Customer Accounts Flashcards
Opening Customer Accounts
- new account form to gather essential facts
- signed by RR and principal
- principal does NOT need to sign before activity
- customer signature required for margin or options accounts
New Account Documentation
REQUIRED:
- name and residence (not P.O.Box)
- if of legal age
- signature of RR opening account
- signature of principal
REASONABLE EFFORT (prior to settlement date of initial)
- taxpayer ID, such as SSN
- occupation and employer name and address
- where customer associated with another member
- info used to make recs, such as invest back, taxt status, and investment objectives
** Educational background not needed
** if no SSN, IRS requires to withhold a certain percentage
Arbitration Clauses
- many new account forms contain a clause that obligates the customer to submit future disputes with the rep or the firm to binding arbitration
- if included, must be HIGHLIGHTED and preceded by proper disclosure
- copy of agreement must be given to customer and customer must sign form acknowledging receipt
Investment Objective_ Income
- investments that produce steady, reliable stream of cash
- ex: bonds, utility stocks, annuities
Investment Objective_ Growth
- capital appreciation
- ex: common stock
Investment Objective_ Preservation of Capital
- primarily concerned with safety
- ex: US Treasury bills or money- market mutual funds
Investment Objective_ Tax Relief
- high income earners who are subject to higher taxes
- ex: muni bonds, or tax deferred investments
Investment Objective_ Risk Tolerance
- comfort level with risk
Investment Objective_ Time Horizon
- short and long term liquidity needs
Individual Account
- opened by and for one person
- only authorized person, unless third party is authorized
Joint Account
- more than one owner for record
- each owner can initiate activity, however all signature required and check should be to all parties
- new account info for each owner should be obtained
- however, ONE account number and ONE social
Joint Tenants with Right of Survivorship vs. Tenants in Common
JTWROS: both own jointly, one dies, other gets whole
TIC: ownership may be proportional to tenant’s contribution and deceased owner’s interest will pass to estate
Corporate Accounts
- RR must be sure person opening account for corporation is authorized to do so, by obtaining a copy of the corporate resolution
Partnership Accounts
- information about each partner must be obtained
- all partners should sign where necessary and a copy of partnership agreement should be kept on file
- partnership must also specify which partners are authorized to execute transactions
Fiduciary Accounts
- someone who acts on behalf of and for the benefit of someone else
- fiduciaries should provide documentation of their authority
Accounts for Incompetents
- incompetents are persons who have been declared by a court as unable to handle their own affairs
Accounts for Minors
- member firms will not allow minor to open an account in their own name
- accounts for minor opened under Uniform Gifts to Minors Act:
- adult donor gives an irrevocable gift of cash or securities to a minor and appoints an adult to act as custodian
- only one minor and one custodian per account
- ** account may be in minors SSN
- may not be margin accounts and uncovered short prohibited
- if custodian dies, court will appoint new one
- when minor turn 18, custodian should transfer the securities to the beneficial owner’s individual name
Trading Authorization
- power of attorney allowing a designated person to trade the account
- broker dealer must receive a written trading authorization signed by the account owner PRIOR to permitting the authorized person to trade in the account
- firm should also obtain signature of each authorized person and the date the trading authority was granted
Discretionary Accounts
- when the RR is the authorized third party, account generally referred to as a discretionary account
- if firm permits this, customer and principal must approve the discretionary authorization in writing BEFORE it become effective
RR May Accept Verbal Authorization When…
customer:
- selects the specific security
- decides whether to buy or sell the security
- specifies the number of shares, leaving discretion only as to TIME and/or PRICE
