Welcome to Customer Documentation and Screening: the unit covering the paperwork and identity checks a firm completes before a private placement investor's money moves, and the privacy rules that govern the information collected along the way.
Exam Weight: 3 scored items within Function 2 (9 items / 18% of exam)
What You'll Learn
In this unit, you'll cover:
- Identifying Potential Investors and the Confidentiality Agreement: how a firm confirms a contact is a legitimate prospect before sharing deal details, and why a signed confidentiality agreement lets the issuer do so
- Customer Screening: Identification and Know-Your-Customer Documentation: the identifying information a firm's customer identification program (CIP) must collect and verify, and the broader know-your-customer (KYC) duty that continues after the account opens
- Account Authorizations: Power of Attorney, Trust Documents, and Corporate Resolutions: which document names who has authority to act for an individual, a trust, or a corporate account
- Documentation of Customer Authorization: Full Versus Limited: the written-authorization and approval steps full discretionary trading requires, and why limited time-and-price discretion needs none of them
- Documentation for Electronic Private Placement Offerings: the notice, access, and evidence-of-delivery test that lets a firm deliver offering documents electronically
- Qualified Institutional Buyer Certification Letters, Subscription Agreements, and Investor Questionnaires: the documents that establish buyer eligibility, lock in an investor's purchase commitment, and gather the facts a firm needs to screen a prospective investor
- Regulation S-P: Initial Privacy Notice and Opt-Out: what the initial privacy notice must disclose, and how a consumer opts out of having personal information shared
- Regulation S-P: Disclosure Limitations, Exceptions, and Safeguarding: when a firm may share nonpublic personal information without notice, and the incident-response duties that protect it
Why This Matters
A representative who cannot produce the right document, in the right form, before the right deadline can stall or unwind a placement that was otherwise ready to close. Confusing an identification check with a know-your-customer review, or a full discretionary authorization with a limited one, is a common source of exam traps.
The privacy rules run on their own timelines and their own closed lists, distinct from the account-opening paperwork earlier in this unit.
Let's start with how a firm identifies potential investors and uses a confidentiality agreement.