The riskiest moments in an account's life come after it opens. A new address, a death, a wire to a stranger or a move to another firm can each send money to the wrong person. So each event has its own rule and its own clock.
You gather the customer's information, but you cannot accept the account yourself. A principal is a registered supervisor qualified to approve business for the firm. Under Financial Industry Regulatory Authority (FINRA) Rule 4512, a principal accepts each new account in writing under the firm's procedures. Securities and Exchange Commission (SEC) Rule 17a-3(a)(17) adds that the account record must show whether you signed it and whether a principal approved it.
Supervision belongs where the decisions are made. An office where final acceptance of new accounts happens is an office of supervisory jurisdiction (OSJ) under FINRA Rule 3110, and it needs a designated principal. For accounts that may trade municipal bonds, Municipal Securities Rulemaking Board (MSRB) Rule G-27 requires a designated principal's prompt written approval.
Common mistakes
- A 3-day validation, 6-day ACATS clock: The carrying firm has one business day to validate or take exception, then three business days after validation to finish.
- Notice to the new address: Name and address notices go to the old address or each joint owner, plus the representative.
- Treating Rule 2165 as mandatory or withdrawal-only: The firm may hold, and holds reach trades as well as disbursements, for at most 15 + 10 + 30 = 55 business days.
Bottom line
- A principal accepts every new account in writing; a branch manager who is neither an ROP nor a General Securities Sales Supervisor needs an ROP or a General Securities Sales Supervisor to approve or disapprove an options approval within 10...
- The account record goes to the customer within 30 days of opening and at least every 36 months; updated information is kept six years.
- Name or address change notices go to the old address or each joint owner, plus the representative, within 30 days; objective changes bring an updated record within 30 days.
- On a death, freeze the account and collect the death certificate, letters testamentary or of administration, and affidavit of domicile; JTWROS passes to the survivor.
Exam shortcut
When a stem shows assets leaving an account, ask three questions in order. Where is it going? A third party, outside entity or non-home address means procedures for confirmation, notification or follow-up that can be documented. Whose is it? A customer 65 or older, or impaired, opens the Rule 2165 hold. Was it paid for?
The full lesson (about 3,616 words, 24 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- B10
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