• b.30 calendar days from the day it first occurred
• c.15 business days, the period after which an unsatisfied deficit stops being outstanding
• d.5 business days, the same period as the trigger

Regulatory Notice 26-10 provides that, once a customer who makes a practice of missing deficits fails to satisfy one by the close of business on the fifth business day, the member must enforce procedures preventing the customer from creating or increasing a short position or debit balance for 90 calendar days after that fifth business day, or until the deficit is satisfied. Thirty days is not in the rule. Fifteen business days is the point at which an unsatisfied deficit stops being counted as outstanding, which is a different concept. Five business days is the trigger for the restriction, not its length.FINRA Rule 4210(d)(2); Regulatory Notice 26-10

Under FINRA Rule 2111, the customer-specific suitability obligation owed to an institutional customer:

• a.Never applies, because Rule 2111 exempts every institutional account whatever the customer says about its own judgment
• b.Is met automatically once the account holds at least $50 million in assets, with no statement from the customer needed
• c.May be met when the institutional customer affirmatively indicates it is exercising independent judgment and is capable of evaluating investment risks✓
• d.Requires the same customer-specific investment-profile analysis and documentation as an individual retail account, with no exception

Rule 2111(b) lets a firm fulfil the customer-specific obligation for an institutional account when it has a reasonable basis to believe the customer is capable of evaluating investment risks independently and the customer affirmatively indicates it is exercising independent judgment. The firm must still have a reasonable basis to believe the recommendation is suitable in general. The obligation is not removed for institutions, and the $50 million total-assets figure is part of the definition of an institutional account, not an automatic exemption. Individual retail accounts get fuller profile analysis, and retail recommendations are now governed by Reg BI.FINRA Rule 2111(b)

A customer buys stock in a cash account on Monday, and no holiday falls that week. Under Regulation T's current payment period, by which day must full payment be received?

• a.Tuesday of that week
• b.Thursday of that week✓
• c.Wednesday of that week
• d.Friday of that week

Regulation T defines the payment period as the standard settlement cycle plus two business days. With T+1 settlement that is three business days after the purchase, so Monday's trade is due Thursday. Tuesday is the settlement date, not the payment deadline. Wednesday is only two days out. Friday reflects the old four-day period that applied before the move to T+1.Regulation T, 12 CFR 220.2 and 220.8

What is the purpose of the trusted contact person a firm asks a retail customer to name?

• a.To give that person authority to place trades if the customer is away
• b.To give the firm a contact for suspected exploitation or customer details✓
• c.To make that person responsible for margin calls the customer cannot meet
• d.To let that person receive tax documents for the customer

Under Rule 4512 the firm may contact the trusted contact to address possible financial exploitation and to confirm the customer's contact information, health status, or the identity of a guardian, executor, trustee or attorney-in-fact. The person has no trading authority, no liability for the account, and no right to receive the customer's tax documents.FINRA Rule 4512

A firm reasonably believes a 72-year-old customer is being financially exploited and places a temporary hold on a requested disbursement. Absent any extension, how long can the initial hold last?

• a.30 business days
• b.15 business days✓
• c.10 business days
• d.5 business days

Rule 2165 allows a temporary hold that expires no later than 15 business days after the firm first placed it. The firm may extend it by 10 business days if it reasonably believes exploitation is continuing, and by a further 30 business days if a regulator or court is involved. The other periods are not the initial limit.FINRA Rule 2165

Under FINRA Rule 2165, which customer is a "specified adult"?

• a.A 55-year-old who names a trusted contact and a power of attorney
• b.A 64-year-old customer with no known impairment and a long history
• c.A 62-year-old retiree whose account holds over $1 million in securities
• d.A 45-year-old the firm believes has an impairment and cannot protect himself✓

A specified adult is a natural person age 65 or older, or a person age 18 or older whom the firm reasonably believes has a mental or physical impairment that leaves him unable to protect his own interests. The 62- and 64-year-olds are under 65 with no impairment, and naming a trusted contact or holding a large account does not make a customer a specified adult.FINRA Rule 2165

After a firm opens a new account for a natural person, it must send the customer a copy of the account record within 30 days. After that, how often must the firm furnish the record?

• a.At least once every 12 months
• b.At intervals of up to five years
• c.At least once every 24 months
• d.At intervals no greater than 36 months✓

Rule 17a-3(a)(17) requires the account record to be furnished within 30 days of opening and then at intervals no greater than 36 months. Twelve and twenty-four months are more frequent than required, and five years is longer than the rule permits.SEC Rule 17a-3(a)(17)

A customer sends a registered representative a written complaint alleging an unauthorized trade. What must the representative do?

• a.Report it to FINRA first and tell the firm only afterward
• b.Forward it promptly to a principal or to compliance✓
• c.Try to settle it privately by reimbursing the customer's loss
• d.Hold it until the customer repeats the complaint by phone

Written complaints belong to the firm, which must log them and handle them through a principal. A representative who pays a customer privately violates settlement and recordkeeping rules. Waiting for a repeat call delays a complaint the firm is obliged to record, and bypassing the firm to report to FINRA skips the required supervisory review.FINRA Rules 4513 and 3110

Under FINRA Rule 2231, what is the minimum frequency for sending account statements to a customer whose account holds positions or had activity?

• a.At least once every six months
• b.At least once every calendar year
• c.Only when the customer requests one
• d.At least once every calendar quarter✓

Rule 2231 requires a general securities member to send a statement at least once every calendar quarter to customers whose accounts held securities positions, money balances or had activity. Annual or semiannual statements fall short of that minimum, and a statement may not be conditioned on a customer request.FINRA Rule 2231

Under FINRA Rule 2360, the options disclosure document must be given to a customer no later than:

• a.Ten days after the first opening transaction in an option
• b.When the account is approved for options trading✓
• c.After the customer's first closing transaction in an option
• d.At the customer's first exercise or assignment of a contract

The Options Disclosure Document must be furnished at or before the time the account is approved for options trading. Waiting until a closing trade, ten days after an opening trade, or an exercise would let the customer trade before receiving the risk disclosure.FINRA Rule 2360

A customer's account is approved for options trading on March 3. Under FINRA Rule 2360, by when must the signed options agreement be returned?

• a.Within 15 days after approval✓
• b.Before the first opening trade
• c.Within 5 business days after approval
• d.Within 30 days after approval

Rule 2360 gives the customer 15 days after account approval to return the signed options agreement, so trading may begin before the signature is in hand. It is not a precondition to the first trade, and the 30-day and five-business-day periods are not the rule's deadline.FINRA Rule 2360

A customer is approved to write uncovered options. When must the firm furnish the special written statement for uncovered option writers?

• a.When the customer is first assigned on a short option
• b.Fifteen days after the customer returns the options agreement
• c.When the customer first buys an option to close a position
• d.At or before the first uncovered short option write✓

Rule 2360 requires the special statement on uncovered writing at or prior to the customer's initial writing of an uncovered short option. Giving it after an assignment, after a closing purchase, or after a 15-day wait would let the customer take on the risk before the warning.FINRA Rule 2360

A firm opens a margin account for a non-institutional customer. When must it provide the margin disclosure statement?

• a.At or before opening, then at least each calendar year✓
• b.Within 15 days after opening, then once every three years
• c.At opening only, with no later delivery while the account is open
• d.Before the first margin loan, and again after each margin call

Rule 2264 requires the statement prior to or at the time the margin account is opened and then at least once a calendar year. The statement is not limited to a single delivery, is not delayed until after opening, and is not tied to margin loans or margin calls.FINRA Rule 2264

A registered representative asks a customer, who is the representative's brother, for a personal loan. Under FINRA Rule 3240, the loan is:

• a.Permitted only after FINRA gives prior written approval
• b.Permitted only if it is secured by securities in his account
• c.Permitted if the firm's procedures allow loans from family members✓
• d.Prohibited, since borrowing from any customer is barred

Rule 3240 permits borrowing from a customer who is an immediate family member if the firm's written procedures allow it; no pre-approval is needed for that category. The rule does not bar every customer loan, it does not require FINRA approval, and it does not require the loan to be secured by the account's securities.FINRA Rule 3240

A registered representative proposes to take 25% of any profits in an unrelated customer's account, share no losses, and contribute no capital. Under FINRA Rule 2150, this is:

• a.Permitted if the customer and the firm both authorize it in writing
• b.Permitted because the account is a discretionary account
• c.Permitted if profits are taken only after a 12-month holding period
• d.Prohibited, since sharing must be proportional to his contribution✓

Rule 2150 allows sharing in an account's profits or losses only with prior written authorization from the member and the customer, and only in direct proportion to the person's financial contribution. A representative who contributes nothing may not share, even with both authorizations. A holding period or discretionary status does not change that result.FINRA Rule 2150

What should a firm obtain from the executor before opening an account for a deceased customer's estate?

• a.Certified letters testamentary or letters of administration✓
• b.A power of attorney that the decedent signed before death
• c.A trading authorization signed by the decedent's heirs
• d.A copy of the will that no court has certified

A firm needs proof from the probate court that the executor or administrator has authority, normally certified letters testamentary or letters of administration. A power of attorney ends at death, heirs have no authority until the estate is settled, and an uncertified will does not show that the executor has been appointed.Estate and fiduciary accounts

A firm learns that the sole owner of an individual account has died. What should it do first?

• a.Liquidate all positions and mail a check to the spouse
• b.Cancel open orders and wait for the estate documents✓
• c.Keep executing orders placed by the account's representative
• d.Move the assets at once to the person named in the will

On notice of death the firm freezes the account and cancels open orders, then waits for court-certified documents showing who may act for the estate. Continuing to trade, moving assets to a named heir, or liquidating for a spouse all act without that authority.Account administration

In 2026 a 40-year-old with $90,000 of earned income puts $5,000 in a Roth IRA and $4,000 in a traditional IRA. The 2026 combined limit is $7,500. What is the consequence of the $1,500 excess?

• a.No penalty, since the limit applies to each IRA separately
• b.A one-time 10% penalty, after which the excess is deductible
• c.A 6% excise tax for each year it remains uncorrected✓
• d.Ordinary income tax on the excess only, with no further penalty

The annual limit applies to all of a person's traditional and Roth IRAs combined. An excess contribution is subject to a 6% excise tax each year it remains uncorrected, unless it is withdrawn by the return due date. The 10% figure is the early-withdrawal penalty, which is a different charge, and the limit is not applied separately to each account.Internal Revenue Code Section 4973; IRS limits for 2026

A 62-year-old opens a first Roth IRA and takes out earnings three years later. What is the tax treatment?

• a.The earnings are taxable and also subject to the 10% penalty
• b.The earnings are taxable, with no 10% penalty applied✓
• c.The earnings are tax-free, since the owner is over 59 1/2
• d.The earnings are tax-free but the 10% penalty still applies

A qualified Roth distribution needs a five-year holding period and an event such as age 59 1/2. With only three years the withdrawal of earnings is not qualified, so the earnings are taxable. The 10% penalty applies only to early withdrawals before 59 1/2 and this owner is 62. The earnings are not tax-free, so the other options are wrong.Internal Revenue Code Section 408A

A 38-year-old takes $10,000 from a traditional IRA to buy a first home. How is the withdrawal treated?

• a.Taxable income that is also subject to the 10% penalty
• b.Tax-free, but subject to the 10% early-withdrawal penalty
• c.Taxable income, but exempt from the 10% penalty✓
• d.Tax-free and penalty-free, as with a Roth IRA distribution

Up to $10,000 over a lifetime may be taken from an IRA for a qualified first-time home purchase without the 10% additional tax, but a traditional IRA withdrawal is still ordinary income because the account is funded with pre-tax dollars. The other options either exempt it from tax or apply the penalty that the exception removes.Internal Revenue Code Section 72(t)

A firm's house maintenance requirement is 30%, above the FINRA minimum of 25%. A customer's long margin account has a market value of $50,000 and a debit balance of $36,000. What is the result?

• a.A call of $2,500
• b.A call of $11,000 to meet the 50% Regulation T level
• c.No call, since equity exceeds the 25% FINRA minimum
• d.A house maintenance call of $1,000✓

Equity is $50,000 - $36,000 = $14,000. FINRA's 25% minimum is $12,500, which is met, but the firm's 30% requirement is $15,000, so the account is $1,000 short. A firm may set house requirements above FINRA's minimum. Regulation T applies to initial purchases, not to maintenance, so $11,000 is not required. A $2,500 call has no basis in these figures.FINRA Rule 4210 (maintenance margin)

A customer with low risk tolerance plans to use $40,000 as a home down payment in 18 months. Which recommendation is most suitable?

• a.An emerging-markets stock fund
• b.A small-cap growth mutual fund
• c.Long-term zero-coupon bonds
• d.Short-term Treasury bills✓

With a short horizon and low risk tolerance the customer needs capital preservation and liquidity, which short-term Treasury bills provide. Small-cap and emerging-markets funds can lose value over 18 months, and long-term zero-coupon bonds carry large interest rate risk that could cut the price before the money is needed.Suitability (customer investment profile)

An investor in a dividend reinvestment plan receives $300 of dividends, which the plan uses to buy more shares. How is the $300 treated for tax purposes?

• a.Taxable income that also increases the cost basis✓
• b.Taxable only when the new shares are eventually sold
• c.Taxable as a capital gain in the year it is received
• d.Taxable income that leaves the cost basis unchanged

Reinvested dividends are taxed in the year paid just as if they had been received in cash. Because tax has been paid on the $300, it is added to the basis of the shares, which prevents double taxation at sale. Deferral until sale is not allowed, the dividend is not a capital gain, and leaving the basis unchanged would tax the same dollars twice.Dividend reinvestment plans

An investor bought 100 XYZ at $20 in January and 100 XYZ at $30 in June, then sells 100 shares at $35 without identifying which lot. Using the default first-in, first-out method, what is the gain?

• a.$1,000
• b.$1,500✓
• c.$3,500
• d.$500

FIFO treats the earliest shares as sold first, so the cost is $20 and the gain is ($35 - $20) x 100 = $1,500. A gain of $500 would be the later lot, which is last-in, first-out. A gain of $1,000 uses the $25 average cost. A figure of $3,500 is the sale proceeds, not the gain.Cost basis methods

An investor invests $600 each month for three months, when the share price is $10, $12 and $15. What is the investor's average cost per share?

• a.$12.00✓
• b.$12.33
• c.$13.00
• d.$11.00

The $600 buys 60, 50 and 40 shares, a total of 150 shares for $1,800, so the average cost is $12.00. A figure of $12.33 is the simple average of the three prices, which ignores that more shares were bought at lower prices. The other figures have no basis in the purchases.Dollar-cost averaging

An investor sells XYZ at a loss on March 10. Which later or earlier transaction would trigger the wash sale rule and disallow the loss?

• a.Buying XYZ shares on February 5
• b.Buying XYZ shares on February 12✓
• c.Buying XYZ shares on April 11
• d.Buying other stock on March 12

The wash sale rule covers a purchase of the same or substantially identical security within 30 days before or after the sale. February 12 is 26 days before March 10, so it counts. February 5 is 33 days before and April 11 is 32 days after, both outside the window. Another company's stock is not substantially identical.Internal Revenue Code Section 1091 (wash sales)

A customer inherits 100 shares of XYZ that the decedent bought at $20; they were worth $65 on the date of death. The customer sells them at $70. What is the result?

• a.A $5 per share gain, short-term if sold within a year
• b.A $50 per share gain, treated as long-term
• c.A $5 per share gain, treated as long-term✓
• d.A $45 per share gain, taxed as ordinary income

Inherited property receives a basis stepped up to the value at death, here $65, so the gain is $70 - $65 = $5 per share. Inherited property is automatically treated as held long term regardless of how long the heir owned it. A $50 gain uses the decedent's old basis, a short-term result ignores the automatic long-term treatment, and a capital gain is not ordinary income.Internal Revenue Code Sections 1014 and 1223

A customer buys 400 shares of a stock at $30 in a margin account. What is the initial Regulation T requirement?

• a.$12,000, the full purchase price in cash
• b.$6,000, which is 50% of the $12,000 purchase✓
• c.$3,000, which is 25% of the purchase
• d.$2,000, the minimum equity for a margin account

Regulation T sets initial margin on stock purchases at 50%, so a $12,000 purchase requires $6,000. The 25% figure is a maintenance percentage for long positions, not the initial deposit. The $2,000 figure is a minimum equity amount that applies in addition. Paying the full price describes a cash account.Regulation T

A customer sells short 200 shares of a stock at $40 in a margin account. What is the Regulation T requirement?

• a.$2,000, the minimum equity for any margin account
• b.$8,000, the full amount of the sale proceeds
• c.$4,000, which is 50% of the proceeds✓
• d.$2,400, which is 30% of the sale proceeds

Regulation T requires 50% of the short sale proceeds as initial margin, here $4,000. The 30% figure is the maintenance level for most short positions. The proceeds are held by the broker, and the customer is not asked to deposit them again. The $2,000 minimum applies to equity in the account, not as a substitute for the percentage.Regulation T

A customer has a long margin account with a $14,000 debit balance. Below what long market value does the account fall under the 25% maintenance requirement?

• a.$18,200, found by adding 30% to the debit
• b.$18,667, found by dividing the debit by 0.75✓
• c.$17,500, found by dividing the $14,000 debit by 0.80
• d.$28,000, found by dividing the $14,000 debit by 0.50

Equity must be at least 25% of long market value, so the debit can be at most 75% of it, and $14,000 over 0.75 is about $18,667. Dividing by 0.80 or by 0.50 uses the wrong percentage, and adding 30% to the debit has no basis in the rule.FINRA Rule 4210

A customer sells short 100 shares of a stock now trading at $20. What is the maintenance requirement under FINRA's rule?

• a.$500, which is 25% of the $2,000 market value
• b.$200, which is 10% of the $2,000 market value
• c.$600, which is 30% of the current $2,000 market value✓
• d.$1,000, which is 50% of the $2,000 market value

FINRA requires 30% of the current market value for a short position in a stock priced at $5 or more, so 30% of $2,000 is $600. The 25% figure applies to long positions. The 50% figure is the initial Regulation T requirement, and 10% is not a maintenance level for stock.FINRA Rule 4210

What is the minimum equity required to open a margin account for margin purchases?

• a.$20,000 in cash or eligible securities
• b.$2,000 in cash or eligible securities✓
• c.$15,000 in cash or eligible securities
• d.$10,000 in cash or eligible securities

FINRA requires minimum equity of $2,000 for a customer to buy on margin, and Regulation T and the maintenance rules apply on top of that. The other figures are not the opening minimum for ordinary margin trading.FINRA Rule 4210

Two investors hold a joint account as joint tenants with rights of survivorship, and one dies. What happens to the decedent's interest?

• a.It is frozen until a court appoints a trustee for the account
• b.It passes to the decedent's estate and heirs under the will
• c.It is split equally between the survivor and the children
• d.It passes automatically to the surviving owner by operation of law✓

A joint tenancy with rights of survivorship transfers a deceased owner's share to the survivor by operation of law, outside the will. Passing through the estate describes tenants in common. A court-appointed trustee and automatic division with the children have no basis in a survivorship account.Customer account types

Who owns securities held in a UTMA custodial account for a minor?

• a.The donor, who may revoke the gift and take the assets back later
• b.The minor, managed by a custodian until the age of majority✓
• c.The parents, who may withdraw funds for their own use
• d.The custodian, who may reclaim the gifted assets at any time

A gift to a UTMA account is irrevocable and belongs to the minor, while the custodian manages it for the minor's benefit. The custodian and donor give up ownership and may not take the assets back. A parent who is custodian must still use the money for the child.Uniform Transfers to Minors Act

Which margin agreement permits the broker-dealer to pledge a customer's securities as collateral for its own bank loan?

• a.The hypothecation agreement✓
• b.The credit agreement
• c.The limited trading authorization
• d.The loan consent agreement

Hypothecation lets the firm pledge margined securities as collateral. The credit agreement sets out interest charges and terms of the debit balance. The loan consent agreement allows the firm to lend the customer's securities to short sellers, and a limited trading authorization lets another person place orders.Margin account agreements

Why does a member firm ask a customer for a trusted contact person?

• a.To receive trade confirmations in place of the customer
• b.To reach someone if it suspects exploitation or loses contact✓
• c.To place orders when the customer cannot be reached
• d.To guarantee the customer's margin debit if the customer defaults

A trusted contact lets the firm raise concerns about the customer's well-being or suspected exploitation and confirm the customer's contact details. The trusted contact has no authority to trade, does not guarantee debts, and does not take over the customer's confirmations.FINRA Rule 4512

A member firm reasonably believes that a 70-year-old customer is being financially exploited and places a temporary hold on a disbursement. How long may the initial hold last?

• a.15 business days from the date it is placed✓
• b.30 calendar days from the date placed
• c.60 calendar days after the hold is first placed
• d.10 business days, counted from the date it is placed

Rule 2165 lets a member hold a disbursement for an initial 15 business days when it reasonably believes a specified adult is being exploited. Further time is possible only if the member reports the matter to a regulator or court, and the shorter and longer periods do not match the rule.FINRA Rule 2165

Under FINRA's rule on holding disbursements for suspected exploitation, who is a specified adult?

• a.A person age 65 or older, or an adult with a mental or physical impairment✓
• b.A person age 70 or older, or an adult named as a trustee on any account
• c.A person age 55 or older, or an adult living alone without family
• d.A person age 62 or older, or an adult who has retired from work

The rule protects customers age 65 or older and customers 18 or older whom the member reasonably believes cannot protect their own interests because of a mental or physical impairment. Other age thresholds and circumstances, such as living alone or being retired, do not qualify.FINRA Rule 2165

Which Regulation Best Interest obligation requires a representative to understand the risks, rewards and costs of a recommendation?

• a.The compliance obligation, which requires written policies and procedures
• b.The care obligation, which requires reasonable diligence, care and skill✓
• c.The conflict obligation, which requires identifying and mitigating conflicts
• d.The disclosure obligation, which covers material facts about the relationship

The care obligation is the part of Regulation Best Interest that calls for reasonable diligence, care and skill in understanding a recommendation and its fit for the customer. The other obligations cover what must be disclosed, how conflicts are handled, and which policies the firm must maintain.Regulation Best Interest

Regulation Best Interest applies to a recommendation made to which of these persons?

• a.A natural person using it for personal, family or household purposes✓
• b.A broker-dealer buying securities for its own trading account
• c.A natural person using it for a business trading operation
• d.A corporation using it to fund the company's own employee pension plan

Regulation Best Interest protects retail customers, who are natural persons receiving a recommendation for personal, family or household use. Entities, broker-dealers and business uses fall outside the definition.Regulation Best Interest

What is the maximum length of a Form CRS from a broker-dealer that is not also an investment adviser?

• a.Five pages
• b.Seven pages
• c.Two pages✓
• d.Four pages

A broker-dealer's relationship summary may not exceed two pages, or the electronic equivalent. A combined summary from a dual registrant may run to four pages. One page and six pages are not limits in the instructions.SEC Form CRS