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Function 3 Specialized Hub
Series 7 Customer Accounts & Regulatory Compliance Questions
Navigate individual, joint (JTWROS vs TIC), trust, custodial (UGMA/UTMA), discretionary accounts, USA PATRIOT Act CIP, AML SAR/CTR filings, and SEC Rule 144 compliance.
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📋 FINRA Blueprint Weighting Notice:
Customer accounts and supervisory compliance account for Functions 1, 2, and 4 questions, representing about 30 to 34 questions total on the Series 7 examination.
Essential Rules & Calculation Shortcuts for Series 7 Customer Accounts & Regulatory Compliance Questions
Primary legal statutes and self-regulatory organization (SRO) standards governing this topic
Every practice question in this module is derived directly from FINRA, SEC, MSRB, and federal statutes. You can review the official texts via the verified links below:
USA PATRIOT Act Customer Identification Program (CIP) Mandates
Under the USA PATRIOT Act Customer Identification Program (CIP), what 4 pieces of identifying information MUST a broker-dealer obtain from an individual customer BEFORE opening an account?
Joint Accounts: JTWROS vs. Tenancy in Common (TIC) Estate Rights
Two business partners open a joint brokerage account as Tenancy in Common (TIC) with a 60/40 ownership allocation. If the 60% owner dies, what happens to the deceased partner's share of the account?
Corporate Accounts: Corporate Charter vs. Corporate Resolution
When opening a margin account for a corporation, which document specifies WHICH individuals have legal authority to trade on behalf of the corporation?
Discretionary Accounts: Written Authorization and Time/Price Discretion
A registered representative executes a trade for a client choosing the security and the number of shares without calling the client beforehand. Under FINRA rules, what documentation MUST be in place?
Suspicious Activity Report (SAR) Filing Threshold and Strict Confidentiality
A broker-dealer identifies a series of structured deposits and questionable transactions totaling $8,500 that have no apparent business purpose. The firm files a Suspicious Activity Report (SAR). Which rule governs the notification of the customer?
FINRA Rule 2165 Financial Exploitation Temporary Hold Duration
When a member firm places a temporary hold on the disbursement of funds from a senior customer's account due to reasonable belief of financial exploitation, what is the initial maximum hold period permitted under FINRA Rule 2165?
Statutory Disqualification under Exchange Act Section 3(a)(39)
Under the Securities Exchange Act of 1934 and FINRA bylaws, which event causes an individual to be subject to an automatic STATUTORY DISQUALIFICATION (SD) from the securities industry?
Customer Identification Program (CIP): Four Mandatory Verification Elements
An individual walks into a broker-dealer branch office seeking to open a cash trading account. Under the USA PATRIOT Act and FINRA Rule 2090/CIP rules, which four pieces of identifying customer information must the firm obtain prior to opening the account?
Joint Accounts: JTWROS vs. Tenants in Common (TIC) Upon Death
Two business partners, Alan and Brian, open a joint brokerage account funded with $500,000. Alan contributes $350,000 (70%) and Brian contributes $150,000 (30%). If the account is titled as Tenants in Common (TIC) and Alan dies unexpectedly, what happens to Alan's share of the account assets?
Discretionary Accounts: Written Power of Attorney vs. Time/Price Discretion
A client calls their registered representative at 9:45 a.m. and states: 'Buy 500 shares of Microsoft (MSFT) today whenever you feel the price is best.' The representative executes the purchase of 500 shares of MSFT at 1:30 p.m. at $415 per share. The client did not provide prior written discretionary authorization. Has the representative violated FINRA rules?
Uniform Gifts/Transfers to Minors (UGMA/UTMA): Rules, Custodianship, and Taxes
An uncle opens a Uniform Transfers to Minors Act (UTMA) account for his 12-year-old niece and names himself as the sole custodian. Which of the following statements regarding the operation and legal ownership of this account is TRUE?
Anti-Money Laundering: Currency Transaction Reports (CTR) vs. SAR Thresholds
A retail client visits a broker-dealer branch and makes three cash deposits of $4,000 each over two consecutive business days to fund a brokerage account. The client acts evasive when asked about the source of funds and asks if deposits of $4,000 trigger federal government reporting. Under the Bank Secrecy Act and FinCEN regulations, what filing is required?
Entity Accounts: Corporate Resolution, Charter, and Partnership Agreements
A registered representative meets with the Chief Financial Officer (CFO) of a mid-sized manufacturing corporation who wants to open a corporate brokerage account to trade equities and fixed-income securities on margin. Which specific document is required to prove who has authority to execute transactions on behalf of the corporation?
Senior Investor Protection: Temporary Holds on Disbursements (FINRA Rule 2165)
An 81-year-old client with early signs of cognitive decline arrives at a broker-dealer branch accompanied by an unknown individual introduced as a 'caretaker.' The client requests an immediate wire transfer of $150,000 (representing 75% of their total life savings) to an offshore bank account for an 'urgent overseas investment opportunity.' Under FINRA Rule 2165, what protective action is the firm permitted to take?
OFAC Sanctions & SDN List: Immediate Freezing and Mandatory Reporting
During routine Customer Identification Program (CIP) screening against the Office of Foreign Assets Control (OFAC) database, a broker-dealer's compliance system generates an exact positive match for an individual listed on the Specially Designated Nationals (SDN) list attempting to wire $250,000 into a new account. What is the mandatory regulatory action required by federal law?
Traditional IRA vs. Roth IRA: Contributions, Deductibility, and Tax Penalties
A 45-year-old single executive earns an annual salary of $250,000 and participates in an employer-sponsored 401(k) plan. The executive wishes to save additional funds for retirement. Which statement accurately describes the executive's IRA contribution options?
Regulation T Free-Riding Violation: Causes and 90-Day Account Restriction
In a cash brokerage account with zero unsettled funds, an investor purchases $20,000 of stock on Monday morning. On Tuesday afternoon, before depositing funds to pay for the purchase, the investor sells the entire position for $22,000 and attempts to use the sales proceeds to pay for Monday's purchase. What regulatory violation has occurred, and what penalty is imposed under Federal Reserve Regulation T?
New Account Form: Required Signatures and Principal Approval Timeline
A new retail customer completes an application to open a standard cash brokerage account with a registered representative. Regarding the execution of the New Account Form, whose signature is legally required by FINRA rules before any transactions can settle?