A registered representative (RR) is approached by an elderly client who wishes to make a significant charitable donation directly from their investment account. The client asks the RR to serve as an executor for their will and also to be a signatory on the charity's bank account to ensure the funds are properly managed. What is the most appropriate action for the RR?
- AAccept all roles to provide comprehensive support to the client's charitable intentions.
- BAccept only the role of executor, as it is a common practice for trusted advisors.
- CDecline all requests that involve direct control or signatory authority over client or charity funds.
- DAccept the signatory role on the charity's account, provided the firm approves it as an OBA.
Show answer & explanationAnswer & explanation
Correct answer: C. Decline all requests that involve direct control or signatory authority over client or charity funds.
FINRA rules generally prohibit RRs from having direct control or signatory authority over client funds or assets, or those of a charity where the client is making a donation. Serving as an executor or having signatory authority can create conflicts of interest and expose the RR and firm to significant risks. The RR should decline these requests and advise the client to seek independent legal counsel for estate planning and charitable giving management.
Why the other options are wrong
- A. This would violate multiple FINRA rules regarding control over client funds and conflicts of interest.
- B. Serving as an executor is generally prohibited under FINRA Rule 3270 if it involves managing client assets, unless specifically approved by the firm as an OBA and does not involve control over assets.
- D. Having signatory authority over a charity's bank account, especially one funded by a client, creates significant conflicts of interest and is generally not permissible, even with OBA approval.
Control Over Client Funds (Prohibition)
FINRA rules generally prohibit registered representatives from having direct control or signatory authority over client funds, assets, or accounts, including those of charities funded by clients, to prevent conflicts of interest and potential misuse.
- Prevents conflicts of interest.
- Protects client assets from misuse.
- Includes roles like executor, trustee, or power of attorney unless specific exceptions apply and firm approval is granted.
Memory trick: No direct control, no client funds to roll.