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Question

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

An investor maintains a brokerage account with a FINRA member firm. During a recent three-month calendar quarter, no trade executions (buys or sells) occurred in the account. However, during the second month of the quarter, a bond interest payment was credited to the account's cash balance. Under FINRA rules regarding customer account statement delivery, which requirement applies to this account for that quarter?

  1. A statement must be sent for the month in which the interest payment was credited, with statements required at least quarterly when no activity occurs.Answer
  2. B
    A statement is required only on a quarterly basis because dividend and interest credits are excluded from the definition of account activity.
  3. C
    A statement must be generated monthly only if the investor executed an active buy or sell transaction within the period.
  4. D
    A statement is required only annually if the account maintains a positive cash balance without margin debt.

Answer

A statement must be sent for the month in which the interest payment was credited, with statements required at least quarterly when no activity occurs.
Under FINRA Rule 2231, broker-dealers must deliver customer account statements at least quarterly for accounts holding cash or security positions. However, for any month in which activity occurs—including passive entries such as interest or dividend credits—a statement must be sent for that specific month.

Step-by-Step Solution

1
Identify the general rule for customer account statement frequency under FINRA rules.
Broker-dealers must send account statements at least quarterly to customers holding security positions or cash balances.
Quarterly is the baseline frequency for inactive accounts holding funds or securities.
2
Determine if the interest payment constitutes account activity.
Under FINRA Rule 2231, account activity includes purchases, sales, interest payments, dividend payouts, and transfer of funds or securities.
Crediting bond interest alters the cash balance and constitutes reportable activity.
3
Apply the activity rule to the delivery schedule.
Because activity occurred in the second month, a monthly statement must be delivered for that month. For months with no activity, quarterly delivery remains the minimum standard.
Any month with activity obligates the firm to issue a monthly statement.

Key Concept

Customer Account Statement Frequency and Activity Triggers
Estimated Time:1m 0s
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Topics

Account Statements, Privacy Protection, and Regulation S-P