Translate words into behavior
Every order trades certainty for control.
Market orders prioritize execution.
A market order seeks prompt execution but does not guarantee a price. A limit order controls price but may never execute.
Stop orders change after a trigger.
A stop order becomes a market order when its stop price is reached. A stop price is a trigger, not a guaranteed execution price.
Registration controls ownership.
Individual, joint, custodial, trust, corporate, and retirement registrations create different ownership, authority, and transfer consequences.
Protection has boundaries.
SIPC addresses missing assets at a failed broker-dealer within legal limits. It does not insure a security’s market value or erase unsuitable advice.
Margin is borrowing.
The broker-dealer lends part of the purchase price against eligible collateral. The customer pays interest and can face maintenance demands or liquidation.
Five original questions
Predict what happens next.
1. A customer enters a sell stop order at 42. Once the order is triggered, it becomes:
- A limit order
- A market order
- A day order
- A buy order
Answer: B — A market order. Execution is likely after the trigger, but the execution price may be below 42 in a fast market.
2. SIPC protection is primarily designed for a customer who:
- Loses money because a stock declines
- Is defrauded by an issuer
- Has assets missing when a broker-dealer fails
- Receives unsuitable investment advice
Answer: C. SIPC helps restore missing cash and securities held by a failed broker-dealer, within statutory limits. It does not insure market value.
3. Under a joint tenants with rights of survivorship registration, a deceased owner’s interest generally:
- Passes through probate
- Escheats to the state
- Passes to the surviving joint tenant or tenants
- Is liquidated immediately
Answer: C. Survivorship means the deceased owner’s interest passes to the remaining owner or owners.
4. A sell limit order at 50 may be executed at:
- 50 or higher
- 50 or lower
- Any available price after triggering
- Exactly 50 only
Answer: A — 50 or higher. A sell limit establishes the minimum acceptable execution price, but execution is not guaranteed.
5. In a margin account, the customer is primarily:
- Lending cash to the broker-dealer
- Borrowing part of the purchase price from the broker-dealer
- Receiving FDIC insurance on securities
- Buying only municipal bonds
Answer: B. Margin lets the customer borrow from the broker-dealer using eligible securities as collateral and paying interest.
Common confusion
Watch the guarantee language.
- A market order does not guarantee price.
- A limit order does not guarantee execution.
- A stop price is not the eventual execution price.
- SIPC is not protection from market loss.
- Account registration is not a decorative label; it changes authority and disposition.
Sources and limits
Mapped to Section 3.
- FINRA SIE Content Outline — Sections 3.1 through 3.3.
- Investor.gov: Types of orders.
- SIPC: What SIPC protects.
Role by Role is independent and is not affiliated with or endorsed by FINRA or SIPC. Educational content is not investment, legal, licensing, or employment advice.