Rule Atlas
FINRA Rule 2090: Opening Customer Accounts: FINRA Rules and Key Ownership Structures
Under FINRA Rule 2090 (FINRA / SEC / MSRB / CBOE), opening Customer Accounts: FINRA Rules and Key Ownership Structures establishes the authoritative rules tested on the FINRA Series 7. This lesson covers the essential FINRA requirements for opening new customer accounts, including necessary documentation, principal approval, and the characteristics of common account types. VoraPrep verifies every threshold, worked table, and practice question below against the current FINRA Series 7 blueprint.
Current Statutory Thresholds & Limits in Effect
Core Statutory Concepts
| Required Information (FINRA Rule 4512) | Description | Purpose |
|---|---|---|
| Customer's Full Legal Name | Identity of the individual or entity. | Legal identification, tax reporting. |
| Permanent Residence Address | Physical address (P.O. boxes generally not acceptable for primary). | Verifies identity, legal notices, mailing statements. |
| Mailing Address (if different) | Where statements and correspondence are sent. | Customer convenience. |
| Date of Birth | To confirm legal age (18 or 21, depending on state for contracts). | Prevents minors from opening accounts directly, verifies identity. |
| Social Security Number (SSN) / Tax ID | For U.S. citizens/residents or entities. | IRS reporting (dividends, interest, capital gains). |
| Employment Status & Occupation | Current employer, position, and business address. | Assessing potential conflicts of interest, verifying income stability. |
| Citizenship | Essential for compliance with various regulations (e.g., OFAC). | Global regulatory compliance. |
| Customer's Financial Information | Annual income, net worth (liquid and illiquid), tax status. | Crucial for suitability analysis (Reg BI, FINRA suitability rules). |
An 85-year-old client approaches a registered representative to open an individual brokerage account. She states her primary concern is ensuring her adult daughter can manage the account and make investment decisions on her behalf if she becomes incapacitated due to declining health, but she wants to retain sole ownership and control as long as she is able. Which of the following statements most accurately analyzes this situation?
Practitioner Application: Opening Customer Accounts: FINRA Rules and Key Ownership Structures
A prospective client, Ms. Elena Rodriguez, has approached you to open a new brokerage account. She is a successful entrepreneur, newly married, and wants to set up an account that can be easily passed to her spouse upon her death, but she also wants full control during her lifetime. She's also inquiring about opening a separate account for her 12-year-old niece to save for college. What are the critical regulatory steps you must follow for both accounts, and what specific information is required to ensure compliance and proper account structuring?
- Opening a new customer account involves a rigorous process mandated by FINRA to protect both the customer and the broker-dealer, ensuring suitability and preventing illicit activities. Key rules governing this process include FINRA Rule 2090 (Know Your Customer) and FINRA Rule 4512 (Customer Account Information).
- Required Information for Account Opening (FINRA Rule 4512): Before or at the time of account opening, broker-dealers must gather specific information to ensure they "know their customer" and can make suitable recommendations. While some information is legally required, other details are crucial for suitability analysis.
Common FINRA Series 7 Distractors on FINRA Rule 2090
- 1Principal Approval Timing: A common trap is suggesting that principal approval is optional or can be delayed indefinitely. Remember, it's mandatory and must be promptly after the first transaction, but ideally before.
- 2"Kiddie Tax" Confusion: While assets in UGMA/UTMA accounts are taxed at the minor's rate, unearned income above a specific threshold is taxed at the parent's marginal rate, which is often higher. This "kiddie tax" rule is a common point of confusion.
- 3Joint Account Beneficiaries: Remember the difference between JTWROS (survivor gets assets) and TIC (estate gets assets).
- 4Required Information vs. Desired Information: The exam might list information that is useful for suitability but not legally required by FINRA Rule 4512 for opening. Focus on the statutory requirements.
- 5Principal Approval is Mandatory: All new accounts require prompt principal approval.
Frequently Asked Questions: FINRA Rule 2090
What is the core rule under FINRA Rule 2090 (Opening Customer Accounts: FINRA Rules and Key Ownership Structures)?
Under FINRA Rule 2090 (FINRA / SEC / MSRB / CBOE), opening Customer Accounts: FINRA Rules and Key Ownership Structures establishes the authoritative rules tested on the FINRA Series 7. This lesson covers the essential FINRA requirements for opening new customer accounts, including necessary documentation, principal approval, and the characteristics of common account types. VoraPrep verifies every threshold, worked table, and practice question below against the current FINRA Series 7 blueprint.
How is FINRA Rule 2090 tested on the FINRA Series 7?
Principal Approval Timing: A common trap is suggesting that principal approval is optional or can be delayed indefinitely. Remember, it's mandatory and must be promptly after the first transaction, but ideally before. "Kiddie Tax" Confusion: While assets in UGMA/UTMA accounts are taxed at the minor's rate, unearned income above a specific threshold is taxed at the parent's marginal rate, which is often higher. This "kiddie tax" rule is a common point of confusion.
Where can I practice FINRA Series 7 questions on Opening Customer Accounts: FINRA Rules and Key Ownership Structures?
Test yourself instantly with the free playable FINRA Series 7 question on this page, or launch VoraPrep's full FINRA Series 7 adaptive question bank, interactive lessons, and 1:1 exam simulator at voraprep.com/series7.