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FINRA Series 7

Category - Series 7

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Bubba has a cash account and fails to make full and prompt payment for a purchase. The broker liquidated the transaction. Two weeks later, Bubba places another buy order for 100 shares of XYZ. What does the broker do?

refuses the order
handles the order after obtaining a promise from Bubba to effect prompt settlement
requires a 25% down payment before executing the order
executes the order at its own risk

Explanation

Answer: A - refuses the order. Reg T requires that under these circumstances the account must be frozen for 90 days. Any trade prior to that, requires cash in advance.

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FINRA Series 7

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FINRA Series 7

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