Quick Answer
Preserve replaced records at least six years after update, and the final or unchanged original at least six years after closure. A covered outside account that already exists when a person becomes associated needs employer consent and written notice within 30 calendar days. Escheatment follows state law.
The account-opening lesson covers initial collection and approval. The firm uses reasonable diligence to maintain every account and conducts ongoing customer monitoring. Changed information or a needed control can require a maintenance response, but those events do not limit the duty.
Which Account Information Must Stay Current?
The firm maintains information that is current or in use. It preserves information that is no longer current or in use.
| Record item | Maintenance requirement |
|---|---|
| Customer identity | Keep the customer's name, residence, and legal-age status current. |
| Responsible associated persons | For a noninstitutional account, keep each responsible person's name current. If multiple people share responsibility, also keep a record of each person's scope current. |
| Account acceptance | Keep the partner, officer, or manager's signature that shows the firm accepted the account under its procedures. |
| Entity authority | For a legal entity, keep the names of the people authorized to transact for it current. |
When any customer account information changes, preserve the prior record for at least six years after the update. Preserve the last update, or the original information if nothing changed, for at least six years after the account closes.
Exam Tip: Gotchas
- The two at-least-six-year periods start from different events. Replaced account information runs from the date of its update. The last update, or unchanged original record, runs from account closure.
What Controls Apply When Identity Cannot Be Verified?
An unresolved identity issue does not create one automatic response. The firm's written Customer Identification Program (CIP) must include response procedures. Those procedures should describe four decisions.
| Situation | Decision the written procedures should describe |
|---|---|
| Before opening | When the firm should refuse to open the account. |
| During verification | The terms under which the customer may conduct transactions while the firm continues verification. |
| After failed attempts | When the firm should close the account. |
| Possible suspicious activity | When the firm should file a Suspicious Activity Report. |
The response depends on the circumstances and the firm's written procedures. Failed verification does not automatically require closure.
Exam Tip: Gotchas
- Identity-verification procedures cover four separate decisions. They should describe when the firm should not open an account, transaction terms during verification, when the firm should close after failed attempts, and when it should file a Suspicious Activity Report. Failed verification does not automatically require closure.
How Does Escheatment Work?
Escheatment moves property from a dormant account to a state under that state's unclaimed-property law. The firm attempts to contact the owner first. If contact does not restore the owner's claim and the state's conditions apply, the firm follows that state's process.
There is no single nationwide dormancy period, deadline, or remittance rule. The applicable state law supplies those details.
Exam Tip: Gotchas
- State law supplies the escheatment timetable. A question must provide enough state-law facts to support any dormancy period, deadline, or remittance step.
What Must an Associated Person Do With an Outside Account?
The requirements cover an outside account in which securities transactions can occur and the associated person has a beneficial interest. They apply when the account is at another member firm or another financial institution.
| Account status | Required action |
|---|---|
| New covered outside account | Before opening, obtain the employer firm's prior written consent and notify the outside institution in writing about the association. |
| Account that existed before the person became associated | Within 30 calendar days after becoming associated, obtain the employer firm's written consent to maintain the account and notify the outside institution in writing about the association. |
| Employer requests account records in writing | The executing member sends duplicate confirmations and statements, or the transaction data in them. |
Exam Tip: Gotchas
- Duplicate records require a written employer request. The executing member sends the confirmations, statements, or transaction data after that request.
What Should You Check on Exam Day?
- Preserve each replaced account record for at least six years after its update. Preserve the last update, or unchanged original record, for at least six years after closure.
- Treat escheatment as a state-law process that follows attempted owner contact. Do not infer a nationwide dormancy period, deadline, or remittance rule.
- For a covered new outside account, obtain prior written employer consent and send written notice before opening.
- For a covered outside account that predates the association, obtain written employer consent and send written notice within 30 calendar days after becoming associated.
- After the employer makes a written request, the executing member sends duplicate confirmations, statements, or transaction data.