Series 7 Exam Question 386: Answer and Explanation

Question: 386

Which of the following need approval from a brokerage firm's principal?

I. New accounts

II. Recommendations

III. Handling of complaints

IV. Trades in all accounts

• A. I and II
• B. I, III, and IV
• C. II, III, and IV
• D. I, II, III, and IV

Correct Answer: B

Explanation:

B. Principals of a firm must approve all new accounts, advertising used by the firm, handling of complaints, trades in all accounts, and so on. However, as far as the Series 7 exam goes, principals don't need to approve recommendations made by registered reps. In real life, I would get approval before making recommendations if I were you. You have to remember that principals must sign all order tickets, and if you don't clear a recommendation with them first, they may be reluctant to do so.