Q:
When a corporation wishes to open a margin account with a broker-dealer, which of the following is required?
I. A corporate resolution from the board of directors
II. A copy of the corporation’s trust indenture
III. A copy of the corporation’s charter or by-laws
IV. An agreement that the stock of the corporation will not be traded by the broker-dealer as a market-maker.
a) I, II
b) I, III
c) II, IV
d) I, II, III, IV
A:

The correct answer is b.
Whenever a corporation opens an account with a broker-dealer, a resolution by the board of directors, appointing specific individuals who have trading authority must accompany the application. In addition, if the company wishes to open a margin account, the company must also provide a copy of its charter or by-laws as evidence that the company is legally permitted to trade on margin.


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