A customer can finish signing an account packet while the firm still lacks permission to accept an options order or lend securities. Each document answers a different question.
You need to know whose money you handle, who may give instructions, and whether your firm has accepted the relationship. Customer agreements establish the account's terms and permissions. The accompanying new-account form supplies customer information and records the firm's acceptance.
Your employer, the broker-dealer (BD), conducts securities transactions for customers or its own account. You act as its agent. A cash account requires the customer to pay for purchases without borrowing from the firm. Even this ordinary account requires customer records and firm acceptance.
The Financial Industry Regulatory Authority (FINRA) requires reasonable diligence to learn and retain essential customer facts when opening and maintaining accounts. These facts let you service the account, follow special handling instructions, understand another person's authority, and comply with applicable requirements. The obligation continues after account opening. FINRA Rule 2090 and Supplementary Material.01
Common mistakes
- Treating a customer's signature as firm acceptance. Rule 4512 requires the designated firm signatory; even a complete customer signature does not fill that role.
- Giving a trusted contact trading power. Meeting the age-18 requirement establishes eligibility as a contact, not authority to place orders.
- Using 30 days for every document. Arbitration-copy delivery uses 30 days; the margin agreement uses “promptly,” and eligible securities lending requires consent first.
Bottom line
- New-account records identify the customer, relevant authority and the firm's acceptance signatory.
- Arbitration clauses require prominent disclosures, a location notice immediately before signing, and a copy within 30 days with receipt acknowledged.
- Arbitration awards are generally final and binding, subject to limited review; state-law compliance waivers are void.
- The NASAA model requires a properly executed written margin agreement promptly after the initial transaction.
Exam shortcut
Identify the action before choosing a deadline: opening, approving, signing, sending, receiving or lending. Then locate the event that starts its clock. Circle “business” when the branch-manager exception appears. Do not silently turn the separate 15-day options deadlines into 15 business days. Check who must act. A customer signs an agreement, a supervisor grants approval, and the firm sends disclosures. One person's completed task cannot replace another person's obligation.
The full lesson (about 3,352 words, 22 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- G16
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