Series 7 Exam Question 193: Answer and Explanation

Question: 193

If a customer wants to open a new account but refuses to provide some of the financial information requested by the member firm, which of the following statements is TRUE?

• A. The firm may open the account for the customer and make recommendations freely.
• B. The firm may open the account if it can determine from other sources that the customer has the financial means to handle the account.
• C. The firm may open the account and take unsolicited trades only.
• D. The firm may not accept any trades for the account until the information is received from the customer.

Correct Answer: B

Explanation:

B. You will find that this is not an unusual situation. When you're opening an account for a new customer, the customer may not feel comfortable sharing all their financial information with you. However, you can still do trading in the account and make recommendations if you can determine financial information from other sources, such as D&B cards. Say, for example, that the D&B card says that the customer is the CEO of a corporation that made $5 billion last year. You can assume the customer has a lot of money, and you can certainly make recommendations that are larger in size. The recommendations you make to a customer should be suitable to their investment objectives and financial situation. If you can't determine the information from other sources, you can still make trades and recommendations that would be suitable for all investors, such as mutual funds or U.S. government securities.