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

Under SEC Regulation S-P, a broker-dealer fulfills the requirement to provide a reasonable means for a customer to opt out of nonpublic personal information disclosures to nonaffiliated third parties by requiring the customer to write and mail a physical letter.

Answer: Answer

Answer

The statement is false because requiring a customer to write and mail a physical letter is explicitly classified by SEC Regulation S-P as an unreasonable opt-out method.
The statement is false. Under SEC Regulation S-P, broker-dealers must provide a reasonable and convenient method for clients to opt out of sharing nonpublic personal information with nonaffiliated third parties. Examples of reasonable means include providing a check-off box on a privacy notice, a toll-free telephone line, or a prominent online opt-out link. Requiring a client to compose and mail a custom physical letter creates an unnecessary hurdle and is explicitly prohibited as an unreasonable opt-out method.

Step-by-Step Solution

1
Identify the regulatory standard for customer privacy opt-out mechanisms under SEC Regulation S-P.
Regulation S-P requires financial institutions (including broker-dealers and registered investment advisers) to provide consumers and customers with a reasonable means to opt out of disclosures to nonaffiliated third parties.
The rule ensures that financial institutions cannot make opting out unnecessarily difficult or burdensome.
2
Evaluate the specified opt-out method (writing and mailing a physical letter) against regulatory guidance.
SEC rules specifically state that requiring a customer to write their own letter or call an unstaffed number places an unreasonable burden on the customer.
Reasonable means include providing a detachable check-off box, a prepaid return response card, or an electronic opt-out mechanism for online transactions.

Key Concept

SEC Regulation S-P Reasonable Opt-Out Requirements
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Topics

Account Statements, Privacy Protection, and Regulation S-P