Introduction

Welcome to Customer Agreements and Account Types: the unit covering the rules for how firms open, document, and manage customer accounts, from basic cash accounts through margin and options trading.

Exam Weight: Part of Communication with Customers and Prospects (20%, 12 questions)

What You'll Learn

In this unit, you'll cover:

• Required Product Disclosures: Which disclosure documents apply to which products (prospectus, ODD, official statement)
• Unlawful Representations: Why registration never equals approval under USA Section 405
• Performance Guarantees Prohibition: The line between describing product features and making prohibited guarantees
• New Account Requirements: FINRA Rule 4512, trusted contact persons, and SEC recordkeeping
• Margin Accounts: Regulation T, FINRA Rule 4210, hypothecation, and margin calls
• Options Accounts: The multi-step approval process under FINRA Rule 2360
• Options Valuation: Intrinsic value, time value, and moneyness calculations
• Books and Records: SEC Rules 17a-3 and 17a-4 retention periods

Why This Matters

Customer agreements and account documentation underpin the securities industry. Every transaction begins with a properly opened account and proper disclosure. The Series 63 exam frequently tests the specific rules, timing requirements, and distinctions between account types, particularly the differences between who sets initial margin (the Fed) versus maintenance margin (FINRA) and the precise steps required to open an options account.

Let's start with the disclosure documents that must be delivered for different types of securities products.