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Question

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

Under SEC Regulation S-P and FINRA rules governing customer privacy disclosures and account statement delivery, which of the following statements are correct?

  1. A broker-dealer must provide an initial privacy notice to a retail customer no later than when the customer relationship is established.Answer
  2. Account statements must be delivered to customers at least quarterly, even if there has been no trading activity in the account.Answer
  3. C
    Broker-dealers are required to deliver privacy notices to retail customers only when an account is closed.
  4. D
    Firms must obtain explicit written opt-in authorization from customers before sharing nonpublic personal information with nonaffiliated third parties.

Answer

The correct statements are that an initial privacy notice must be provided no later than when establishing a customer relationship, and that broker-dealers must deliver customer account statements at least quarterly regardless of trading activity.
Under SEC Regulation S-P, a financial institution must provide an initial privacy notice to a customer no later than when it establishes a customer relationship. Additionally, under FINRA rules, broker-dealers must deliver customer account statements at least quarterly for inactive accounts, and monthly for any month in which account activity takes place.

Step-by-Step Solution

1
Identify SEC Regulation S-P requirements for privacy notices
Confirm that initial privacy disclosures are required upon establishing a customer relationship, with annual disclosures thereafter, and that customers must be given a reasonable mechanism to opt out of nonaffiliated third-party sharing.
Reg S-P protects consumer nonpublic personal information through opt-out rights and timely disclosure.
2
Identify FINRA rules regarding customer account statement frequency
Confirm that account statements are required quarterly at minimum, and monthly if any account activity occurred during the month.
Regular account statement delivery ensures transparency and allows customers to monitor transactions.

Key Concept

Regulation S-P Privacy Notice Delivery and Customer Account Statement Frequency
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Topics

Account Statements, Privacy Protection, and Regulation S-P