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Question

Difficulty: Very hardCustomer Account Types and Ownership Structures

Match each customer account ownership structure with its defining legal documentation or operational restriction required under FINRA rules.

  • Corporate Brokerage AccountRequires a formal resolution passed by the board of directors specifying which officers are authorized to trade, along with proof of entity existence.
  • Discretionary Trading AccountRequires prior written authorization from the customer and prompt written approval by a designated principal for each transaction order.
  • UTMA Custodial AccountIs registered under the minor's tax identification number with exactly one custodian and one beneficial owner, containing irrevocable gifts.
  • General Partnership AccountRequires an executed agreement specifying which individuals can act on behalf of the business, with all partners legally bound by transactions.

Answer

Corporate Brokerage Account pairs with board resolution requirements; Discretionary Trading Account pairs with client written power of attorney and principal trade approval; UTMA Custodial Account pairs with single minor beneficial owner under their SSN with irrevocable assets; General Partnership Account pairs with partnership agreement specifying authorized partners.
Each account ownership structure demands specific documentation to verify legal authority and tax responsibility. Corporate accounts require board resolutions; discretionary accounts demand signed trading authority and principal oversight; UTMA custodial accounts are tied irrevocably to one minor's tax ID under one custodian; and general partnership accounts require partnership agreements identifying authorized traders.

Step-by-Step Solution

1
Analyze Corporate Account requirements under FINRA rules.
Corporations are legal entities separate from their owners; thus, opening an account requires the corporate charter/articles of incorporation and a specific corporate resolution passed by the board of directors naming authorized traders.
Broker-dealers must ensure the legal entity authorized specific individuals to trade firm assets.
2
Analyze Discretionary Account operational rules.
Discretionary authority allows a representative to trade without prior consent per transaction, requiring written trading power of attorney from the customer and supervisory principal signature/trade approval.
Protects investors from unauthorized trading and ensures strict supervisory oversight.
3
Evaluate UTMA Custodial Account rules.
UGMA/UTMA rules strictly mandate one minor beneficiary and one adult custodian per account. Donated assets belong irrevocably to the minor and use the minor's Social Security Number for tax reporting.
Custodial assets are legally owned by the minor, not the custodian.
4
Evaluate General Partnership documentation requirements.
A partnership agreement identifies the general partners who hold legal authority to place orders and bind the firm.
Establishes authorization and responsibility among members of an unincorporated business entity.

Key Concept

Documentation and Operational Authority Rules across Customer Account Structures
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Topics

Customer Account Types and Ownership Structures