FINRA Series 7Opens Accounts and Evaluates Customer ProfileEasy
A registered representative is opening a new account for a 78-year-old customer. Under FINRA rules, the firm must make reasonable efforts to obtain the name and contact information of a trusted contact person. Which statement about the trusted contact person is TRUE?
- AThe trusted contact must be a joint owner on the account
- BThe firm may contact the trusted contact only after obtaining a court order
- CThe firm may contact the trusted contact to address possible financial exploitation or to confirm the customer's current contact information
- DProviding trusted contact information is mandatory before any account can be opened
Show answer & explanationAnswer & explanation
Correct answer: C. The firm may contact the trusted contact to address possible financial exploitation or to confirm the customer's current contact information
FINRA Rule 4512 requires firms to make reasonable efforts to obtain a trusted contact's information, which allows the firm to reach out regarding suspected exploitation, cognitive decline, or to verify the customer's whereabouts. Providing a trusted contact is not mandatory to open the account, and no court order is needed.
Why the other options are wrong
- A. A trusted contact is not an account owner and has no ownership or trading authority.
- B. No court order is required; the firm can contact them proactively.
- D. The customer may decline to provide this information; it is only required that the firm make reasonable efforts to obtain it.
Trusted Contact Person
A person the firm may contact regarding a customer's account to address possible financial exploitation, confirm contact details, or address health concerns.
- Firm must make reasonable efforts to obtain, not mandatory for customer to provide
- Not an account owner and has no trading/transaction authority
- Used to protect against exploitation of vulnerable adults
Memory trick: Trusted contact = 'Tip line' for elder protection, not a co-owner.