Ethics, suitability, options, margin, trusts, ads (🔥 heavy test weight)

331. An agent who makes the same recommendation to all clients is engaging in

Blanket recommendations

332. Definition of blanket recommendations

Making identical investment recommendations to all customers

333. All written customer complaints require which three actions

Escalation, written response, record retention

334. Definition of a customer complaint

A written grievance

335. Complaints must be escalated when they are

In writing

336. Higher-than-normal commissions are allowed when

Justified by liquidity, execution difficulty, or risk

337. Firms anticipating high commissions must

Provide advance disclosure

338. Clauses waiving legal rights are called

Exculpatory clauses

339. Exculpatory clauses are

Prohibited and unenforceable

340. If a client gives instructions not in best interest, adviser must

Follow client instructions

341. Claiming securities are approved by regulators is

Fraudulent

342. Implying SEC or state approval is

Prohibited

343. Commission sharing between agents is allowed only if

Same or affiliated firm

344. Rebating commissions to clients is

Unethical

345. Definition of selling away

Trading securities off the firm’s books without permission

346. Selling exempt securities outside firm authority is selling away if

No firm permission

347. Difference between selling away and private transaction

Firm permission

348. Definition of a private securities transaction

Off-book trade with firm approval

349. Outside business activity requires agent to

Notify firm

350. To avoid selling away, agent must

Obtain firm permission

351. Outside job becomes selling away if it involves

Securities sales

352. What happens to POA at death

Automatically revoked

353. POA after incompetence remains valid only if

Durable

354. Definition of durable power of attorney

Authority survives incompetence

355. Durable POA authority after death

Ends immediately

356. Why banks must disclose non-FDIC status

Banking and securities offered together

357. Required disclosure when banking and securities offered together

Not FDIC insured, subject to risk

358. Securities products are not insured by

FDIC

359. Key disclosure for securities products

Risk of loss

360. Customer name and address required on order tickets

No

361. Definition of discretion

Trading authority without prior approval

362. Discretion requires

Power of attorney

363. Discretion under verbal POA allowed for

10 business days

364. Maximum verbal discretion period

10 days

365. Order where agent controls time or price is

Not held order

366. Leaving timing decision to agent is considered

Not held

367. Discretion exists if agent controls

Asset, amount, or action

368. Not held orders allow agent to control

Time and/or price only

369. Orders from spouse without POA should be

Refused

370. Unauthorized trade becomes fraudulent if

Not disclosed

371. Unauthorized trade should be reported

Immediately

372. Trust trading authority belongs to

Trustee

373. Trustee may invest speculatively if

Consistent with trust objectives

374. Trustees must avoid investing in assets connected to

Trustee or grantor

375. Trustee’s duty of loyalty requires

Acting for beneficiaries

376. Beneficiaries may trade trust accounts only with

Written POA

377. SIPC covers losses from

Broker-dealer failure

378. Definition of insider trading

Trading on material nonpublic information

379. Insider trading occurs when information is

Not public

380. Fees for brokerage services must be

Reasonable

381. Issuers may not summarize

Formal filings

382. Agents may share accounts only with

Written firm and client consent

383. Trading authority in shared accounts belongs to

Either owner

384. Agents and IARs may loan to clients

Never

385. Opening accounts in others’ names to avoid registration is

Prohibited

386. Guaranteed may be used only for

Interest, principal, dividends

387. Guaranteed total return statements are allowed only if

No capital gains involved

388. Sales contests are prohibited if they encourage

Securities sales

389. Soft-dollar payments occur between

Broker-dealers and IAs

390. Definition of soft-dollar arrangement

Services in exchange for brokerage

391. Soft dollars may purchase

Research and client-benefit services

392. Soft dollars may NOT purchase

Office expenses or advertising

393. Exculpatory clauses are

Prohibited

394. Upfront mutual fund costs are called

Sales charges

395. Volume-based sales reductions are called

Breakpoints

396. Breakpoints provide investors with

Reduced sales charges

397. Definition of letter of intent

Agreement to qualify for breakpoints

398. No-load fund 12b-1 fee limit

Less than 0.25%

399. Definition of 12b-1 fee

Ongoing marketing fee

400. No-load mutual funds have

No sales charges

401. Advantage of no-load funds

Lower costs

402. Disadvantage of no-load funds

Less professional advice

403. Affiliated stock use requires adviser to

Disclose conflicts

404. Model law governing trust investments

Uniform Prudent Investor Act

405. Investment seminars may not include

Specific stock recommendations

406. Agents may conduct seminars and

Distribute prospectuses

407. Free credit balances must be paid

Immediately upon request

408. Free credit balances are disclosed

Quarterly

409. Trustee fiduciary duty owed to

Beneficiaries

410. Trustee duty in irrevocable trust owed to

Beneficiaries only

411. Duty to avoid favoring beneficiaries

Impartiality

412. Duty to avoid overconcentration

Diversification

413. Duty to review investments

Monitoring

414. Trustee may avoid diversification if

Trust purpose requires it

415. Definition of spoofing

Fake orders to manipulate price

416. Definition of layering

Tiered spoofing strategy

417. Exam candidates may identify as

Holding achieved registrations only

418. Agents joining new firms must

Obtain written consent for outside accounts

419. Original firm must retain records

Per retention rules

420. IA holding client checks beyond 3 days is deemed

Custodian

421. To avoid custody, checks must be handled within

3 business days

422. Definition of cybersecurity

Protection of firm and client data

423. Cybersecurity best practices include

Ongoing assessments

424. Cybersecurity programs require

Asset inventories

425. Cybersecurity programs required for

All financial firms

426. Secure client communications may use

Encryption

427. Trading on advance research knowledge is

Prohibited

428. Age defining vulnerable investor

65 or older

429. Charging higher commissions requires

Advance notice

430. Definition of self-dealing

Acting in own interest over client’s