Two Kinds of Adviser

2 questions on this screen, from this outline item's own pool, so some will test a rule you met earlier in the unit. Pick an answer, say how sure you are, then reveal. Being sure and wrong is the most useful thing that can happen here, and the coach treats it that way.

Question 1Exam level

An introducing firm takes a customer's order but holds none of the customer's money or securities. Which firm actually holds and safeguards those assets, and sends the account statements?

A. The custodian bank B. The clearing (carrying) firm C. The transfer agent D. DTCC

How sure are you?

Sure Fairly sure Guessing

Correct: B. The clearing, or carrying, firm holds the customer's assets, clears and settles the trades, and issues the statements.

A. A custodian bank can hold assets in other contexts, but the outline's introducing/clearing split names the clearing firm as this role.

C. A transfer agent keeps the issuer's ownership record; it does not hold a customer's brokerage assets.

D. DTCC nets and settles between clearing firms; it is not the firm that holds a specific customer's account.

Unit: SIE outline 1.1.4

Question 2Above the exam

A 40-year-old has a net worth of $700,000 excluding her home, and earned $210,000, then $215,000, then $190,000 in the last three years respectively, the $190,000 being this most recent year. Does she qualify as an accredited investor under the natural-person tests?

A. No; her net worth is under $1,000,000, and her most recent year's income of $190,000 breaks the requirement that each of the two most recent years clear $200,000 B. Yes; her net worth alone qualifies her. $700,000 is below the $1,000,000 net-worth threshold, so this test alone does not qualify her. C. Yes; any single year over $200,000 in the past three years is enough. The test requires each of the two most recent years to clear the threshold, not just any one year in a longer span. D. No; only entities, never individuals, can be accredited investors. The natural-person tests exist specifically to qualify individuals; entities have their own separate tests.

How sure are you?

Sure Fairly sure Guessing

Correct: A. The net-worth test needs over $1,000,000 excluding the home; $700,000 fails it. The income test needs over $200,000 individually in each of the two most recent years; her two most recent years are $215,000 and $190,000, and the $190,000 year breaks the test.

B. $700,000 is below the $1,000,000 net-worth threshold, so this test alone does not qualify her.

C. The test requires each of the two most recent years to clear the threshold, not just any one year in a longer span.

D. The natural-person tests exist specifically to qualify individuals; entities have their own separate tests.

Unit: SIE outline 1.1.4

Now answer