Training and Supporting SA's in the Financial Services Industry  


New Accounts

What is a New Account?
SA Responsibilities Concerning New Accounts
What type of account is your broker opening?
The New Account Form
Possible fields on the New Account form
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
Tax Certification
Arbitration Agreement
Margin Agreement
Option Agreement
  What's in a name?

One of the first pieces of information gathered from the client is the Title on the account. Title refers to the legal name recorded for the account plus any clarifying legal terms that apply to the situation. Whether a business account or a personal account, capturing the legal name correctly, identifying appropriate clarifying legal terms and recording both in the format established by each firm is vitally important. Determining the correct title for an account is the first step toward complying with NYSE Rule 405 - the Know Your Customer rule. This is the most important rule in dealing with clients and requires that each registered representative be diligent in learning all essential information about a client. The title of the account tells what type of documentation is required in order to conduct business.

Foundation™

At the Foundation level, an SA will primarily compare information between what the firm requires with how information is recorded by the broker on the new account form.

One of the first firm provided tools needed by a Sales Assistant is written instructions that show the required format for all possible new account types. These instructions will specify where the names of various parties on the account should be placed and how legal clarifiers should be listed. While there may be many similarities among firms concerning these formats, the software used by a clearing firm may mandate subtle differences. Information may need to be isolated or designated in a particular manner to allow the operating system to recognize it properly.

A Foundation Sales Assistant should confirm that the title presented on the new account form exactly matches the firm format designated for that account type. If the title fails to precisely match, the SA should direct questions to the broker. The broker should confirm what needed for the situation and help portray that information correctly. Pay close attention to detail when making these comparisons.

Example

A broker writes a title on the account form as follows:

Jack M. Jones and

Melinda R. Jones JTWROS

Assuming the broker intends to establish a joint account with rights of survivorship for Jack and Melinda Jones, the firm requires the following format:

Jack M Jones Or possibly JACK M JONES and

Melinda R Jones MELINDA R JONES - JTWROS

JTWROS

While such differences may seem small and insignificant, the results of not adhering exactly can be unnecessary hassles. Some reasons for following the correct formats include:

    1. Punctuation or caps may effect how information is fed into the firm’s contact management system.
    2. The name corresponding to the Social Security Number for the account may be required to be on a particular line so the firm’s system can verify proper tax withholding.
    3. A connecting word or symbol such as "and" or "&" may be picked up by the firm’s system as part of the person’s name if the firm format omits such qualifiers.
    4. The legal qualifier, JTWROS, may be read as part of the title if the firm’s system is set to search for this on a separate line or when separated by some non-alphanumeric character.

If it becomes apparent during the reconciliation process that the broker is establishing an account whose title simply does not fit one of the firm provided formats, a Foundation SA should call in a supervisor. There are many exceptions to the standard account titles that are used too infrequently to publish. A supervisor will recognize these situations and enlist help for exceptions. 

Expansion™

At Expansion™ level, an SA should understand what the various account types represent and be familiar with the most common uses for each account title. Knowing what the various account titles represent allows the SA to review the title as written by the broker and see if it "makes sense" before comparing to the firm standard format for such an account. The broker should still be questioned concerning any discrepancies.

The following is NOT an exhaustive list of all possible account titles, but provides enough information to address the most usual circumstances and a few circumstances that might be somewhat less common. (Please refer to your firm’s operational information for a complete list of accounts titles for your firm) For simplification, we’ll divide the account titles into appropriate groups and categories referenced in "What is a New Account?".

Personal—Retail

Individual Account

As the title implies, this account is owned entirely by one person and the account carries the social security number of that person. In almost all cases, firm operating systems reserve only one line of mandatory input for individual accounts. Though other clarifiers* may be placed on the account at the clients request, those clarifiers are only to accommodate the client and are not considered part of the account for reporting purposes.

      *An example of a client requested clarifier for an individual account might be:

John W. Hooker

Bond Account

      In the example above, the client might have all his bond money in one account and all his stock money in another account. Since both accounts are for John W. Hooker, the client requested a clarifying designator to make the accounts easier to identify. While clarifiers such as these are sometimes approved to go on accounts, they remain the exception rather than the norm.  As will be addressed more fully in a later module, there are certain compliance related issues concerning a client having more than one account at a firm, so make sure that such cases are identified clearly to a branch manager.

Joint Account

A joint account is owned by more than one person. The account will carry information concerning all ownership parties, but only one of those parties is designated as "owner of" the primary social security number used for reporting purposes. Most joint accounts are designated as either "Joint Tenants With Rights of Survivorship (JTWROS)", or "Joint Tenants in Common (JTTEN)". In either case, any party named on the account has full authority to direct activity in the account on behalf of the other owners.

JTWROS—Joint Tenants with Rights of Survivorship

When an account has multiple owners and is designated as JTWROS, it means that each party has 100% ownership and control over the account. Upon death of one party in a JTWROS account, the remaining party(ies) become the owner(s) of all assets. (To actually reregister a JTWROS requires the client to present certain documents to the firm, but activity in the account can continue uninterrupted as directed by the remaining owner.)

JTTEN—Joint Tenants in Common

When an account has multiple owners and is designated as JTTEN, it means that each party owns a pre-established percentage of all assets in that account. This ownership may be a 50%/50% split between two people; a 10%/20%/30%/40% split among four people; 15%/85% split between two people…or any combination the clients conceive. Upon death of one party in a JTTEN account, the percentage of the account owned by the deceased party passes to the decedent’s estate. Remaining ownership percentages of surviving account owners remains unchanged. (To actually reregister a JTTEN account requires the decedent’s executor to present certain documents to the firm, but activity in the account can continue uninterrupted as directed by the remaining owners)

Uniform Gift/Transfer to Minor Account

A uniform gift/transfer to minor account is an account established for the exclusive benefit of one minor child that is being directed by one adult. The minor has complete and irrevocable ownership in all assets within the account and all tax reporting is done via the minor’s social security number. The adult makes all decisions concerning the account and only authorizes disbursements that directly benefit the minor. No family relationship is required between the adult and the minor.

Guardian or Conservatorship

Accounts established where one party is guardian or conservator of the account, for benefit of another party, are established under a court order. Court papers appointing a guardian or conservator must be dated within 60 days of the account opening date. The guardian or conservator on behalf of the beneficial owner makes all decisions. Tax reporting is done using the beneficial owner’s social security number. The beneficial owner may be a minor, or any person the court deems unable to take responsibility for financial decisions.

Numbered Account

A numbered account is established when the ownership party wishes to remain anonymous. These situations reflect a number instead of an ordinary name or account title and always involve the compliance department prior to opening.

Personal—Retirement

IRA or ROTH IRA

Accounts established as an IRA or ROTH IRA are used to deposit money set aside by individuals for retirement planning purposes. These accounts generally contain the identifying word IRA or ROTH IRA in the title and include the name and social security number of the beneficial owner. If the account is for a minor, your firm may require additional information concerning an adult in the title.

Most IRA or ROTH IRA accounts for individuals are set up naming the brokerage firm as custodian of the assets. That means the client is adopting a prototype written by the firm, filed with the IRS, and approved by the IRS as properly structured to meet IRS guidelines for holding and properly reporting information concerning the account. Some brokerage firms allow IRA and ROTH IRA accounts to be established through them but designating someone other than that firm as custodian of the IRA. Whatever the case, many firms require the account title to include the name of the custodian for the IRA on a separate line—refer to your firm’s procedures.

Education IRA

Accounts designated as educational IRAs are used to deposit money set aside by individuals for education planning purposes. These accounts generally contain language identifying them as an educational IRA in the title and include the name and social security number of the beneficial owner.

Most education IRA accounts for individuals are set up naming the brokerage firm as custodian of the assets. That means the client is adopting a prototype written by the firm, filed with the IRS, and approved by the IRS as properly structured to meet IRS guidelines for holding and properly reporting information concerning the account. Some brokerage firms allow education IRAs accounts to be established through them but designating someone other than that firm as custodian of the IRA. Whatever the case, many firms require the account title to include the name of the custodian for the IRA on a separate line—refer to your firm’s procedures.

Business—Retail

Sole Proprietorship

A sole proprietorship is a form of business organization where a single owner has total control over the business and all managerial decisions. Consequently, a sole proprietor account is the business equivalent of an individual retail account in that the account is owned and controlled by the owner of the business. That owner may opt to authorize an additional party to make decisions concerning the account or retain this right exclusively. Most sole proprietorship accounts are opened using the name of the owner followed by the name of the business. Account titles may also include the designation "sole proprietorship" and have a tax identification number for reporting purposes. If the business is small, a sole proprietor may use their own social security number and designate the account using the proprietor’s name "d.b.a." (doing business as) the name of the company. Your firm may have special requirements for "d.b.a." accounts.

Partnership

A partnership is a form of business organization whereby two or more people own and manage the business and are equally and personally liable for its debts. A partnership account is owned by the partnership, uses the legal name of the partnership, generally states the designation of "partnership" in the account title, and uses the partnership’s tax identification number for reporting purposes.

Corporation

A corporation is a form of business organization whereby the total worth of the business is divided into shares of stock (either publicly traded or private stock) where each share represents a unit of ownership in the company. Liability of the owners is limited to the amount each owner has invested in the company. Corporate accounts are owned by the corporation, use the legal name of the corporation, include the designation "inc." or "corp." in the account title, and use the corporation’s tax identification number for reporting purposes. Generally includes "Non-profit" organizations that are incorporated.

Limited Liability Company (LLC)

An LLC is a form of business organization that is a hybrid between a partnership and a corporation. An LLC account is owned by the LLC, uses the legal name of the LLC, includes the designation of "LLC" in the title, and uses the LLC’s tax identification number for reporting purposes.

Non-Corporate, Non-Profit, Religious

It is fairly simple to identify accounts that fall under this category—charities, churches, etc. The title of the account will follow that of the organization. These accounts do NOT include designations such as "inc." or "corp." in the account title. Though not considered part of the legal title, many such accounts identify one or more people as contacts and include these beneath the title of the account. The accounts use the entity’s tax identification number for reporting purposes.

Estate

Estate accounts are established to serve as accumulation accounts upon the death of certain parties. Estate accounts are designated as such in the title: Estate of John Doe. The title of estate accounts contains the name(s) of executor(s) for the estate and for reporting purposes uses either the decedent’s social security number or a separate tax identification number obtained for the estate. (The IRS requires all estates that file form 1041 to have an EIN. Like you, we don’t give tax advice, but the IRS instructions for Form 1041 say that any estate with income over $600 must file Form 1041—but read that for yourself. Some firms may require ALL estates to have an EIN regardless of size so that any income or proceeds generated will fall under the firm’s procedure for corporate reporting rather than individual reporting. When in doubt, follow firm procedures.)

Personal Trusts

A trust account is a legally established arrangement where one party, the trustee, has control over assets for the benefit of another party, the beneficiary. There are many types of trusts established for many reasons. The preferred order of information in the title of a trust account may vary with firms but the information included is reasonably uniform. The title will state the name of the trust, the name of the trustee, the beneficiary, and the type and date of the document that established the trust.

i.e. The Mary Jane Trust (this is the name of the trust)

John Brown trustee (this is the boss)

FBO Martha X (this person benefits)

U/A dated 08/01/1989 (trust was established under an agreement

on the given date.)

or

U/W dated 08/01/1989 (trust was established under a will

on the given date.)

Since a trust is a separate legal entity, the trust will always have a tax payer identification number for reporting purposes.

 
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