Chapter 2 - Account Basics Flashcards
What four pieces of basic information is needed to open a new account for a client?
Customer Name
Address
Social Security Number or Tax I.D Number
and
Date of Birth.
What are the two ways a firm may verify the identity of a new account applicant?
- Matching the information with a valid, government issued ID.
- or- - “Non-documentary method” - the firm verifies the information with a consumer credit company.
What 7 pieces of information are requested on the New Account form?
- Customer name and address
- Customer date-of-birth
- Customer social security number
- Cash or Margin account?
- Occupation
- Citizenship
- Officer, director, or 10%+ equity shareholder?
The required verification of customer identity is called the _____________.
“CIP” (Customer Identification Program)
True or False
Not all clients must be informed that the firm has a Customer Identification Program (CIP).
False
At account opening, each customer must be notified that the firm has a “Customer Identification Program” and that it will be requesting information to help fight funding for terrorism or money laundering activities.
A firm’s Customer Identification Program is intended to prevent what two activities?
- Funding of terrorist activity
2. Money laundering activity
True or False
Each customer must be notified in writing at the time that the account is opened that the account is covered by FDIC (Federal Deposit Insurance Corporation) insurance.
False.
Each customer must be notified in writing at the time that the account is opened that the account is covered by SIPC (Securities Investor Protection Corporation) insurance.
True or False
Each customer must be notified in writing at the time that the account is opened that the account is covered by SIPC (Securities Investor Protection Corporation) insurance.
True
SIPC insures customer accounts against what?
Broker-dealer failure
True or False
SIPC insures customer accounts against broker-dealer failure.
True
True or False
The notice regarding SIPC that is sent to clients at the time of account opening must state that information may be obtained about SIPC, including a copy of the SIPC brochure, by contacting SIPC.
True
The notice must provide the address and telephone number of SIPC.
In addition, this information must be made available to customers annually thereafter.
True or False
The notice regarding SIPC that is sent to clients at the time of account opening must state that information may be obtained about SIPC, including a copy of the SIPC brochure, by request from the broker-dealer.
False.
The notice regarding SIPC that is sent to clients at the time of account opening must state that information may be obtained about SIPC, including a copy of the SIPC brochure, by contacting SIPC.
The notice must provide the address and telephone number of SIPC.
In addition, this information must be made available to customers annually thereafter.
If a FINRA member includes a predispute arbitration agreement, it must be _____________ and must include language that explains that:
the customer is giving up his or her right to sue;
arbitration is final and binding;
arbitrators do not have to explain the reasons for their award;
arbitration panels include a minority of individuals who were, or are, affiliated with the securities industry.
Highlighted
True or False
If a FINRA member includes a predispute arbitration agreement, it must be highlighted and must include language that explains that:
the customer is giving up his or her right to sue;
arbitration is final and binding;
arbitrators do not have to explain the reasons for their award;
arbitration panels include a minority of individuals who were, or are, affiliated with the securities industry.
True
True or False
FINRA requires that within 60 days of signing an arbitration agreement as part of the account opening process, the customer must be provided with a separate “stand-alone” copy of the predispute arbitration agreement, and the customer must sign an acknowledgment of receipt of the copy of the agreement.
False.
FINRA requires that within 30 days of signing an arbitration agreement as part of the account opening process, the customer must be provided with a separate “stand-alone” copy of the predispute arbitration agreement, and the customer must sign an acknowledgment of receipt of the copy of the agreement.
True or False
FINRA requires that within 30 days of signing an arbitration agreement as part of the account opening process, the customer must be provided with a separate “stand-alone” copy of the predispute arbitration agreement, and the customer must sign an acknowledgment of receipt of the copy of the agreement.
True
FINRA requires that within ________ days of signing an arbitration agreement as part of the account opening process, the customer must be provided with a separate “stand-alone” copy of the predispute arbitration agreement, and the customer must sign an acknowledgment of receipt of the copy of the agreement.
30
In addition to the SIPC information, what else must the customer be provided with a copy of?
(3 things)
- Firm’s privacy statement
- Firm’s business continuity plan
- BrokerCheck contact information
FINRA rule 2090 is also known as what?
The “Know Your Customer” rule
Which FINRA rule states that the registered representative and the member firm must use reasonable due diligence to know and retain the “essential facts” relative to every customer?
FINRA rule 2090 - the “Know Your Customer” rule
The “Know Your Customer” rule (Rule 2090) requires firm’s to retain essential facts regarding a client. These essential facts are required for what?
(4 things)
- effectively service the customer’s account;
- act in accordance with any special handling instructions for the account;
- understand the authority of each person acting on behalf of the customer; and
- comply with applicable laws, regulations and rules.
True or False
The registered rep must sign the new account application for each account opened.
False.
There is no requirement for the registered rep to sign the new account application unless he completed a suitability determination.
The manager who approves the application is required to sign the document.
When must a registered representative sign a new account form?
If the rep completes a suitability determination, his signature is required on the new account form.
True or False
A customer’s signature is required on the new account form.
False.
Client signature is not required unless the account being opened is a discretionary account.