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Question

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

Match each customer relationship status or account activity scenario under SEC Regulation S-P and FINRA statement rules to its correct regulatory delivery requirement.

  • An individual who opens a retail brokerage account and maintains an ongoing financial relationship with the broker-dealer.Must receive an initial privacy notice at relationship establishment and annual privacy notices for the duration of the account relationship.
  • An individual who submits a wire transfer application and financial details for a single isolated transaction without opening an account.Must receive an initial privacy notice only if nonpublic personal information will be disclosed to nonaffiliated third parties, with no annual notice requirement.
  • A customer account that experienced security buys, sales, interest payments, or dividend deposits during the preceding month.Must be issued an account statement on a monthly delivery schedule.
  • A customer account that has had zero trading activity, cash movements, or dividend postings for the past two quarters.Must be issued an account statement at least on a quarterly delivery schedule.

Answer

1. Ongoing account relationship -> Initial notice at opening and annual privacy notices thereafter. 2. Isolated single transaction -> Initial notice only if nonpublic personal information is shared with nonaffiliated third parties. 3. Account with monthly activity -> Monthly statement delivery. 4. Inactive account for two quarters -> At least quarterly statement delivery.
Each scenario correctly matches its regulatory definition under SEC Regulation S-P and FINRA statement delivery rules. Retail account holders with ongoing accounts are customers needing initial and annual privacy disclosures. One-time transaction participants are consumers needing disclosure only prior to third-party sharing. Active accounts demand monthly statements, while idle accounts require quarterly statements.

Step-by-Step Solution

1
Differentiate between a 'consumer' and a 'customer' under SEC Regulation S-P.
An individual opening an account has an ongoing relationship ('customer') requiring initial and annual privacy notices. An individual engaging in an isolated transaction is a 'consumer' requiring a privacy notice only if nonpublic personal information is shared outside opt-out exceptions.
Reg S-P grants broader notice rights to customers compared to consumers.
2
Apply FINRA Rule 2231 delivery frequency standards based on account activity status.
Accounts with monthly activity require monthly statements, while completely inactive accounts require statements at least quarterly.
Activity triggers the monthly delivery rule to ensure timely reporting of transactions.

Key Concept

Distinction between Regulation S-P consumer vs. customer privacy notice obligations and FINRA account statement delivery frequency rules.
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Topics

Account Statements, Privacy Protection, and Regulation S-P