Quick Answer
A firm that hires a registered person must deliver FINRA's educational communication to that person's former customers when the firm or the person contacts them about transferring assets, or when a former customer transfers assets on their own initiative. The duty runs for three months from the registered person's start date, timed differently for written, oral, and no-contact scenarios.
This topic covers a specific notice a new firm owes a registered person's former customers when that person moves firms. It is a different obligation from updating a firm's own internal account records after a registration change.
What Triggers the Educational Communication Delivery Requirement?
A former customer is any customer who had a securities account assigned to that registered person at the person's previous firm. A customer the representative merely dealt with, without an assigned account, is not one.
A member firm that hires or associates with a registered person must deliver FINRA's educational communication to a former customer of that person when either:
- The firm, or the registered person individually, contacts the former customer to transfer assets to the new firm; or
- Absent any individualized contact, the former customer transfers assets on their own initiative into an account assigned, or to be assigned, to that registered person at the new firm.
When Must the Communication Be Delivered?
| Contact type | Delivery requirement |
|---|---|
| Written contact | The educational communication must accompany the written contact. A hyperlink is sufficient if the contact itself is electronic. |
| Oral contact | The firm or registered person must tell the former customer orally, at the time of contact, that an educational communication with important considerations will be provided not later than 3 business days after the contact, and must deliver it within 3 business days of that contact, or with other transfer-related documentation if that happens sooner. |
| No individualized contact | The communication must be delivered with the account-transfer approval documentation. |
- The delivery requirement applies for a period of three months following the date the registered person begins employment or association with the new firm.
- The timing rule attaches to the first individualized contact with that former customer about the transfer. A second contact about the same transfer does not start a new clock.
Exam Tip: Gotchas
- The three-month delivery window is measured from the date the registered person begins employment or association with the new firm, not from the date of any particular contact with a former customer.
Who Is Excluded From "Former Customer"?
- Former customer does not include an account of a non-natural person that meets the institutional-account definition covered elsewhere in this course. A natural person who meets that definition by holding at least $50 million in total assets is still a former customer and still gets the communication.
- The requirement does not apply when the former customer expressly states they are not interested in transferring assets. If that same customer later transfers assets anyway, without further individualized contact and inside the three-month window, the firm must still deliver the communication with the transfer documentation.
Exam Tip: Gotchas
- An express rejection is not a permanent exemption. If the former customer changes their mind and transfers assets without further individualized contact, and does so inside the three-month window, the no-prior-contact delivery rule reactivates. After that window closes, it does not.
- The institutional-account carve-out only removes a non-natural person's account. A wealthy individual who separately meets the $50 million test is still a former customer.
What Should You Check on Exam Day?
- Match the delivery method to the contact type: accompany written contact, notify orally and deliver within 3 business days for oral contact, or attach to transfer approval documentation for no contact.
- Count the three-month window from the registered person's start date at the new firm, never from a contact date.
- Confirm whether the excluded account belongs to a non-natural person; a qualifying natural person is never excluded.
- Remember an express rejection only pauses the duty until the customer transfers assets on their own initiative.