A widow inherits her late husband's IRA, a small business owner wants a SEP, and a couple in Texas asks how to title a joint account. Three openings, three registration rules, three tax outcomes. Pick wrong and the firm has a compliance and a tax problem.
Before opening, you must inform the customer of the account type and any restrictions. A prime brokerage account lets an institution clear and custody trades through one firm while executing elsewhere. An advisory or fee-based account charges a flat or asset-based fee instead of commissions, suiting active accounts.
Registration determines who owns and controls the assets.
KEY: Tenants in common has no survivorship. A deceased owner's share goes to the estate, unlike joint tenants with right of survivorship.
FINRA Rule 4512 requires customer account information: name, address, tax ID, and whether anyone holds trading authority. For discretionary accounts, written authorization is mandatory.
Rule 4514 bars drawing checks or negotiable instruments against a customer account without prior written authorization.
Common mistakes
- Confusing transfers and rollovers. Direct transfers are unlimited; indirect IRA rollovers are limited to one per 12 months.
- Missing the 60-day window. Funds not redeposited within 60 days become a taxable distribution.
- Forgetting RMD age. RMDs begin at 73, not 70½ or 72, for Traditional IRAs.
Bottom line
- FINRA Rule 4512 requires firm to record name, address, identity, and (for discretion) written authorization; the customer must sign nothing to open a cash account
- Rule 4514 requires written authorization before drawing negotiable instruments from a customer account
- Rule 4515 requires principal approval and recordkeeping before any change in account name or designation
- Traditional IRA 2026 limit $7,000 ($8,000 if age 50+); RMDs begin at age 73; 10% penalty on withdrawals before 59½
Exam shortcut
Penalty before 59½, RMD at 73. Memorize the two age numbers together. "One per year" tells you it's an indirect rollover; transfers have no limit. ERISA = private employers; government 457 and church plans are outside ERISA. Grandchildren are the SECURE Act's favorite distractor. Age and financial independence never matter.
The full lesson (about 1,938 words, 13 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- B3
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