Introduction

Welcome to Customer Screening and Documentation: the unit that covers everything a registered representative must do to verify who a customer is, protect their private information, and document the authority behind every account.

Exam Weight: Part of 9% (~11 questions across Chapter 2) | FINRA Section 2.2

What You'll Learn

In this unit, you'll cover:

• Customer Identification Program (CIP): The four required pieces of identifying information under the USA PATRIOT Act
• Know Your Customer (KYC): FINRA Rule 2090's ongoing obligation to know essential facts about every customer
• Special Customer Categories: Screening for corporate insiders, broker-dealer employees, and foreign persons
• Suspicious Activity: Suspicious Activity Report (SAR) and Currency Transaction Report (CTR) thresholds, filing deadlines, and the prohibition on tipping off customers
• Privacy Regulations: Regulation S-P notice requirements, opt-out rights, and exceptions
• Account Authorizations: Powers of attorney, trust documents, corporate resolutions, and trading authority
• Discretionary Accounts: Written authorization requirements, principal approval, and the time-and-price exception

Why This Matters

Before a single trade is placed, the firm must know who the customer is and document the authority behind the account. These screening and documentation rules protect firms from regulatory violations, money laundering exposure, and privacy breaches. The Series 7 exam tests specific thresholds (like the $5,000 SAR trigger and $10,000 CTR trigger), filing deadlines, and the precise boundaries of discretionary authority. One wrong number means a wrong answer.

Let's start with the Customer Identification Program, the first step every firm must complete when opening an account.