Jermaine wants to open a margin account with InvestorsInternational. He telephones his agent, Jeffrey Haynes, and gives him authorization. Which of the following statements is true regarding Jermaine''s customer account?
Answer(s): D
It is considered an unethical practice to execute a transaction on margin without securing a client's written authorization immediately following the initial transaction. Once Jeffrey has signed a margin agreement, he would then be allowed to trade in a margin account, i.e., borrow a portion of the purchase price from the broker-dealer
Cheryl Anders, an agent of Mammouth International, wishes to sell one client''s securities to another interested client. Which of the following is NOT required in order to effect this agency cross transaction?
Answer(s): A
All but the client attorney signature are required to effect an agency cross transaction. Cheryl must alert each client to the potential for conflict of interest and is obligated to provide disclosure in writing prior to such a transaction. She must also make her clients aware that they may revoke their consent at any time. The client(s) must then provide written consent to proceed with the transaction. Furthermore, Cheryl must send a written confirmation of the transaction's details no later than when the transaction has been completed. Finally, it is her fiduciary responsibility to send an annual written disclosure of agency cross transactions executed, including the amount of commission received. An attorney's signature is not required
Which of the following consititutes a legitimate non-cash payment between investment advisor and broker-dealer?
Answer(s): C
Non-cash payments, also known as soft dollars, are permitted for services exchanged between investment advisors and broker-dealers. Among the acceptable forms of payment are in-house and third party research, and computer software. This is permitted provided that disclosures are made on client confirmations and that it can be proved that the advisor is using the information for decision-making on client recommendations. Not included in the definition of acceptable forms of payment are: travel expenses, computer hardware, furniture and other overhead expenses
At the state level, the minimum cooling-off period between the filing of a securities registration and its effective date is:
Answer(s): B
The statutory minimum cooling-off period is 10 days for state registration
Cheryl Anders is an agent for Mammouth International, a broker-dealer in Nevada. Cheryl''s client, Mr Stone, wants to dispose of 10,000 shares of Granite Mountain securities.Cheryl''s other client, Mrs Hampshire, has been waiting for a great price on the Granite Mountain stock. Cheryl knows that this transaction could benefit everyone if done correctly.The transaction is known as:
This is known as an agency cross transaction because Cheryl is acting as a broker for one client on each side of the transaction. In order for a cross transaction to occur, there are specific conditions that must be met. This transaction would not be permitted if Cheryl suggested the idea to both parties. However, since Mr Stone offered to sell his securities, Cheryl is within this provision of the Investment Advisor's Act of 1940
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