A broker-dealer compliance department is conducting a regulatory audit of its data protection policies under SEC Regulation S-P and statement disclosure procedures under FINRA rules. Which of the following statements regarding initial privacy notices, consumer opt-out provisions, and annual delivery exemptions are correct?
- A consumer who does not establish an ongoing customer relationship with the broker-dealer must be provided an initial privacy notice before the firm discloses nonpublic personal information to nonaffiliated third parties.Cevap
- Requiring a customer to write and mail their own custom letter is considered an unreasonable opt-out method under Regulation S-P guidelines.Cevap
- CA broker-dealer must issue an annual privacy notice to all retail customers regardless of whether its privacy policy has changed or if it discloses nonpublic personal information exclusively under statutory exceptions.
- DBroker-dealers are strictly prohibited from delivering account statements electronically, requiring physical paper mailings for all active retail margin accounts.
Cevap
The correct statements are that a consumer without an ongoing customer relationship must receive an initial privacy notice before nonpublic personal information is shared with nonaffiliated third parties, and that requiring customers to write custom letters is an unreasonable opt-out mechanism.
Under SEC Regulation S-P, a consumer (an individual obtaining a financial service on a one-time basis) only needs an initial privacy notice if the firm plans to disclose nonpublic personal information to nonaffiliated third parties. Furthermore, opt-out mechanisms must be reasonable and convenient; requiring a customer to draft a custom letter fails the reasonable opportunity test. Therefore, both the statement on consumer initial notices and the statement on unreasonable opt-out mechanisms are correct.
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Regulation S-P Privacy Notice Delivery and Opt-Out Requirements