General Securities Sales Supervisor (Series10) Practice Exam

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If a broker-dealer sends monthly statements to customers, how often must they notify customers of any free credit balances?

A monthly
B quarterly
C semi-annually
D yearly

The correct answer is: A monthly

The correct choice is that customers must be notified of any free credit balances monthly if a broker-dealer sends out monthly statements. This requirement ensures that customers are regularly informed about their account status, including any available cash balances that could be utilized or withdrawn. The notification of free credit balances is particularly important for maintaining transparent communications and allowing customers to make informed decisions regarding their investments. Regular updates about account balances help promote trust and enable customers to react quickly to changes, whether it’s reinvesting the cash or withdrawing funds for personal use. While less frequent notifications, such as quarterly, semi-annually, or yearly, could still provide some level of information, they would not be sufficient to meet the needs for timely updates that benefit the customer’s financial strategies and liquidity. Monthly communications align with the overall principle that broker-dealers must be diligent in ensuring their clients are kept well-informed about all pertinent aspects of their accounts on a regular basis.