Customer Accounts
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Terms in this set
- Cash vs. Margin Accounts In a cash account the customer pays in full for every purchase; in a margin account the customer borrows part of the price from the firm, pledging the securities as collateral and signing margin agreements first.
- Regulation T & Margin Requirements The Federal Reserve's Regulation T sets the initial margin requirement — currently 50% of a purchase — and payment deadlines; FINRA adds minimum maintenance margin of 25% of market value for long positions (30% for short).
- Traditional vs. Roth IRAs Individual retirement accounts with opposite tax timing: traditional IRA contributions may be tax-deductible and withdrawals are taxed as ordinary income with required minimum distributions; Roth contributions are after-tax and qualified withdrawals — including all growth — are tax-free, with no lifetime RMDs.
- Joint Account Registrations Joint tenants with rights of survivorship (JTWROS) passes a deceased owner's interest automatically to the survivor(s); tenants in common (TIC) passes the deceased's stated percentage to their estate instead.
- Custodial Accounts (UGMA/UTMA) Accounts an adult custodian manages for a minor under the Uniform Gifts/Transfers to Minors Acts: one custodian, one minor, gifts are irrevocable, the minor's Social Security number is used, and assets transfer at the age of majority.
- Discretionary Accounts Accounts where the customer gives written authorization (power of attorney) for the rep to choose the asset, the action (buy/sell), or the amount without contacting the customer first; a principal must accept the account and review its activity.
- Opening Accounts & CIP To open an account a firm collects the four CIP essentials — name, date of birth, residential address, and SSN/TIN — verifies identity under the USA PATRIOT Act, and gathers the suitability profile (objectives, finances, risk tolerance).