Ch6 Comm w Customer & Prospect

Question 1

Fee disclosure-
when provided & notice of update

What is not on the fee disclosure

Answer 1

Provided at account opening (also easily accessible on website)
Fee updates must be communicated at least 30 days prior to the change

Not on FEE DISCLOSURE
-commission (if agency capacity)
-markup or markdown (principal)
-advisory fee

Question 2

IA brochure-

When provided

What’s included

Answer 2

Brochure= Form ADV
Part 2A (advisor)
Part 2A Appendix 1(wrap fees)
Part 2B (bodies)

Written acknowledgment of receipt recommended, especially if additional comp (besides fees) & sale of proprietary products
* * * * *
Provide when advisory agreement signed, if 5bz day free look.
[If no free look, then at least 48 hrs before agreement signed]

Update to Admin within 90 days of end of fiscal year

Update to clients within 120 days of end of fiscal year unless:
-no material changes
-no personalized advice, <$500 fees
-client is investment company
* * * * *
Info included:
P.48-49
P. 114
Disciplinary action (10yrs) included SRO fines > $2500, or limitations

Question 3

Electronic delivery of “brochure”

Initial delivery

Subsequent delivery

Answer 3

Initial delivery-
Verification of receipt by client

Subsequent delivery-
E- consent (get prior consent for e-delivery)

-Standard format
-Format that client may retain
-Supervisory procedures re: folks sending the info to prevent violations

Question 4

Guarantee of performance

Performance based comp

Answer 4

Guarantee of returns or gains= prohibited 🚫

Performance based comp= prohibited 🚫 unless qualified client
-$1.1million AUM
- > $2.2million is assets (excluding primary residence)

P.119

Note: when computing fee, consider
Gains (realized & unrealized)
Losses (realized & unrealized)

Question 5

New brokerage account agreement

Answer 5

Legal capacity
Employment
CIP (name, DOB, phys address, TIN)
Citizenship (visa info)
Financial info

Approved/signed by principal

Question 6

Margin agreement

Margin acc risk disclosure

Answer 6

Margin agreement must be secured from customer after initial tsxn
Credit agreement
Hypothecation
Loan consent (optional)

Margin acc risk disclosure at opening & annually

Question 7

Options account

ODD

Options Account agreement

Answer 7

ODD (published by OCC) provided no later than account approval by Registered Options Principal

Besides brokerage acc info, also get investment experience & knowledge

Options must be paid in full, even if purchasing in a margin account

Signed options account agreement must be received from customer within 15 days of approval to do anything other than close initial positions.
Says: received ODD, bound by rules of OCC/FINRA

Account approval lists:
Date ODD provided
Types of tsxns approved
Agent assigned
Principal approving
Approval date
Acc info verification date(s)