Account Registration

When opening a brokerage account, firms must collect and maintain specific customer information. FINRA Rule 4512 governs these requirements.

FINRA Rule 4512: Customer Account Information

FINRA Rule 4512 requires broker-dealers to obtain and maintain "essential facts" about each customer account.

Required Information for All Accounts

Additional Information for Margin Accounts

Beyond basic requirements, margin accounts require:

• Net worth
• Annual income
• Investment experience
• Investment objectives
• Signed margin agreement

Trusted Contact Person (TCP)

FINRA Rule 4512 requires firms to make reasonable efforts to obtain a Trusted Contact Person for non-institutional accounts.

TCP Requirements

When Firms May Contact TCP

• Address possible financial exploitation
• Confirm customer contact information
• Confirm health status
• Identify legal guardian or power of attorney

Important: The TCP is NOT authorized to transact in the account. They are only a contact resource.

Purpose of TCP Rule

The TCP provision helps protect investors, especially seniors, from:

• Financial exploitation
• Diminished capacity issues
• Unauthorized account access

Know Your Customer (KYC)

The Know Your Customer rule requires firms to:

1. Use reasonable diligence to know the customer
2. Understand essential facts about the customer
3. Know the customer's financial situation and needs

Essential Facts Include:

Customer Identification Program (CIP)

Under the USA PATRIOT Act, firms must verify customer identity:

CIP Requirements

Acceptable ID Documents

• Driver's license
• Passport
• State-issued ID
• Military ID

Account Documentation

New Account Form

Contains all required customer information:

• Personal information (name, address, DOB)
• Employment information
• Financial information
• Investment profile
• Signatures

Customer Agreement

Outlines terms and conditions including:

• Rights and responsibilities
• Fee schedules
• Arbitration agreement
• Margin disclosure (if applicable)

Required Signatures

Account Approval Process

Steps to Open an Account

1. Application - Customer completes new account form
2. Verification - Firm verifies identity (CIP)
3. Review - Associated person reviews for completeness
4. Approval - Principal (supervisor) approves
5. Documentation - Customer receives copies

Principal Approval

A registered principal must approve:

• New account openings
• All trades in the account (typically)
• Changes to account information

Record Retention Requirements

FINRA and SEC rules specify retention periods:

Note: "Maintain" = current/in-use records. "Preserve" = no longer current records.

Account Updates

When Updates Are Required

• Customer notifies firm of changes
• Annual review/verification
• Before making recommendations
• When circumstances indicate changes

Information That May Change

• Address
• Employment status
• Income/net worth
• Investment objectives
• Risk tolerance

Institutional vs. Non-Institutional Accounts

Different requirements apply based on account type:

Institutional Account (per FINRA)

Includes accounts of:

• Banks and insurance companies
• Registered investment companies
• Registered investment advisers
• Entities with $50+ million in assets

Different Treatment

Account Transfer (ACATS)

The Automated Customer Account Transfer Service (ACATS) enables account transfers between broker-dealers:

Key Takeaways

• FINRA Rule 4512 requires essential customer information
• Trusted Contact Person protects vulnerable investors
• CIP verifies identity under USA PATRIOT Act
• Principal approval required for new accounts
• Records must be maintained for 6 years
• Updates required when circumstances change