Series 7 Exam Question 315: Answer and Explanation

Question: 315

George Lincoln opens a margin account and signs a loan consent, hypothecation, and credit agreement. Which of the following statements are TRUE?

I. George's stock may not be kept in street name.

II. A portion of George's stock may be pledged for a loan.

III. George will be required to pay interest on the money borrowed.

IV. George's stock must be cosigned by the broker-dealer.

• A. I and IV
• B. II and III
• C. I and II
• D. None of the above

Correct Answer: B

Explanation:

B. Because George is borrowing money through a margin account to purchase securities, he must leave the stock in the broker-dealer's safekeeping, pay interest on the loan, register the stock in street name, and agree to allow the broker-dealer to pledge the securities because he signed a loan consent agreement.