Corporate and Institutional Accounts

Corporate and institutional accounts are opened for business entities rather than individuals, which changes the documentation requirements and suitability standards.

Account Requirements

• Opened in the name of a corporation, Limited Liability Company (LLC), or other business entity
• Requires a corporate resolution - a formal document that:
  • Authorizes specific individuals to trade on behalf of the entity
  • Identifies who can make investment decisions and execute transactions
• An EIN (Employer Identification Number) is required instead of a Social Security Number
• The entity's governing documents may restrict certain types of investments

Exam Tip: Gotchas

A corporate resolution is required to identify who can trade. Without it, no individual has authority to act for the entity. The exam may present a scenario where someone claims to represent a corporation but has no resolution on file. An EIN replaces the SSN for business entity accounts, and the resolution specifies who can trade, not just who owns the entity.

Suitability Standards

• Institutional customers are presumed to be more knowledgeable about investments and markets
• Subject to different suitability standards than retail customers
• The broker-dealer may rely more on the institution's own judgment and analysis
• Still subject to suitability rules, but the analysis considers the institution's sophistication

Exam Tip: Gotchas

Institutional customers have different (not lower) suitability standards. The broker-dealer can rely more on the institution's own analysis, but suitability rules still apply.

What Should You Check on Exam Day?

• Can you explain what a corporate resolution authorizes and why it matters?
• Do you know what document replaces a Social Security number for a business account?
• Can you state whether institutional customers have lower or just different suitability standards?
• Do you know why a broker-dealer can rely more on an institution's own judgment?