Quick Answer
Every account record must hold six items: name and residence, legal age status, a principal's signature, entity representatives, and, except for institutional accounts, the responsible associated person and a trusted contact. Reasonable efforts let a firm open and maintain an account without one. Tax ID, occupation and employer, and associated-person status are owed before the initial trade settles.
The customer account information rule splits into two tiers: information the firm must maintain for every account, and information the firm must try to obtain but is not strictly required to have on file.
One item on the first tier carries a softener of its own. The absence of a trusted contact person's name or contact information does not prevent the firm from opening or maintaining the account, provided the firm makes reasonable efforts to obtain it.
What Must Every Account Record Contain?
A member firm must maintain the following for every account it opens.
| Required item | Detail |
|---|---|
| Customer's name and residence | Basic identifying information. |
| Legal age status | Whether the customer is of legal age. |
| Associated person(s) responsible | Name of the associated person(s) responsible for the account; if more than one person shares responsibility, the record must show the scope of each person's responsibility. Does not apply to an institutional account. |
| Principal signature | Signature of a partner, officer, or manager showing the account was accepted under the firm's policies and procedures for accepting accounts. |
| Authorized representatives | For a corporation, partnership, or other legal entity customer: the names of any persons authorized to transact business on the entity's behalf. |
| Trusted contact person | Name and contact information for a person age 18 or older who may be contacted about the account. Does not apply to an institutional account. The absence of a trusted contact person's name or contact information does not prevent the firm from opening or maintaining the account, provided the firm makes reasonable efforts to obtain it. |
Recording who is responsible is not the same as supervising. Naming the associated person in the account record does nothing to discharge the firm's separate duty to supervise the account it services, which includes working out who is responsible for it, making sure those people are appropriately qualified and registered, and being able to give that information to a regulator on request.
Exam Tip: Gotchas
- The principal signature requirement only establishes that a partner, officer, or manager accepted the account under firm policy. It is a recordkeeping item, not the supervisory review and approval process itself.
- The same trap sits one row above it. Writing the responsible associated person into the record does not satisfy the duty to supervise the account.
What Must the Firm Make Reasonable Efforts to Obtain?
For every account except an institutional account and an account limited to unrecommended open-end investment company (mutual fund) shares, the firm must make reasonable efforts to obtain the following, to the extent each item applies to that account, before the initial transaction settles:
- Tax identification or Social Security number.
- Occupation and employer: the customer's occupation, and the name and address of the employer.
- Associated-person status: whether the customer is an associated person of another FINRA member firm.
Think of it this way: occupation and employer, and associated-person status, are gathering targets rather than gatekeepers. The firm must try before the first trade settles, and a customer who withholds either one does not automatically block the account. The tax identification number is not in that class. A firm's customer identification program must obtain a taxpayer identification number for a U.S. person before the account opens, and the only relief is for a customer who has applied for one and is waiting to receive it.
Exam Tip: Gotchas
- The standard here is "reasonable efforts prior to settlement of the initial transaction," not an absolute requirement to obtain occupation and employer or associated-person status before opening the account. The taxpayer identification number is the exception, because the customer identification program rules put a U.S. person's number before account opening.
- A customer's tax identification or Social Security number identifies the customer for recordkeeping. It is a different fact from the customer's tax status, which is assessed later as part of the customer's investment profile.
What Should You Check on Exam Day?
- Count the required-maintenance items: six, not five or seven. Two of the six (associated person responsible, trusted contact) do not apply to an institutional account. The trusted contact is softer than the other five: a firm that makes reasonable efforts to obtain one may open and maintain the account without it.
- Count the reasonable-efforts items: three (tax ID, occupation and employer, associated-person status), owed before settlement of the initial transaction. Occupation and employer and associated-person status are not owed before the account opens. A U.S. person's taxpayer identification number is, because the customer identification program collects it before opening.
- Watch for the second exemption from reasonable efforts: unrecommended open-end fund accounts, not only institutional accounts.
- Separate the principal signature (account acceptance) from any later supervisory review of the account's activity.