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Question

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

Under SEC Regulation S-P and FINRA rules governing account documentation and privacy protections, match each customer account status or transaction scenario on the left with its corresponding regulatory delivery timeline or disclosure requirement on the right.

  • An individual uses a broker-dealer's wire transfer service once as a non-account holder, establishing no ongoing financial relationship.Requires an initial privacy notice prior to or at the time of the transaction, with no subsequent annual privacy notices required.
  • A retail margin customer executes three covered call option contracts during the preceding calendar month.Mandates account statement delivery on a monthly basis.
  • A retail cash account holder maintains open stock positions but executes no trades and has no cash flow activity for four consecutive months.Mandates account statement delivery at least on a quarterly basis.
  • A broker-dealer intends to share nonpublic personal information of a retail customer with a nonaffiliated financial marketing firm.Requires providing an initial privacy notice and a reasonable opt-out method with a minimum 30-day delay prior to information disclosure.

Answer

1. One-time consumer wire transfer matches with initial privacy notice requirement only.
2. Active margin account with monthly option trades matches with monthly statement delivery requirement.
3. Inactive cash account with security positions matches with quarterly statement delivery requirement.
4. Nonaffiliated third-party data sharing matches with initial privacy notice and reasonable opt-out mechanism requirement.
Each pair correctly aligns the specific SEC Regulation S-P or FINRA Rule requirement with the appropriate investor relationship type or account activity status.

Step-by-Step Solution

1
Analyze the distinction between a consumer and a customer under SEC Regulation S-P.
A consumer undergoing a single isolated service (wire transfer) requires only an initial privacy disclosure, not annual notices.
Reg S-P defines consumers by isolated transactions without an ongoing customer relationship.
2
Determine statement frequency requirements for active vs. inactive accounts under FINRA Rule 2231.
Active trading months require monthly statements; inactive accounts holding positions require at least quarterly statements.
Account activity triggers monthly statement delivery, whereas holding positions without activity permits quarterly delivery.
3
Evaluate third-party data sharing rules and opt-out mechanics under Regulation S-P.
Sharing nonpublic personal information with nonaffiliated third parties requires providing an opt-out notice and giving a reasonable duration (e.g., 30 days) before sharing.
Reg S-P mandates consumer/customer privacy protection and opt-out rights prior to nonaffiliated third-party data disclosure.

Key Concept

Regulation S-P Privacy Notices & Account Statement Frequency Rules
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Topics

Account Statements, Privacy Protection, and Regulation S-P