A new client wires $30,000 and signs the new-account form, but no registered principal has approved the account yet. Until that signature lands, the account is not properly opened, and the cash sits in limbo.
You gather the customer's financial profile first: income, net worth, tax status, investment objectives, risk tolerance, and time horizon. That profile drives suitability. Only a registered principal (Series 24 or, for a Series 6 firm, an appropriate principal) can approve the account.
The approval is documented by signature and date on the new-account form. Approval may come before the first trade or promptly after the first transaction, but it must be a deliberate, recorded review, not a rubber stamp.
KEY: The opening rep cannot self-approve. A separate registered principal evaluates the profile and signs.
The new-account record names the customer, the rep, the approving principal, and the customer's objectives. For most accounts you reverify and update the profile at least every 36 months. Material changes (job loss, retirement, divorce) trigger an update sooner.
Common mistakes
- Letting the opening rep approve the account. Only a separate registered principal can approve; self-approval is never valid.
- Thinking approval must precede the first trade. It can come promptly after the first transaction, typically by the next business day.
- Confusing 3110 and 3120. 3110 builds the supervisory system; 3120 tests and reports on it annually.
Bottom line
- A registered principal must approve every new account, in writing, promptly after the first transaction (or before).
- The new-account record captures the customer's financial profile and investment objectives; updates are reverified at least every 36 months.
- FINRA Rule 3110 requires a written supervisory system; Rule 3120 requires a yearly test of that system's controls.
- MSRB Rule G-27 is the municipal-securities parallel to Rule 3110 for firms dealing in munis and 529 plans.
Exam shortcut
See "who signs the new account?" Pick a registered principal other than the opening rep, before or promptly after the first trade. See a held security with no forwarding. The deadline is noon of the next business day. Match the rule fast: 3110 = build supervision, 3120 = test it yearly, G-27 = municipals.
The full lesson (about 1,355 words, 9 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- B6
Browse all free Series 6 lessons or jump into free Series 6 practice questions.