General Securities Representative (Series 7) Practice Exam

What is a common reason for freezing an account after the account owner's death?

1. Prevent unauthorized trades

2. Allow time for estate settling

3. Update client information

4. Reassess investment strategy

The correct answer is: Prevent unauthorized trades

The primary reason for freezing an account after the account owner's death is to prevent unauthorized trades. When an account holder passes away, there is an inherent concern about the possibility of unauthorized transactions occurring if the account remains active. Freezing the account ensures that no trades, withdrawals, or changes can be made until the appropriate processes and verifications are completed. This step protects the deceased's assets and ensures that only authorized parties, such as an executor or legal representative, can manage the account in accordance with the deceased's will or estate plan. While considerations like allowing time for estate settling and updating client information are valid and necessary processes following the death of an account holder, they are not the primary focus of freezing the account. The primary concern is the security and integrity of the account until all legal matters are addressed. Reassessing investment strategy, while important in the context of managing an estate, is not an immediate concern necessitating an account freeze.