Practice Quiz

FINRA Series 63 (NASAA)

Category - Series 63

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When a client has purchased securities on margin, the broker-dealer
  1. may require that the client leave all his securities, even those not purchased on margin, in street name.
  2. must keep the securities that the client paid cash for separate from the securities that the client purchased on margin.
  3. may use any securities that the client purchased on margin as collateral for a loan from a bank upon receiving a written agreement signed by the client.
  4. Both B and C are correct statements.
Explanation
Answer: D - A broker-dealer is required to keep any securities a client paid cash for separate from the securities that the client purchased on margin, and upon receiving a written agreement signed by the client-a hypothecation agreement-may use those securities that were purchased on margin as collateral for a loan from a bank. The broker-dealer may not require that a client leave securities purchased through cash transactions in street name.
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