New account form
Name/addy/employer/SSN/DOB
FINRA Rule 2090
Know your customer rule
FINRA Rule 2111
Suitability rule
USA Patriot Act
Verify identity,maintain records,check to see if terrorist
CIP (Customer Identification Program)
Name/DOB/Addy/SSN
Validate identity
Unexpired drivers licence/passport/military id
Each customer must receive copy of account record
Within 30 days of opening account
Regulation SP
Safeguard public records - privacy Gramm-Leach-Bliley Act
Initial privacy notice when opened and annually
Given to customers
Initial privacy notice only
Given to consumers
Regulation S-AM
Limitations on Affiliate Marketing
Suitability Information
income/net worth/tax status/investment objective/risk tolerance
Control Relationship
member controls or is controlled by an issuer of securities
Control Relationship Disclosure
Must be made in writing and disclosed on customer confirmation
DPP (Direct Participation Program)
Flow through tax consequences to investors - high risk, illiquid, long term in nature
DPPs must have
Clearly stated standards - fully explain to customer
DPP Roll Up
Transaction involving the combination or reorganization of one or more limited partnerships into securities
Non Conventional Investments (NCI)
Distressed Debt (corporate bonds from companies who have filed for bankruptcy or look to do so in the near future)
Equity Linked Note (ELI)
nonconventional investment that the final payment at maturity is based, in part, on the return of the underlying equity. No interest given, lump sum at the end.
ELNs report to
TRACE if not listed on a national exchange
Transfer and Ship
Securities are transferred into the customer's name and shipped
Transfer and hold in safekeeping
Securities are transferred into the customer's name but held by broker dealer
Hold in street name
Securities transferred into broker/dealer's name and held but customer is still beneficiary owner
Delivery vs payment (DVP)
Customer instructs the representative to deliver any securities purchased to an agent bank, which will pay the member upon delivery.
Third Party account
Fiduciary Account
Discretionary account
The account owner gives the member trading authorization. Customer signs power of attorney.
Power of attorney revoked
By customer in writing, at any time, and ends on the death or mental incompetence of the customer
Trade is discretionary if member chooses any
action (buy or sell) asset (security) amt (# of shares or dollar)
Not held order
Member chooses the price or timing of an order
Discretionary authority must be approved by
principal before its exercise
Discretionary orders must be approved by
principal promptly after execution
Discretionary accounts must be reviewed by Principal
frequently
Most powers of attorney are
nondurable (cancelled if grantor becomes mentally incompetent or dies)
Tenants In Common (TIC)
Require each party to specify a percentage interest in account.
Tenants In Common (TIC) death
% of account passes to estate not other partner
Joint tenants with right of survivorship (JTWROS)
Account has 100% undivided interest in account
Joint tenants with right of survivorship (JTWROS) death
If one party dies the other party becomes sole owner of account
Transfer on Death (TOD)
Moves % to beneficiary in JTWROS death
Corporate Account
Must obtain corporate charter and corporate resolution
Certificate of Incumbency
Document that appoints an individual to oversee a guardianship account and is good for 60 days