Practice Quiz

FINRA Series 63 (NASAA)

Category - Series 63

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A hypothecation agreement refers to
  1. an agreement wherein a client gives his broker-dealer discretion to purchase securities that the broker-dealer deems appropriate in whatever quantity the broker-dealer feels appropriate and at a time and price the broker-dealer believes is a good deal.
  2. an agreement that a client must sign prior to executing any short sales with the broker-dealer.
  3. an agreement signed by a client who is executing a margin transaction that allows the broker to hold the margined securities in street name as collateral for the loan.
  4. a document signed by a client indicating that he or she understands that some of the charts and examples presented in a broker-dealer’s advertising literature are based on hypothetical trades.
Explanation
Answer: C - A hypothecation agreement refers to an agreement signed by a client who is executing a margin transaction that allows the broker to hold the margined securities in street name as collateral for the loan.
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