Free Series 6 Quiz: Test Your Knowledge on
Investment Products & Regulations

Wrap accounts are ideal for clients who trade frequently since they bundle advisory, brokerage, and transaction costs into a single fee, rather than charging per trade. This structure helps active traders avoid high commission costs associated with frequent transactions.

Both non-durable and durable powers of attorney end upon the grantor’s death.

A limited trading authorization grants an individual the ability to place trades but not withdraw funds or securities. A full trading authorization expands this to include withdrawal rights. Broker-dealers must receive signed written consent from the account owner and document the authorized trader’s signature and approval date.

A joint tenants with rights of survivorship account provides equal ownership to all account holders. If one owner dies, their share automatically transfers to the surviving owner(s), bypassing probate. This is different from a tenants in common account, where each owner’s share is passed to their estate rather than the co-owner.

Member firms are required to keep records of any customer account updates for at least six years after the change is made.

Under industry regulations, only the approving principal’s signature is mandated when opening a standard brokerage cash account.

Suitability rules require registered representatives to act in the best interests of their customers, ensuring recommendations are based on client needs rather than personal or firm incentives. Each of the listed actions constitutes a suitability violation, as they prioritize the RR’s financial gain over the client’s investment objectives.

The marital deduction permits a husband and wife to transfer unlimited assets to each other without triggering gift or estate taxes. This applies both during their lifetime and upon death, allowing the first spouse to pass their entire estate to the surviving spouse tax-free.

Passive income is generated from business ventures where the investor does not actively participate, such as limited partnerships. While it is taxed similarly to earned and investment income, passive losses can only offset passive income or gains—not earned or portfolio income.

Under Reg BI, a retail customer is a natural person or their non-professional legal representative who receives a securities recommendation primarily for personal, family, or household purposes. Professional legal representatives and fiduciaries managing investments for others do not qualify as retail customers.