how important is statement of account objectives?

Discussion in 'Retail Brokers' started by zedDoubleNaught, Dec 15, 2012.

  1. Every so often I get a letter asking me to verify or update the info the broker has on me regarding investment objective, income level, net worth, employment, etc. This is per SEC Rule 17a-3(a)(17). How important is this record, is it more for the broker or for the account holder? Can an account be frozen or something if some info is not up to date? Or if trading in the account does not match the objective (eg, trading a 'speculative' stock when the objective is set at 'capital preservation')?
  2. 1245


    The information in not important to anyone except FINRA and the SEC. They have the broker put in place procedures that have to do with "the know your customer rule". Each Broker Dealer has a WSP (Written Supervisory Procedures) which outlines how they will deal with all rules and regulation. This is just one of the procedures your firm said they would do to comply.
  3. There are cases in which it could fall back on you.

    For example, if you send back the form with incorrect replies, failing to inform them of adverse changes in your credit status or income, and they as a result continue to extend a large amount margin credit, and you end up in losing more than the account value (which is unusual but can happen) and with a large debit balance, you could be charged with fraud (the same as if you put false information on the original account application).

    I am referring here to the income part of the form that you send back. As to the investment objectives part, that is just so that they can limit your speculative trading if you list objectives that do not include speculation. They could be liable if they advise you to trade inappropriately for your objectives, although this would mainly apply to brokers who give advice.
  4. Thanks, I didn't think about the fraud aspect. I suppose it's just best to ensure everything is up to date.
  5. If its no ones business, then I keep it that way.
    Especially the govts.
  6. One of my brokers (actually, its web site) wouldn't let me trade the leveraged funds FAS and FAZ until I changed my investment objective to "speculation".