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Question

Difficulty: MediumAccount Statements, Privacy Protection, and Regulation S-P

Match each investor interaction or account status with its corresponding privacy disclosure or statement delivery timeline under SEC Regulation S-P and FINRA rules.

  • A retail customer opens a new margin account to establish an ongoing relationship with a firm.Must receive an initial privacy notice at or before account opening, plus an annual privacy notice thereafter.
  • A casual consumer conducts a single wire transfer at a broker-dealer without opening an account.Must receive an initial privacy notice only if the firm intends to disclose nonpublic personal information to nonaffiliated third parties.
  • A customer's established brokerage account has no trade activity or position changes during a quiet quarter.Must receive an account statement at least quarterly.
  • A customer's brokerage account executes options transactions during the current month.Must receive an account statement for that specific month.

Answer

Retail customer opening an account matches initial and annual privacy notices; casual one-time consumer matches conditional privacy notice prior to third-party sharing; inactive quarterly account matches quarterly statement delivery; active account month matches monthly statement delivery.
Under Regulation S-P, ongoing customer relationships mandate an initial privacy disclosure upon account creation and annual updates. One-time consumers only receive a privacy notice if the firm shares nonpublic personal information with nonaffiliated third parties. Regarding statements, FINRA requires monthly delivery during active trading months and quarterly delivery for inactive accounts.

Step-by-Step Solution

1
Differentiate between 'customer' and 'consumer' under SEC Regulation S-P.
An ongoing customer relationship requires an initial privacy notice at account opening and annual privacy notices thereafter. A casual consumer conducting an isolated transaction requires a privacy notice only if nonpublic personal information will be disclosed to nonaffiliated third parties.
Reg S-P establishes distinct privacy disclosure obligations based on whether an ongoing financial relationship exists.
2
Determine account statement frequency rules under FINRA guidelines.
Account statements must be delivered monthly for any month containing trading or position movement, and at least quarterly when an account remains inactive.
Regular statement delivery ensures transparency while accommodating periods of account inactivity.

Key Concept

Regulation S-P Privacy Notice Delivery and FINRA Account Statement Frequency Rules
Estimated Time:1m 30s
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Topics

Account Statements, Privacy Protection, and Regulation S-P