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Question

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

Under SEC Regulation S-P, a broker-dealer that collects nonpublic personal information from an individual executing a single wire transfer without opening an account must deliver an initial privacy notice to that individual prior to executing the transfer, even if the firm does not disclose the individual's nonpublic personal information to any nonaffiliated third parties.

Answer: Answer

Answer

The statement is False. Under SEC Regulation S-P, an individual who conducts a single transaction without an ongoing relationship is a consumer, not a customer. Initial privacy notices are only required for consumers if the broker-dealer discloses their nonpublic personal information to nonaffiliated third parties.
The statement is false because SEC Regulation S-P differentiates between a consumer (an individual obtaining a financial product or service on a isolated basis) and a customer (an individual with an ongoing relationship). A broker-dealer must provide an initial privacy notice to a consumer ONLY if it intends to disclose the consumer's nonpublic personal information to nonaffiliated third parties outside statutory exceptions. Since the firm does not share nonpublic personal information with nonaffiliated third parties, no initial privacy notice is mandated.

Step-by-Step Solution

1
Determine the individual's relationship status under Regulation S-P.
The individual is classified as a consumer because a single wire transfer without an account does not establish an ongoing relationship.
Regulation S-P distinguishes between consumers (one-time transactions) and customers (continuing relationships).
2
Identify the initial privacy notice delivery trigger for consumers.
Initial privacy notices are required for consumers only if nonpublic personal information is shared with nonaffiliated third parties.
Unlike ongoing customers who must always receive an initial notice upon account opening, consumers only require notice prior to third-party data sharing.
3
Evaluate the statement against the regulatory rule.
The statement incorrectly asserts that notice is required even without third-party data sharing.
Because the firm does not disclose the consumer's nonpublic personal information to nonaffiliated third parties, no initial privacy notice is required.

Key Concept

Consumer vs. Customer Initial Privacy Notice Delivery Triggers under Regulation S-P
Estimated Time:1m 30s
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Topics

Account Statements, Privacy Protection, and Regulation S-P