Chapter 9 - Opening and Maintaining Accounts

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Questions and Answers

What should firms do when targeting elderly investors from a supervisory perspective?

Analyze their client book and surveillance of account opening documentation (correct)

Focus solely on high-risk clients

Avoid using confirmation letters

Limit contact with elderly investors

Under IDPC rule section 3640, what must an Approved Person not do?

Solicit clients through misleading trade names (correct)

Provide investment advice without proper qualifications

Engage in unauthorized financial transactions

Misrepresent their capabilities or role

What common issues should advisors be trained to spot when dealing with elderly clients?

Market trends and economic forecasts

Regulatory compliance requirements

Diminished capacity, elder abuse, and financial predators (correct)

Financial diversification strategies

What factor should chief compliance officers primarily consider when formulating their approach to elderly clients?

Proximity to retirement and reduced earning capacity Signup and view all the answers

What is a financial predator in the context of elderly clients?

A person exerting undue influence over an elderly client for financial gain Signup and view all the answers

In what situation should advisors escalate an issue to the firm’s compliance or legal department?

When they encounter medical or law-related issues pertaining to elderly clients Signup and view all the answers

What systemic approach should firms adopt during the new account opening process for elderly clients?

A process similar to AML high-risk procedures Signup and view all the answers

What must investment advisors ensure regarding the recommendations made to elderly investors?

Each recommendation must be suitable according to the client’s KYC information Signup and view all the answers

Which of the following best describes the Discovery process for investment advisors?

A means to assist in identifying issues that affect elderly clients Signup and view all the answers

What might firms implement as an additional supervision measure for elderly investors?

Use of confirmation letters Signup and view all the answers

What should firms consider when conducting product due diligence for elderly investors?

Whether the product is suitable for elderly clients Signup and view all the answers

Which of the following approaches might be considered discriminatory in supervision practices?

Using age as a sole determinant for additional supervision Signup and view all the answers

What should a firm ensure regarding its advisors who work with elderly clients?

That they receive training on recognizing vulnerable clients and potential issues Signup and view all the answers

How often should the accounts of elderly clients be updated compared to other clients?

They should be subject to more frequent updating requirements Signup and view all the answers

What is a key sign that may indicate potential abuse of elderly clients that employees should watch for?

All of the above Signup and view all the answers

What additional considerations should firms make regarding investment products for elderly clients?

Evaluating products with deferred sales charges Signup and view all the answers

What must occur when there are significant changes to a client's KYC information that affect suitability judgments?

The same approval process as the initial application must be followed Signup and view all the answers

Which control is NOT typically used to ensure clients receive statements and confirmations at their true address?

Telephonic confirmation by the client's adviser Signup and view all the answers

When reviewing changes to a client's circumstances, what is particularly important to document?

The date when the changes took effect Signup and view all the answers

Which issue should dealer members NOT consider concerning account-opening documentation?

How long the documentation should be kept Signup and view all the answers

In cases involving advisor misappropriation of client assets, which changes should be monitored closely?

Home or email address changes Signup and view all the answers

What must be addressed regarding managed accounts and trading agreements?

Legal advice regarding signature requirements Signup and view all the answers

For which type of account documentation does it NOT typically matter if all parties sign every agreement?

Corporate trading authorizations Signup and view all the answers

Which approach is NOT part of handling client complaints effectively?

Ignoring minor complaints to focus on major issues Signup and view all the answers

Study Notes

General Supervision and Client Analysis

Firms must analyze client portfolios and account documentation to identify elderly investors.
Additional supervision measures should be considered for vulnerable clients, similar to high-risk clients under AML guidelines.
Confirmation letters may be utilized for communication with elderly investors to ensure understanding and security.

Misleading Communications

Under IDPC rule section 3640, misleading communications by Approved Persons and Dealer Members are prohibited.
This rule aims to prevent deception or misrepresentation in any form, including trade names.

Medical and Legal Awareness for Advisors

Advisors need training to identify medical or legal issues affecting elderly clients, such as diminished capacity and elder abuse.
Financial predators—individuals exerting undue influence on clients—pose a significant risk; advisors should escalate concerns to compliance or legal departments.

Client Categorization and Supervision

Identifying vulnerable clients requires careful categorization within the firm, especially concerning elderly investors.
Training for employees should include recognition of signs of distress and potential abuse, ensuring timely reporting to compliance teams.
A specific age threshold, such as 60 years, may trigger additional supervision without being discriminatory.

Information Gathering and Account Opening

The new account opening process for elderly clients may mimic the scrutiny applied to high-risk clients for AML purposes.
Firms should implement more frequent updates for elderly client accounts to reflect changes accurately.

Suitability and Investment Recommendations

Investment recommendations must align with each client's Know Your Client (KYC) information; additional considerations may apply for elderly investors.
Product reviews should assess whether investments (e.g., those with deferred sales charges) are appropriate for older clients.

Changes to Client Information

Changes impacting suitability judgments should be formally approved, following the same process as for initial applications.
Long-term reviews of client information changes are essential, particularly when discrepancies arise.
Monitoring changes of addresses is crucial to prevent advisor misappropriation of funds.

Account Documentation and Control

Dealer members must maintain rigorous policies on account-opening documentation, covering various types of accounts and authorizations.
Key concerns include obtaining required signatures, determining the necessity of witness signatures, and addressing document formats (original, copies, or electronic).
Original signed documents may be required for specific agreements (e.g., trading futures or options) before trading commences.

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