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Difficulty: Very hardAccount Statements, Privacy Protection, and Regulation S-P

Under SEC Regulation S-P, a broker-dealer that collects nonpublic personal information from an individual who conducts a one-time wire transfer (a consumer) must deliver an initial privacy notice to that individual prior to executing the transaction, even if the firm does not disclose any nonpublic personal information to nonaffiliated third parties.

Answer: Answer

Answer

The statement is False. Under SEC Regulation S-P, initial privacy notices are mandatory upon relationship establishment for customers, but for consumers engaging in one-time transactions, notice is required only if the firm shares their nonpublic personal information with nonaffiliated third parties.
Under SEC Regulation S-P, broker-dealers must deliver an initial privacy notice to customers when establishing an ongoing relationship. However, for consumers who engage in a one-time transaction, an initial privacy notice is required only if the broker-dealer discloses nonpublic personal information to nonaffiliated third parties outside standard exceptions (such as processing transactions or legal compliance). If no such sharing occurs, the firm is not required to provide a privacy notice to the consumer.

Step-by-Step Solution

1
Classify the individual's relationship status under SEC Regulation S-P.
An individual obtaining a single service (such as a wire transfer or cashing a check) is defined as a 'consumer', whereas an individual opening a brokerage account establishes an ongoing relationship as a 'customer'.
Reg S-P enforces different disclosure rules depending on whether an individual is classified as a consumer or a customer.
2
Evaluate initial privacy notice delivery triggers for consumers versus customers.
Customers must receive an initial privacy notice no later than when the customer relationship is established. Consumers must receive an initial privacy notice only prior to the firm disclosing nonpublic personal information to nonaffiliated third parties.
Because the broker-dealer in this scenario does not share nonpublic personal information with nonaffiliated third parties outside statutory exceptions, no initial privacy notice delivery obligation is triggered for the consumer.

Key Concept

Consumer vs. Customer Initial Privacy Notice Delivery Triggers under SEC Regulation S-P
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Topics

Account Statements, Privacy Protection, and Regulation S-P