A new account form can be complete and still be wrong. The applicant may not be who they claim, the money may be dirty, and the data you collected may leak. Your approval signature sits on all of it.
When you supervise new account opening, you are the checkpoint between a representative's paperwork and the markets. Your acceptance tells regulators that a principal reviewed the account under the firm's written procedures. The ongoing maintenance of existing accounts keeps you responsible as addresses, objectives and authorized persons change.
Rules of the Financial Industry Regulatory Authority (FINRA) set what the firm must know about customers and how accounts are named, statemented and transferred. Exchange Act Section 17 requires broker-dealers to make, keep and file the records and reports the Securities and Exchange Commission (SEC) prescribes, and opens them to examination. Exchange Act Rule 17a-3 lists the records, and Rule 17a-4 sets how long to keep them.
KEY: FINRA Rule 2010 (standards of commercial honor and principles of trade) is the catch-all. Forging a signature on an account-change form, misusing customer data or stalling a transfer violates...
Common mistakes
- Swapping the AML triggers. Using $10,000 as the SAR threshold is the classic wrong answer (see the DECISION box).
- Treating every gap as a stop sign. Only CIP gaps block opening (see the account-information table).
- Choosing a conflicted tester. Anyone doing the tested work, the AML compliance person and anyone reporting to either are out.
Bottom line
- Rule 4512 requires name, residence, legal age, responsible representative, principal acceptance and reasonable efforts to get a trusted contact age 18 or older; institutional accounts (listed institutions or $50 million in total assets) skip the representative and trusted contact.
- Rule 17a-3(a)(17) requires the account record to the customer within 30 days of opening and every 36 months, and notice of name, address or objective changes within 30 days; account records last six years after closing, exception reports 18 months.
- Rule 2231 statements go out at least quarterly and reach third parties only on written instruction while the customer still gets them; Rule 3250 allows a numbered account only with a signed ownership statement.
- CIP collects name, date of birth, street address and taxpayer ID before opening (a pending taxpayer ID may follow), verifies within a reasonable time and keeps records five years.
Exam shortcut
$5,000 signals a SAR, more than $10,000 in cash signals a CTR, and 72 hours signals a vendor. Thirty days signals a SAR deadline, a breach notice or an account-change confirmation. Eighteen months signals exception reports, and 10 business days signals OFAC. On transfer questions, reject any choice that lets the carrying member delay over a disputed balance.
The full lesson (about 4,921 words, 33 min read) adds 2 worked examples, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- C10
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