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Question

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

An individual completes the account documentation to establish a individual brokerage account with a securities firm. At the time the account is opened, the firm provides the client with an initial privacy notice detailing its policies regarding the protection of nonpublic personal information. Which of the following statements correctly describes the firm's ongoing obligation regarding privacy notice delivery to this client under SEC Regulation S-P?

  1. The firm must provide an annual privacy notice to the client for as long as the customer relationship persists.Answer
  2. B
    The firm is only required to provide another privacy disclosure if the client formally requests one in writing or terminates the account relationship.
  3. C
    The firm must include a copy of the privacy notice within every quarterly account statement sent to the client.
  4. D
    The firm is completely exempt from delivering subsequent privacy notices after the initial notice if no nonpublic personal information is shared with nonaffiliated third parties.

Answer

The firm must provide an annual privacy notice to the client for as long as the customer relationship persists.
Under SEC Regulation S-P, financial institutions including broker-dealers and registered investment advisers are required to provide an initial privacy notice when a customer relationship is established and an annual privacy notice every year thereafter as long as the customer relationship continues.

Step-by-Step Solution

1
Identify the regulatory scope of SEC Regulation S-P regarding privacy disclosures.
Regulation S-P governs how financial institutions protect and share nonpublic personal information of consumers and customers.
Establishing customer status requires specific initial and ongoing disclosure procedures.
2
Determine the required frequency for privacy notices delivered to ongoing customers.
Broker-dealers must deliver an initial privacy notice when establishing a customer relationship and an annual notice continuously for the duration of that relationship.
Full compliance requires providing customers regular notice of privacy policies and their right to opt out of information sharing with nonaffiliated third parties.

Key Concept

Regulation S-P Initial and Annual Privacy Notice Delivery Requirements
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Topics

Account Statements, Privacy Protection, and Regulation S-P