In completing the NAF, the following practices should be observed and required information gathered. This list is derived from various sources including SEC, FINRA and federal AML regulations.
• Consolidated FINRA Rule 4512 requires the following for all accounts:
o The names of each associated person responsible for the account and their respective roles (e.g. the RR opening the account and any other RR charged with servicing the account) must be recorded and maintained; generally this information will be in the NAF. If the account was subjected to a suitability analysis, the RR responsible for that must sign the NAF;
o Customer’s name and residence; o Whether the customer is of legal age;
o If the customer is a corporation, partnership or other legal entity, the names of any persons authorized to transact business on behalf of the entity (for instance, by receiving ‘trading authorizations’ signed by the proper signatory);
o Whether the customer is an associated person of another member (see rule for specific exceptions);
o The designated Principal (a partner, officer or manager of the company) must sign the NAF to denote that the account has been accepted in accordance with the Company’s account opening procedures—this signature may be electronic if standard electronic signature procedures are followed (such as those that comply with the E-Sign Act);
• Consolidated FINRA Rule 4512 requires dated, manual signatures of those individuals with discretionary authority—see section below for these procedures;
• For recommendations, Consolidated FINRA Rule 2111 requires certain investment profile information; in the case of institutional accounts, certain conditions must be met to be exempt from a customer-specific suitability analysis: see Section 7 herein;
• The Company’s clearing firm must assign an account number to each new brokerage account;
• Each account must usually be opened in the full legal name of the customer including the full first name and the customer must sign the NAF;;
• Joint accounts must include the type of joint tenancy, e.g., Joint Tenants, Tenants-In- Common, Tenants-By-Entirety, or Community Property;
• Estate or trust accounts should include specific descriptive titles—e.g., pension, profit- sharing, testamentary or living trust—and the names of the trustees and the date of the trust, pension plan, or retirement plan must be included;
• Corporate status should be indicated in the title of the account and the file must include the necessary authorizing resolution;
• The mailing address should be a permanent residence or permanent business address. All addresses should include a zip code. If the mailing address is other than the customer’s home address (for instance, a P.O. Box or third party address), the home address must also be noted. The account form should also include the number of years the customer has been at that address and should include the home telephone number; • Social Security Number (for individuals) or Tax Identification Number (for entities)
must be entered for all accounts in accordance with the following rules: • If custodian account—use the SSN of the minor;
• If trust account—use the SSN of beneficiary or TIN of the trust, if applicable; • If joint account in name of husband and wife—both SSNs are necessary; • If an entity—use the TIN;
• For individuals, the Registered Representative should indicate the name and address of the customer’s employer, years employed, business telephone number and, in addition, if customer is married and spouse is employed, indicate the name of the employer of the spouse (Under the Rules, this requirement is not required for accounts with non- recommended transactions, held at investment company sponsors—however, it is good business practice and generally applies to all customers who are natural persons); see below for procedure about customers who are FINRA employees;
• If the customer is an organization, the Registered Representative should describe the type of organization specifically; e.g., hedge fund, investment partnership, broker- dealer, investment advisory partnership, etc.;
• If the customer is an investment partnership, the Registered Representative should note that in compliance with the Registered Representative’s obligation (and that of the Company to know the customer, certain additional information must be obtained in advance in writing with respect to both the limited and general partners: the names of the general and limited partners; their respective occupations and business addresses; whether the general or limited partners are U.S. citizens; the status of each of the partners (whether sophisticated, accredited, etc.); and whether any of the general or limited partners—or members of their immediate families—fall within restricted categories, such as persons associated with brokers, dealers, mutual funds, banks, trust companies, insurance companies, etc. If a general or limited partner is associated in any capacity with a member of the NYSE, AMEX, or FINRA, written consent from such member organization should be obtained as well as the name of the person at such organization who is to receive copies of transaction documents of the investment partnership involved;
• The type of account opened (either cash, margin, option or custodian) must be noted on the NAF;
• Notation whether customer is an associated person of another broker dealer or a more than 10% shareholder in a public company; and
• To the extent available, electronic entry of account data should be accomplished in the customer database of the Company.
Records should be maintained and preserved as necessary to meet SEC and FINRA rules: see the sections herein on preserving books and records for details. Customer information should be updated in accordance with the Company’s practices: where there are new recordkeeping requirements, associated persons must update customer records to meet those requirements during their routine updating process. Associated persons will rely on compliance staff to keep them informed of changing requirements.