FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationOpening and Maintaining Customer Accounts and Investment RecommendationsMedium
A client is opening a new brokerage account and provides all necessary information, including their name, address, date of birth, Social Security number, and investment objectives. The registered representative completes the new account form. Before any trades can be executed, what final step MUST occur?
- AThe client must fund the account with an initial deposit.
- BThe new account form must be approved by a principal of the firm.
- CThe client must sign the new account form.
- DThe registered representative must send a copy of the new account form to the client.
Show answer & explanationAnswer & explanation
Correct answer: B. The new account form must be approved by a principal of the firm.
Before any transactions can take place in a new account, a qualified principal of the firm must review and approve the new account form. This ensures compliance with regulations and firm policies regarding suitability and customer identification.
Why the other options are wrong
- A. Funding the account is typically required before trades, but the approval by a principal is a prerequisite to accepting and executing those trades.
- C. While client signature is often obtained, it is not universally required by FINRA rules for all account types to open an account, though it is best practice for verification.
- D. Sending a copy to the client is a good practice, but it is not a mandatory step *before* trades can be executed.
New Account Principal Approval
The mandatory step where a qualified principal of a brokerage firm reviews and approves a new account form before any transactions can occur.
- Required by FINRA rules (e.g., Rule 4512).
- Ensures suitability and regulatory compliance.
- Must occur promptly after completion of the form.
Memory trick: Principal's Green Light for Trading