An individual opens a individual brokerage account with a registered broker-dealer to trade exchange-listed equity securities. Shortly after account opening, the broker-dealer prepares to share the customer's nonpublic personal information with a nonaffiliated third-party marketing firm for promotional purposes not covered under any statutory exception. Under SEC Regulation S-P, which condition must be met before the broker-dealer may lawfully disclose this information?
- The broker-dealer must provide the customer with a clear and conspicuous privacy notice and a reasonable opportunity to opt out prior to disclosing the information.Answer
- BThe broker-dealer must obtain affirmative written opt-in consent from the customer prior to releasing any nonpublic personal data.
- CThe broker-dealer may share the information immediately, provided an initial privacy notice is mailed within 30 days following account opening.
- DThe broker-dealer is exempt from opt-out notice requirements because privacy disclosures are required only upon account termination or transfer.
Answer
The broker-dealer must provide the customer with a clear and conspicuous initial privacy notice describing their rights, along with a reasonable opportunity and method to opt out before disclosing nonpublic personal information to a nonaffiliated third party.
Under SEC Regulation S-P, a broker-dealer establishing a customer relationship must provide a clear and conspicuous initial privacy notice outlining its privacy policies and customer rights. If the firm intends to disclose nonpublic personal information to nonaffiliated third parties outside specific legal exceptions, it must afford the customer a reasonable opportunity and means to opt out prior to the information transfer.
Step-by-Step Solution
Key Concept
Regulation S-P Opt-Out Provisions and Initial Privacy Notice Requirements
Estimated Time:1m 30s