Free FINRA Series 7 (General Securities Representative) Opening Accounts Practice Questions

Choice A is correct because Delivery Versus Payment (DVP) accounts require the simultaneous exchange of securities and payment. The customer's agent bank delivers payment at the same time the broker-dealer delivers the securities, eliminating settlement risk.

Choice C is incorrect because DVP does not involve a delayed payment period; the defining feature is simultaneous delivery and payment, not payment within a specified number of days.
Choice B is incorrect because DVP accounts are cash-based institutional arrangements and do not involve margin credit.
Choice D is incorrect because DVP does not involve pledging collateral; it involves direct simultaneous settlement between the broker-dealer and the customer's custodian bank.

Choice D is correct because unlike traditional IRAs, Roth IRA owners are not required to take required minimum distributions (RMDs) during their lifetime. This allows the account to continue growing tax-free indefinitely for the original owner.

Choice B is incorrect because Roth IRA contributions are made with after-tax dollars and are never tax-deductible, regardless of income level.
Choice A is incorrect because Roth IRAs do have income eligibility limits for direct contributions. For 2024, the ability to make a direct Roth IRA contribution phases out at higher modified adjusted gross income levels.
Choice C is incorrect because early withdrawals of Roth IRA earnings before age 59 1/2 may be subject to a 10% penalty if the 5-year holding period has not been met, or if no exception applies.

Choice A is correct because ERISA Section 404(a)(1) establishes the exclusive benefit rule, requiring plan fiduciaries to act solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable plan expenses. This is the core fiduciary standard under ERISA.

Choice D is incorrect because ERISA does not require fiduciaries to guarantee investment returns. Fiduciaries must act prudently in selecting and monitoring investments, but investment losses do not automatically constitute a fiduciary breach.
Choice C is incorrect because ERISA requires diversification of plan investments to minimize the risk of large losses, but does not mandate investment exclusively in government securities. The prudent expert rule governs investment selection.
Choice B is incorrect because plan assets belong to individual participant accounts based on contributions and earnings. ERISA does not require equal distribution; it requires that benefits be paid in accordance with the plan document.