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👥 Customer Accounts · Lesson 1 of 8 · 5 min

Opening an Account: Know Who You Are Serving

📝 A new account form looks like paperwork. It is really the firm's first line of defense against fraud, bad recommendations and elder abuse.

💡 Key idea

Rep gathers the facts, a principal accepts the account in writing. A missing trusted contact does not block the account, but the firm must try to get one.

🧠 Why it matters

FINRA Rule 4512 lists what a firm records for every account: the customer's name and residence, whether the customer is of legal age, the rep responsible, and the signature of a partner, officer or manager accepting the account. For retail accounts the firm also makes reasonable efforts to get the tax ID, occupation and employer, and whether the customer works for another FINRA member. Rule 2090 (Know Your Customer) requires due diligence on the essential facts of every customer. The CIP rule adds four identity items: NDAI, Name, Date of birth, Address, ID number. The firm must also make reasonable efforts to get a TRUSTED CONTACT PERSON (age 18+). Example: a customer declines to name one; the account can still be opened.

📈 In the real world

🪪 Priya, a fictional new customer, opens a brokerage account online. The form asks for her employer, and she checks a box saying she works at another broker-dealer. That answer triggers a separate process at both firms. She leaves the trusted contact blank; the firm explains why it asks, records her choice and opens the account.

📌 Takeaways

  • 4512: name, residence, legal age, rep, and principal acceptance signature
  • CIP identity items: Name, Date of birth, Address, ID number (NDAI)
  • Trusted contact: reasonable efforts required; refusal does not block the account

📖 Terms in this lesson

Customer identification program (CIP): Required verification of a new customer's name, date of birth, address and identification number when an account is opened.

Know your customer (KYC): FINRA Rule 2090: use reasonable diligence to know the essential facts about every customer, starting at account opening.

Trusted contact person: Someone a firm may contact about a customer's account, for example over suspected exploitation; firms must make reasonable efforts to obtain one.

✅ Test yourself

Who must sign to show a new account was accepted under the firm's policies?
  1. The customer's spouse or co-owner
  2. A partner, officer or manager
  3. The firm's outside auditor
  4. The customer's trusted contact

Answer: B · A partner, officer or manager

Rule 4512 requires the signature of a partner, officer or manager (a principal) evidencing acceptance. A trusted contact has no authority over the account, and auditors and spouses play no role in acceptance.

A customer refuses to name a trusted contact person. What happens?
  1. The firm cannot open the account
  2. The firm names one for the customer
  3. The account may still be opened
  4. The account must be cash-only

Answer: C · The account may still be opened

The firm must make reasonable efforts to obtain a trusted contact, but missing information does not prevent opening or keeping the account. The firm never picks one on the customer's behalf.

Which item is one of the four CIP identity items for an individual?
  1. Date of birth
  2. Net worth
  3. Investment objective
  4. Annual income

Answer: A · Date of birth

CIP requires name, date of birth, address and an ID number (NDAI). Income, net worth and objectives are suitability profile facts, not identity verification items.

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