A registered representative (RR) is reviewing their firm's policy on personal securities accounts. The policy states that RRs must obtain prior written consent from their employer before opening an account at another financial institution where securities transactions may be effected. This requirement is primarily in place to enable the firm to:
- AVerify the RR's compliance with personal tax reporting obligations.
- BTrack the RR's net worth for financial stability assessments.
- CMonitor the RR's personal investment performance for training purposes.
- DEnsure the RR is not engaging in insider trading or other prohibited activities.
Show answer & explanationAnswer & explanation
Correct answer: D. Ensure the RR is not engaging in insider trading or other prohibited activities.
FINRA Rule 3210 (Accounts at Other Financial Institutions) requires RRs to obtain prior written consent from their employer before opening an account at another financial institution. This rule is designed to allow the employer to supervise the RR's personal trading activities to prevent conflicts of interest, front-running, insider trading, and other unethical or illegal practices.
Why the other options are wrong
- A. Tax reporting is the RR's personal responsibility, not the firm's primary concern under this rule.
- B. Assessing net worth is not the primary regulatory purpose of monitoring outside brokerage accounts.
- C. While performance might be observed, it's not the primary reason for this regulatory requirement.
FINRA Rule 3210 (Accounts at Other Financial Institutions)
Requires registered representatives to obtain prior written consent from their employing firm before opening a securities account at another financial institution and to arrange for duplicate statements and confirmations to be sent to their employer.
- Prevents conflicts of interest and insider trading.
- Ensures proper supervision of personal trading.
- Applies to accounts where securities transactions can be effected.
Memory trick: Outside accounts? Get consent, prevent dissent.