Chapter 2: Customer Accounts & Suitability
This chapter covers 9% of the Series 7 exam (approximately 11 questions) and focuses on opening accounts, evaluating customers, and ensuring investment suitability.
What You'll Learn
| Unit | Topic | Key Concepts |
|---|---|---|
| 3 | Account Types and Registration | Individual, joint, corporate, trust, custodial (UGMA/UTMA), fiduciary accounts |
| 4 | Customer Screening and Documentation | New account forms, CIP, beneficial ownership, Patriot Act requirements |
| 5 | Customer Investment Profiles and Suitability | Reg BI, suitability obligations, risk tolerance, investment objectives, reasonable basis |
| 6 | Retirement Plans and Tax-Advantaged Accounts | Traditional and Roth IRAs, 401(k), 403(b), SEP, SIMPLE, contribution limits, RMDs |
| 7 | Account Supervision and Approvals | Supervisory procedures, discretionary accounts, trading authorization, FINRA supervision rules |
Why This Chapter Matters
Every client relationship starts with opening an account and understanding the customer's financial situation. This chapter covers the regulatory framework for account opening, the documentation required, and the suitability obligations that govern every recommendation you make.
The exam tests whether you understand different account types, know-your-customer requirements, Regulation Best Interest, and the supervisory structure that ensures compliance.
Exam Strategy
At 9% of the exam, focus on:
- Account types: Know the distinguishing features of each (JTWROS vs. TIC, UGMA vs. UTMA)
- Reg BI: The care obligation, disclosure obligation, and conflict of interest obligation
- Retirement plan rules: Contribution limits, early withdrawal penalties, RMD ages
- Discretionary vs. non-discretionary: What constitutes discretion and when written authorization is required