FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationOpening and Maintaining Customer Accounts and Investment RecommendationsMedium
A client is opening a new account and provides all necessary information, including their investment objectives, risk tolerance, and financial situation. Which of the following individuals is ultimately responsible for approving the new account for opening?
- AThe compliance department manager.
- BA principal of the broker-dealer.
- CThe registered representative.
- DThe client.
Show answer & explanationAnswer & explanation
Correct answer: B. A principal of the broker-dealer.
According to FINRA rules, a principal (a qualified supervisor) of the broker-dealer is ultimately responsible for reviewing and approving all new accounts. The registered representative gathers the information, but the principal gives the final authorization.
Why the other options are wrong
- A. While the compliance department oversees policies, a principal has the direct responsibility for account approval.
- C. The registered representative collects the information but does not have the authority to approve the account.
- D. The client opens the account, but does not approve it from the firm's perspective.
New Account Approval
The formal process by which a qualified supervisor (principal) of a broker-dealer reviews and authorizes the opening of a new customer account.
- Ensures all required information has been collected.
- Verifies the account is suitable for the customer.
- Must be done promptly after the first transaction.
- A principal's signature is required on the new account form.
Memory trick: Rep collects, Client signs, Principal approves, then it shines.