SIE Understanding Trading, Customer Accounts and Prohibited Activities Question 8: Answer and Explanation

Question: 8

Which of the following account types is used to make a short sale?

• A. Cash account
• B. Margin account
• C. Option account
• D. Discretionary account

Correct Answer: B

Explanation:

B: Choice B correctly indicates that a short sale, accomplished by borrowing the security, is executed only in a margin account. Choice A may be used for purchases when no money is borrowed, and no security is borrowed. Choice C is used to trade options and requires risk disclosures. Choice D refers to an account in which the customer allows the representative to select a characteristic of an order other than price and timing.