Quick Answer
Customer information must be protected from improper use and disclosure as it moves between departments or outside the firm. Information about securities ownership obtained while acting as a paying agent, transfer agent, trustee, or similar fiduciary cannot support a solicitation of purchases, sales, or exchanges, unless the issuer requests it and the member acts on the issuer's behalf.
Who May Use or Receive Customer Information?
Customer information is confidential. The operational question is whether a person or party has an appropriate reason to receive it.
- A firm protects customer information from improper use and improper disclosure.
- It controls access when information moves from one department to another.
- It also controls access when information is shared with a party outside the firm.
Access controls protect customer information wherever it flows.
Think of it this way: Customer information is not a general firm resource. Each handoff requires a permitted purpose and controlled access.
May Fiduciary Ownership Information Be Used for Solicitation?
A member can obtain securities-ownership information while serving in a fiduciary role, such as a:
- Paying agent
- Transfer agent
- Trustee
- Similar fiduciary capacity
That fiduciary ownership information cannot be used to solicit purchases, sales, or exchanges. This prohibition includes solicitation for the member's own benefit. The only exception applies when the issuer requests the solicitation and the member conducts it on the issuer's behalf.
The member may use the information to perform the fiduciary function for which it was obtained.
| Use of ownership information | Permitted? |
|---|---|
| Member performs the fiduciary function for which it obtained the information | Yes |
| Member uses fiduciary information to solicit purchases, sales, or exchanges for itself | No |
| Any other solicitation of purchases, sales, or exchanges that the issuer did not request or that the member does not conduct on the issuer's behalf | No |
| Issuer requests the solicitation of purchases, sales, or exchanges and it is conducted on the issuer's behalf | Yes |
Exam Tip: Gotchas
- Fiduciary ownership information is not a general solicitation list. The member cannot use it to solicit purchases, sales, or exchanges. The exception requires an issuer request and solicitation on the issuer's behalf.
- The restriction reaches soliciting purchases, sales, or exchanges, not every fiduciary use. The member may use the information to perform its fiduciary function. It cannot use the issuer exception for its own solicitation.
Memory Aid: Fiduciary information performs its function; solicitation follows the issuer's purpose.
What Should You Check on Exam Day?
- Identify the information, recipient, and permitted purpose.
- Apply access controls inside and outside the firm.
- Look for the member acting as paying agent, transfer agent, trustee, or in a similar capacity.
- Distinguish use for the fiduciary function from use to solicit purchases, sales, or exchanges.
- Permit soliciting purchases, sales, or exchanges only when the issuer requests it and it is performed on the issuer's behalf.