Securities Industry Essentials (SIE) ExamUnderstanding Trading, Customer Accounts, and Prohibited ActivitiesMedium
A customer wants to open a new brokerage account but refuses to provide their Social Security number. Under FINRA rules, what action must the registered representative take?
- AObtain a notarized statement from the customer explaining the refusal.
- BOpen the account as requested, noting the refusal.
- CInform the customer that the account cannot be opened.
- DOpen a cash account but prohibit margin trading.
Show answer & explanationAnswer & explanation
Correct answer: C. Inform the customer that the account cannot be opened.
Under the USA PATRIOT Act and FINRA rules, financial institutions are required to collect specific identifying information, including a Social Security number or Taxpayer Identification Number, to verify the identity of new customers. Without this information, an account cannot be opened.
Why the other options are wrong
- A. A notarized statement does not substitute for the required identifying information under federal law.
- B. Opening an account without a Social Security number is a violation of customer identification rules.
- D. The type of account (cash vs. margin) does not negate the requirement for a Social Security number.
Customer Identification Program (CIP)
A program required by the USA PATRIOT Act for financial institutions to verify the identity of customers opening new accounts. It aims to prevent money laundering and terrorist financing.
- Mandatory for all new accounts.
- Requires collection of name, date of birth, address, and SSN/TIN.
- Identity must be verified through reliable sources.
Memory trick: CIP: Can't Invest without Proof.