General Securities Representative (Series 7) Practice Exam

When must the OCC disclosure document be provided to a client?

1. After an account is opened

2. Prior to opening an account or entering any order

3. Only if requested by the customer

4. Upon receipt of an options agreement

The correct answer is: Prior to opening an account or entering any order

The OCC (Options Clearing Corporation) disclosure document is a critical piece of information that must be provided to clients prior to opening an options account or entering any order related to options trading. This requirement ensures that clients are well-informed about the risks associated with options trading, enabling them to make educated decisions before they commit to trading strategies that could lead to significant financial consequences. Issuing the disclosure document before the establishment of the account or the execution of orders allows clients to review and understand the necessary information regarding options trading, including the nature of the products, potential risks, and the need for suitable investment strategies. This proactive approach enhances investor protection, as clients can assess their suitability and risk tolerance before engaging in these complex financial products. Receiving the document only after an account is opened, upon request, or upon receipt of an options agreement would not fulfill the regulatory requirement to ensure that clients are adequately warned of the potential risks before beginning their activity in options trading. Thus, providing it before any trading activity is essential for compliance and maintaining responsible trading practices.