Flashcards in Opening Customer Accounts Deck (39):
Five requirements for a new customer account
Residence (not PO box)
Legal age y/n
Name of RR
Signature of partner or principal
Before settlement date of first transaction, RR must make reasonable effort to obtain...
Taxpayer ID number
Occupation and employer name and address
Whether customer associated with another member
(Except for institutional accounts or where only transactions are non recommended investment co shares (ie. Mutual funds)
Institutional account is
Savings and loan
Registered investment company
Registered investment advisor
Person with total assets >$50m
Record keeping requirement
6 years from last update or date account closed
Additional non-enforceable SEC record info
Net worth excluding principal residence
Can a principal refuse to open an account if there's insufficient information to assess suitability?
Is educational background required information?
Is suitability or profitability the determinant of fair dealing?
(Based on information disclosed)
Customer agreement to a recommendation does not make it automatically suitable
What are the three main suitability obligations?
Reasonable basis (recommendation suitable for at least some customers)
Quantitative obligation (series of recommended transactions not excessive)
Of the three suitability obligations - which does not apply to institutional customers?
Customer specific - provided there's a reasonable basis for assuming institution is capable of evaluating and it has affirmatively stated it is exercising independent judgement.
What are blue sky laws in relation to customer accounts?
If a customer moves to a new state, firm must be registered there
What's difference between tenants in common and joint tenants with rights of survivorship?
On death of a tenant, open orders are cancelled and deceased's assets frozen until executor intervenes. Each share goes to individual estates.
JTWROS sees entire account go to survivor.
What different documents are needed for a margin account than for a cash account?
Written margin agreement so bank can pledge securities as collateral
What documents does a discretionary account require?
Written power of attorney
If an instruction is to buy/sell a specific amount of security, with price and time left open, is it discretionary?
No - but must be executed that day
Key aspects of a custodian (for a minor)'s fiduciary duty?
Act as "prudent man"
No speculative investments
No trading on margin
(Note no liability for losses if all of these are followed)
An account for "James Doe TOD John Doe" means...
Transfer on death, avoiding probate, but still subject to estate taxes
When a receiving firm initiates a customer account transfer, what happens?
Sends request to carrying firm
Carrying firm cancels open orders, closes to new orders
Within three days of validation, complete the transfer
What are firm obligations on opening an account for an RR of another member firm? (List three)
1. Notify other firm
2. Send duplicate confirmations and statements if requested
3. Notify the RR that it will do this
(Once approved to open an account, executing firm does not need prior approval for any orders)
What are RR requirements when opening an account with a firm other than his employer?
Where account is with a FINRA member, notify employer and executing firm.
What is FinCen Form 104?
Currency Transaction Report or CTR for any transaction over $10k or cumulative total of $10k in any one day
What is the trigger for a CMIR?
Transporting more than $10k in or out of the US
What's the trigger for a SAR?
Transaction or group of transactions of $5k or more where there is suspicion of violating federal laws, illegal activity, structuring to evade reporting, or transaction has no apparent or legitimate business purpose
What are four features of a mandatory AML Compliance Program?
Designated compliance officer
All should be approved by a member of senior management
What is required under a CIP?
Customer Identification Program:
Date of birth
ID number (tax ID, passport for non US citizen, alien ID card number...)
Retain for five years post closing account / check against Treasury OFAC lists
What is needed at opening of a COD account?
Special delivery instructions to the bank and assurance that bank will be given notice and instructions for each transaction
(Securities must be delivered promptly - no later than 35 days post trade)
What's the minimum frequency for statements?
BD may hold for up to two months when travelling domestically, and three months travelling abroad
Longer if valid reason provided
What happens to a PoA on death?
Is a spousal IRA a joint account?
If a BD is underwriting an issue, can it purchase that issue in a discretionary client account?
Yes, if suitable, but must notify customer in writing prior to completing the transaction
When must privacy notices be sent?
When an account opened and annually thereafter.
What's the status of gifts to a UGMA or UTMA account?
Irrevocable. Become property of the minor.
Custodian cannot receive management fee if they made the gift into the account.
What's required for opening a corporate account?
- corporate charter
- corporate resolution
- new account form
Can covered call writing be executed in a minor's account?
Yes. Along with purchasing new issues.
No margin account activity or long or short futures positions.
What happens to UTMA account at age of majority?
Account transfers to individual's name. Securities transferred into their name.
Cannot continue as custodial account (third party trading authorisation could be granted)
Can RR share in profits and losses?
Yes, with permission, and in direct proportion to contribution (exemption from proportion requirement if the account is with family member)
What's an affidavit of domicile used for?
Transfer securities owned by a dead person
Can a UTMA custodian sign a power of attorney granting an RR authorisation on an account?