Customer Information
MSRB Rule G-19(a) requires every municipal securities dealer and broker (collectively “dealers”) to obtain certain information about customers before the completion of the first transaction in their accounts. To open an account, a customer typically fills out a new client account form. The form should record the following information:
- • Name
- • Residential or business address
- • Date of birth (to ensure that the customer is of legal age)
- • Social Security or tax ID number
- • Occupation and employer (and disclosure of whether the customer is employed by another broker-dealer)
- • Employer’s address
- • Whether it is a cash or margin account
- • Any third-party trading authorization or discretionary authorization
- • Suitability information, such as a customer’s financial status, tax status, investment objectives, and other information necessary to make a recommendation
- • A predispute arbitration agreement, if applicable
- • Any written authorization to release the customer’s account information
- • A signed hypothecation agreement, if applicable
- • Registered representative’s signature
- • Signature of the principal
Note that neither the client’s signature nor his educational background needs to be on the new account form. However, a client may need to provide a signature for specific agreements included in the account. For example, the customer may need to sign a third-party trading authorization, a hypothecation agreement if opening a margin account, or a predispute arbitration clause, depending on the dealer and the account.
Generally, the MSRB requires that a dealer only make a recommendation when they have sufficient information about the customer to have a reasonable basis to believe that the recommendation is suitable for the customer. This involves using reasonable diligence to colle