STC Series 7 Chapter 2 Exam 2025
With 100% Correct Answers
A husband and wife have a joint account with right of survivorship. If one of the parties places
an order, the RR:
A. Should contact the other party prior to placing the order
B. Must have the order approved by a principal prior to execution
C. May accept the order
D. May accept the order only if the other party has granted trading authorization - CORRECT
ANSWER✔✔C. May accept the order
Joint accounts have more than one owner of record. In most cases, any joint owner may initiate
activity in the account (e.g., enter orders to buy or sell securities). There is no requirement to
contact the other party prior to placing an order. Trading authorization is required if a person
who is not the owner of the account is going to enter orders.
A pattern day trader is defined as an individual who day-trades no less than:
A. Three or more times in a five-day period
B. Four or more times in a five-day period
C. Five or more times in a five-day period
D. Six or more times in a five-day period - CORRECT ANSWER✔✔B. Four or more times in a five-
day period
A pattern day trader is defined as a person who day-trades no less than four or more times in a
five-day period.
An employee of a brokerage firm has decided to open an account with an investment company
to purchase various mutual funds under the company's complex of funds. The employee:
A. Must provide written notice to the employing firm of the account opening
,B. Must provide written notice to the employing firm of the new account and written notice to
the investment company of the employment with the brokerage firm
C. Is prohibited from opening the account
D. May open the account without notifying either firm - CORRECT ANSWER✔✔D. May open the
account without notifying either firm
Written notification is not required when opening an account with another member firm if the
transactions will be limited to redeemable investment company shares, variable contracts, or
unit investment trusts.
The spouse of a brokerage firm employee wants to open a brokerage account in order to invest
in bonds. If this account is opened at a firm that does not employ her spouse, the employee of
the firm is required to:
A. Obtain the prior written consent of the employing firm in order to open the account
B. Obtain the prior written consent of the employing firm if the account is a joint account
C. Obtain the written consent of the employing firm within a reasonable period after the
account is opened
D. Obtain the prior written consent of the employing firm for each order being entered -
CORRECT ANSWER✔✔A. Obtain the prior written consent of the employing firm in order to
open the account
Employees of broker-dealers who intend to open outside accounts for the purpose of executing
securities transactions are required to obtain the prior written consent of their firm. This rule
also applies to accounts being opened for the spouse or dependent children of member firm
employees.
The major provisions of ERISA provide protection for:
A. Investors in limited partnerships
B. Employers against fraud by their employees
C. Government employees against improper investments by their employer
D. Private sector employees against improper investments by their employer - CORRECT
ANSWER✔✔D. Private sector employees against improper investments by their employer
, ERISA provides private sector employers with guidelines for proper investments in employee
pension plans. This provides protection for employees against improper investments by their
employer. ERISA does not apply to public sector (government) plans.
A prime brokerage account would MOST likely be established for a(n):
A. Individual opening an account for a minor
B. Mutual fund
C. Corporation
D. Hedge fund - CORRECT ANSWER✔✔D. Hedge fund
A prime-brokerage arrangement involves a variety of services offered by a broker-dealer to an
active trading firm, such as a hedge fund. Most prime brokers offer both execution and clearing
services to these customers. Due to regulatory requirements, a mutual fund would not open a
prime brokerage account. Mutual funds generally open an account in which a custodian bank
holds securities and a broker-dealer executes the transactions.
Dennis, Al, and Dan have opened a securities account with your firm as tenants in common. All
of the following are TRUE, EXCEPT:
A. If Dennis dies, his interest in the account will pass to Al and Dan
B. You may accept an order from either Dennis, Al, or Dan
C. Checks issued by your firm from the account will be in the name of all three co-owners
D. When opening the account, you should obtain Social Security numbers from all three co-
owners - CORRECT ANSWER✔✔A. If Dennis dies, his interest in the account will pass to Al and
Dan
In a tenants-in-common account, the interest of a deceased owner passes to the estate of the
deceased. The surviving owners of the account (Al and Dan) would receive the securities if the
account was a joint tenants with rights of survivorship account.
All of the following are typical characteristics of a 401(k) plan, EXCEPT:
A. Employee contributions are fully and immediately vested
B. Employers must match employee contributions
With 100% Correct Answers
A husband and wife have a joint account with right of survivorship. If one of the parties places
an order, the RR:
A. Should contact the other party prior to placing the order
B. Must have the order approved by a principal prior to execution
C. May accept the order
D. May accept the order only if the other party has granted trading authorization - CORRECT
ANSWER✔✔C. May accept the order
Joint accounts have more than one owner of record. In most cases, any joint owner may initiate
activity in the account (e.g., enter orders to buy or sell securities). There is no requirement to
contact the other party prior to placing an order. Trading authorization is required if a person
who is not the owner of the account is going to enter orders.
A pattern day trader is defined as an individual who day-trades no less than:
A. Three or more times in a five-day period
B. Four or more times in a five-day period
C. Five or more times in a five-day period
D. Six or more times in a five-day period - CORRECT ANSWER✔✔B. Four or more times in a five-
day period
A pattern day trader is defined as a person who day-trades no less than four or more times in a
five-day period.
An employee of a brokerage firm has decided to open an account with an investment company
to purchase various mutual funds under the company's complex of funds. The employee:
A. Must provide written notice to the employing firm of the account opening
,B. Must provide written notice to the employing firm of the new account and written notice to
the investment company of the employment with the brokerage firm
C. Is prohibited from opening the account
D. May open the account without notifying either firm - CORRECT ANSWER✔✔D. May open the
account without notifying either firm
Written notification is not required when opening an account with another member firm if the
transactions will be limited to redeemable investment company shares, variable contracts, or
unit investment trusts.
The spouse of a brokerage firm employee wants to open a brokerage account in order to invest
in bonds. If this account is opened at a firm that does not employ her spouse, the employee of
the firm is required to:
A. Obtain the prior written consent of the employing firm in order to open the account
B. Obtain the prior written consent of the employing firm if the account is a joint account
C. Obtain the written consent of the employing firm within a reasonable period after the
account is opened
D. Obtain the prior written consent of the employing firm for each order being entered -
CORRECT ANSWER✔✔A. Obtain the prior written consent of the employing firm in order to
open the account
Employees of broker-dealers who intend to open outside accounts for the purpose of executing
securities transactions are required to obtain the prior written consent of their firm. This rule
also applies to accounts being opened for the spouse or dependent children of member firm
employees.
The major provisions of ERISA provide protection for:
A. Investors in limited partnerships
B. Employers against fraud by their employees
C. Government employees against improper investments by their employer
D. Private sector employees against improper investments by their employer - CORRECT
ANSWER✔✔D. Private sector employees against improper investments by their employer
, ERISA provides private sector employers with guidelines for proper investments in employee
pension plans. This provides protection for employees against improper investments by their
employer. ERISA does not apply to public sector (government) plans.
A prime brokerage account would MOST likely be established for a(n):
A. Individual opening an account for a minor
B. Mutual fund
C. Corporation
D. Hedge fund - CORRECT ANSWER✔✔D. Hedge fund
A prime-brokerage arrangement involves a variety of services offered by a broker-dealer to an
active trading firm, such as a hedge fund. Most prime brokers offer both execution and clearing
services to these customers. Due to regulatory requirements, a mutual fund would not open a
prime brokerage account. Mutual funds generally open an account in which a custodian bank
holds securities and a broker-dealer executes the transactions.
Dennis, Al, and Dan have opened a securities account with your firm as tenants in common. All
of the following are TRUE, EXCEPT:
A. If Dennis dies, his interest in the account will pass to Al and Dan
B. You may accept an order from either Dennis, Al, or Dan
C. Checks issued by your firm from the account will be in the name of all three co-owners
D. When opening the account, you should obtain Social Security numbers from all three co-
owners - CORRECT ANSWER✔✔A. If Dennis dies, his interest in the account will pass to Al and
Dan
In a tenants-in-common account, the interest of a deceased owner passes to the estate of the
deceased. The surviving owners of the account (Al and Dan) would receive the securities if the
account was a joint tenants with rights of survivorship account.
All of the following are typical characteristics of a 401(k) plan, EXCEPT:
A. Employee contributions are fully and immediately vested
B. Employers must match employee contributions
