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Difficulty: Very hardCustomer Account Types and Ownership Structures

Three business colleagues—Alex, Morgan, and Taylor—establish a joint brokerage account structured as Tenants in Common (TIC), with Alex contributing 50% of the funds, Morgan contributing 30%, and Taylor contributing 20%. The account agreement grants full trading authorization to each owner. Which of the following statements regarding the ongoing operation and legal disposition of this account are correct? (Select all that apply.)

  1. Any single joint owner has independent legal authority to place orders to buy or sell securities in the account without prior approval from the other co-owners.Answer
  2. Any check or distribution drawn from the account must be made payable jointly to all three account owners.Answer
  3. C
    Upon Alex's death, Alex's 50% ownership interest automatically transfers in equal shares to Morgan and Taylor, bypassing probate.
  4. D
    Upon presentation of Alex's certified death certificate, the registered representative can immediately re-register Alex's 50% share into a new joint account owned solely by Morgan and Taylor.

Answer

The correct statements are that any single joint owner may enter trading orders independently, and that any cash distributions or checks drawn from the account must be payable jointly to all account owners.
In joint brokerage accounts, trading authority and disbursement rules apply uniformly: any single owner can enter buy/sell orders independently, but all checks and withdrawals must be made payable to all account owners jointly. In a Tenants in Common (TIC) arrangement, each owner holds a specified percentage, and upon an owner's death, their share passes to their estate rather than to the surviving owners.

Step-by-Step Solution

1
Analyze trading authority rules for joint accounts (TIC vs. JTWROS).
Confirm that any registered joint owner on the account agreement possesses full power to initiate orders independently.
Unless a custom limited power of attorney or restricting agreement is filed, each owner retains independent trading privileges.
2
Analyze distribution and disbursement regulations for joint brokerage accounts.
Confirm that checks and monetary withdrawals must be made payable to all named owners jointly.
Broker-dealers enforce this safeguard to prevent unauthorized diversion of funds by a single owner.
3
Evaluate survivorship rights under Tenants in Common (TIC) registration.
Determine that a deceased TIC owner's specific share (50%) passes to their estate, requiring probate court documentation, rather than transferring to surviving tenants.
Automatic transfer to surviving tenants is a defining feature of Joint Tenants with Rights of Survivorship (JTWROS), not Tenants in Common (TIC).

Key Concept

Operational and Survivorship Distinction between Tenants in Common (TIC) and Joint Tenants with Rights of Survivorship (JTWROS)
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Topics

Customer Account Types and Ownership Structures