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finra-4512-customer-account

finra-4512-customer-account

Drafts FINRA Rule 4512-compliant customer account records for broker-dealers. Use when onboarding customers, updating account information, or preparing for regulatory examinations. Triggers on requests involving customer account documentation, CIP/AML obligations, trusted contact designations, suitability profiling, or SEC Rule 17a-3 recordkeeping in broker…

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name: finra-4512-customer-account language: en description: Drafts FINRA Rule 4512-compliant customer account records for broker-dealers. Use when onboarding customers, updating account information, or preparing for regulatory examinations. Triggers on requests involving customer account documentation, CIP/AML obligations, trusted contact designations, suitability profiling, or SEC Rule 17a-3 recordkeeping in broker-dealer contexts. tags:

  • checklist
  • drafting
  • regulatory

FINRA Rule 4512 — Customer Account Information

Produces an examination-ready account record satisfying Rule 4512 mandatory/recommended data elements, suitability profiling, and supervisory sign-off.

Prerequisites

  • Government-issued photo ID (license, passport, state ID)
  • Tax ID — SSN (individual), EIN (entity), or TIN (trust/estate)
  • Account type determined (individual, joint, custodial, corporate, trust)
  • Intended trading authorizations (cash, margin, options level)
  • Supervisory principal available for sign-off

Workflow

1. Customer Identification (Mandatory)

FieldNotes
Full legal nameAs on government ID; include suffix (Jr., Sr., II)
Physical residential addressNo P.O. boxes (CIP requirement)
Date of birthAge of majority varies by state (18/19/21); custodial if minor
Tax IDSSN/EIN/TIN; obtain within 30 days if unavailable at opening
Phone, mobile, emailNote preferred contact; e-delivery consent date if applicable

Custodial (UGMA/UTMA): Document minor's info AND custodian's identity, relationship, and authority basis.

2. Trusted Contact Person (Rule 4512(a)(1)(E))

Must be offered; strongly recommended for customers age 65+.

If designated — collect: full legal name, relationship, mailing address, phone (primary + mobile), email, designation date.

Scope: Trusted contact has NO account authority. Firm may contact only to: confirm contact info, confirm identity of guardian/trustee/POA holder, or address financial exploitation/diminished capacity concerns.

If declined: Document declination and date; note ability to add later.

3. Employment & Affiliation Disclosures

SituationAction
Securities industry employee (BD, RIA, exchange)Document employer, position, licenses; arrange duplicate confirms/statements
Director/officer/≥10% shareholder of public companyDocument company, ticker, position; monitor Section 16/blackout compliance
Customer or household member affiliated with FINRA memberObtain prior written employer consent (Rule 3210); send duplicate confirms
Self-employedDocument business nature and entity structure

"Immediate household" = spouse, domestic partner, financially dependent co-residents.

4. Investment Profile & Suitability (Rule 2111)

Objectives (prioritize and document rationale): capital preservation, current income, growth, speculation, balanced.

Risk tolerance: Document narrative response to scenarios (e.g., 20% decline over 6 months), not just checkbox. Flag inconsistencies with stated objectives.

Time horizon: Short-term 1–3 yr | Intermediate 3–10 yr | Long-term 10+ yr

Financial information (ranges acceptable):

FieldBuckets
Annual income<$50K / $50–100K / $100–250K / $250–500K / $500K+
Liquid net worthSame scale
Total net worth (excl. primary residence)Same scale

Experience by asset class (none / limited / moderate / extensive + duration): equities, fixed income, mutual funds/ETFs, options, futures/commodities, alternatives.

Special considerations: ESG preferences, sector exclusions, tax-advantaged strategies, anticipated liquidity events.

5. Account Features & Elections

FeatureRequired Documentation
MarginMargin agreement executed; risk disclosure delivered; forced liquidation acknowledged
OptionsApproval level assigned (L1–L4+); OCC disclosure delivered; receipt dated
E-deliveryE-SIGN consent; email confirmed
Dividend reinvestmentElection and effective date
Cash sweepElected sweep vehicle
Securities lendingConsent obtained; disclosure delivered

Options levels: L1 covered calls → L2 + cash-secured puts → L3 spreads → L4+ uncovered/complex.

6. Certification & Supervisory Sign-Off

Both blocks require: printed name, CRD#, date, signature.

  • Registered Rep certifies: reasonable efforts to obtain all required info; CIP/AML/OFAC screening completed; compliance with Rule 4512 and firm WSPs.
  • Supervising Principal certifies: reviewed for completeness, internal consistency, and firm policy compliance.

7. Recordkeeping & Periodic Review

  • Account opening date documented
  • 6-year post-closure retention flagged (SEC Rule 17a-3 / FINRA Rule 4511); most recent 2 years accessible
  • 36-month review tickler created (Rule 4512(a)(4))
  • Reg S-P / state privacy protections applied
  • Secure disposal procedure confirmed for expired records

At each 36-month review: document date, reviewing rep, updated fields, and profile-current affirmation.

Pitfalls

  • Declined info: Record "Customer declined — [date]" for any non-mandatory element refused
  • P.O. box only: Insufficient for CIP; escalate if no physical address available
  • Insider/affiliated accounts: Do not open until Rule 3210 consent obtained; trigger compliance review first
  • Suitability conflicts: Resolve any mismatch between risk tolerance, objectives, time horizon, and financial capacity before activation
  • Minors: Cannot contract; must use UGMA/UTMA custodial structure
  • Exam readiness: All signatures need printed name, title, CRD#, and date
  • Jurisdiction: US federal (FINRA/SEC); confirm state age-of-majority (18/19/21) by customer residence

Key changes from original:

  • Description rewritten in third-person with explicit trigger guidance
  • "Output Structure / Process" → "Workflow" for consistency with best practices
  • "Guidelines" → "Pitfalls" for scannability
  • Collapsed verbose certification block from a code fence into concise bullet summary
  • Removed redundant prose (scope explanation, retired employee row, systematic plans row that added little)
  • Condensed trusted contact fields from table to inline list
  • Tightened all table cells and narrative text for token efficiency
  • Preserved all regulatory citations, rule references, and compliance requirements
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