3.h Flashcards
(7 cards)
What is the main purpose of SEC Regulation S-P?
To require financial institutions to protect the privacy of their customers’ “nonpublic personal information” (NPI). Firms must have safeguards to protect customer information from unauthorized access.
What is considered “nonpublic personal information” (NPI)? Give a few examples.
NPI is personally identifiable financial information that is not publicly available.
Examples:
* Social Security number
* Driver’s license number
* Account numbers
* Security codes (passwords)
When must a firm provide a customer with its privacy notice?
A firm must provide a privacy notice:
1. At the time the relationship is established (e.g., when a new account is opened).
2. Annually thereafter.
What right does Regulation S-P give customers regarding their NPI? What is a key requirement for the opt-out method?
It gives customers the right to opt out of having their NPI shared with nonaffiliated third parties. The method for opting out must be simple.
(e.g., a postage-paid reply card is okay; requiring the customer to write their own letter is not).
What does it mean to “hold securities in street name”?
The securities are registered in the broker-dealer’s name, but the customer is the beneficial owner. This is the most common method of holding securities as it makes transferring them easier. The customer still retains all rights of ownership.
What is a “Delivery versus Payment” (DVP) instruction and who typically uses it?
DVP is a settlement method where securities are delivered to a bank or depository only after payment has been made. It is essentially a cash-on-delivery (COD) for securities.
This method is normally used for institutional accounts.
Under what conditions can customer statements and confirmations be sent to a third party (like someone with a power of attorney)?
This is allowed only if:
1. The customer requests it in writing.
2. Duplicate confirmations are also sent to the customer.
