Customer Accounts Practice Questions
Master Customer Accounts for the Series 7 exam with comprehensive practice questions, detailed explanations, and proven study strategies.
1,500+
Practice Questions
91%
Pass Rate
35K+
Students Passed
12%
of Exam
What You'll Learn
Customer Accounts is a critical topic on the Series 7 exam, as it covers the rules and regulations around the opening, maintenance, and closing of customer brokerage accounts. This includes understanding account types, account agreements, customer information requirements, and the proper handling of customer funds and securities. Demonstrating a solid grasp of these concepts is essential for anyone seeking to become a licensed General Securities Representative.
Key Concepts
Account Types
The different types of brokerage accounts that can be opened for individual and institutional customers, such as cash accounts, margin accounts, retirement accounts, and specialty accounts.
Account Agreements
The contractual terms and disclosures that customers must review and agree to when opening a brokerage account, including margin agreements, option agreements, and other related documents.
Customer Information Requirements
The personal, financial, and investment-related information that firms must collect from customers when opening new accounts, as well as the ongoing obligation to maintain accurate and up-to-date customer records.
Handling of Customer Funds and Securities
The strict rules and procedures that firms must follow when receiving, safeguarding, and disbursing customer funds and securities, including the segregation of customer assets and the prompt execution of customer instructions.
Account Statements and Confirmations
The periodic account statements and trade confirmations that firms must provide to customers, detailing their account activities, positions, and other relevant information.
Common Mistakes to Avoid
- Failing to properly distinguish between the different types of brokerage accounts and their associated features and requirements.
- Overlooking the importance of detailed and up-to-date customer information, and the potential consequences of inaccurate or incomplete records.
- Misunderstanding the strict rules around the handling of customer funds and securities, and the need for proper segregation and prompt execution of customer instructions.
- Underestimating the significance of providing timely and accurate account statements and trade confirmations to customers.
- Neglecting to thoroughly review and comprehend the terms and disclosures in the various account agreements that customers must sign.
Sample Customer Accounts Questions
Question 1
Consider an investor who has realized an $8,000 long-term gain and a $6,000 short-term loss. This investor, categorized as a high-income earner, falls into the 20% capital gains tax bracket. How much will the investor owe in taxes?
$400.00
(Correct)$112.00
$1,440.00
$2,000.00
Explanation:
With a $2,000 net capital gain, the investor is liable for 20% in taxes, which equates to $400.
Question 2
An MSRB member with discretionary authority in writing for a client's account needs specific approval for which order?
A buy order for 20 AAA GO bonds issued by a state that the member has a control relationship with
(Correct)A buy order for 10 revenue bonds trading at a deep discount due to economic issues with the financed facility
A sell order for $50,000 worth of GO bonds issued in the client's home state and were transferred in to the client's account
A buy order for $25,000 of very speculative revenue bonds
Explanation:
A buy order for 20 AAA GO bonds from a state where the member has a control relationship necessitates specific authorization. A control relationship arises if, for instance, the state's Governor works for the broker dealer, or if the broker dealer is the state's financial advisor.
Question 3
A registered representative receives $50,000 from a client with instructions to buy whichever stock "he thinks best." The representative:
Must first obtain written discretionary authority from the customer
(Correct)Must first require that the customer repeat the verbal authorization to their manager
May follow the customer's instructions but must confirm all trades within 24 hours
May accept the customer's instructions, but only if the registered representative is a registered investment advisor under the Investment Advisors Act of 1940.
Explanation:
To act on the order, the Representative requires written discretionary authority. The client did not specify which stock to purchase. A client must specify the action (buy or sell), the security, and the quantity to be traded. A representative can determine the best time and/or price for order execu...
Study Tips for Customer Accounts
Familiarize yourself with the different types of brokerage accounts and their defining characteristics, as well as the specific requirements and procedures for each.
Carefully review the customer information requirements and best practices for maintaining accurate and up-to-date customer records.
Understand the rules and regulations surrounding the handling of customer funds and securities, including the strict segregation and prompt execution requirements.
Pay close attention to the content and format of account statements and trade confirmations, as well as the firm's obligations in providing these documents to customers.
Thoroughly review sample account agreements and disclosures to become familiar with the contractual terms and conditions that customers must agree to.
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Related Series 7 Topics
Series 7 Question Types
Frequently Asked Questions
How many Customer Accounts questions are on the Series 7?
Customer Accounts makes up approximately 12% of the Series 7 exam. Upsero includes hundreds of practice questions covering all aspects of this topic.
How do I study for Customer Accounts?
Start with understanding the key concepts, then practice with realistic exam questions. Upsero's ReadyScore tracks your mastery of Customer Accounts so you know when you're ready for the real exam.
Are the practice questions similar to the real Series 7?
Yes! Our Customer Accounts questions are designed to match the exact format, difficulty, and style of the actual Series 7 exam. Many students say our questions are even harder than the real exam.
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