Series 6 New Account Requirements and Customer Identification Rules

Opening a new account is not merely administrative — it is the foundation of every suitability obligation and the first line of defense against financial crime. The Series 6 tests new account procedures because registered representatives are personally responsible for following them correctly. Errors in account opening are a common source of both exam mistakes and real-world regulatory violations.

The Customer Identification Program (CIP)

The Customer Identification Program requirement comes from the USA PATRIOT Act of 2001 and is implemented through FinCEN regulations. Every FINRA member firm must have a written CIP as part of its Anti-Money Laundering (AML) program. The CIP requires firms to verify the identity of every customer who opens an account.

Four Required Identifying Information Items

Before opening an account, firms must collect — at minimum — the following four pieces of information for each individual customer:

1. Full legal name
2. Date of birth
3. Residential address (not a P.O. Box, except for U.S. military addresses)
4. Identification number — a Social Security Number (SSN) for U.S. persons, or a taxpayer identification number, passport number, or other government-issued ID number for non-U.S. persons

For legal entities (corporations, partnerships, trusts), the firm collects the entity's name, address, and taxpayer identification number, plus identification of authorized individuals.

Verification

Firms must verify this information within a reasonable time. Verification methods include:

• Documentary: Government-issued photo ID (driver's license, passport)
• Non-documentary: Credit bureau checks, public records, account history at other institutions

The firm must maintain CIP records for five years after the account is closed.

Beneficial Ownership Rule

FinCEN's Beneficial Ownership Rule (effective 2018) requires firms to identify and verify the beneficial owners of legal entity customers (companies, LLCs, partnerships). Two categories must be identified:

• Ownership prong: Any individual who owns 25% or more of the entity (up to four individuals)
• Control prong: One individual with significant managerial control of the entity (e.g., CEO, managing partner)

Each beneficial owner must provide the same four identifying information items as individual account holders. This rule is designed to prevent legal entities from being used to hide the true ownership of accounts or launder money.

New Account Form Contents

Beyond CIP, the new account form is the firm's primary record of the customer's investment profile. FINRA Rule 4512 (Customer Account Information) requires firms to maintain records that include:

• Customer name, residence, and contact information
• Date of birth (required; used for senior investor protocols)
• Employment status and employer name
• Whether the customer is employed by or affiliated with another FINRA member firm (required disclosure)
• Whether the customer is a director, 10%+ shareholder, or officer of a publicly traded company (control person status)
• Investment objectives (capital preservation, income, growth, speculation)
• Financial situation: annual income, liquid net worth, total net worth
• Tax identification number
• Signature of the registered representative opening the account

Unlike suitability information, some of these items — particularly date of birth and tax ID — are mandatory and cannot be waived by the customer.

Senior Investor Protections

Trusted Contact Person

FINRA Rule 4512 requires broker-dealers to make reasonable efforts to obtain the name and contact information of a Trusted Contact Person (TCP) for all non-institutional customer accounts. The TCP is not given authority over the account — they are a resource the firm can contact if:

• There is reasonable belief that the customer is the victim of financial exploitation
• The firm is unable to reach the customer and has concerns about their welfare
• There are questions about whether the customer has capacity to make financial decisions

Customers can decline to name a TCP. The firm must document the attempt to obtain the information. The rule applies to all customer accounts, not just seniors, but its primary protective purpose is for elderly and vulnerable investors.

Temporary Holds on Disbursements

FINRA Rule 2165 gives member firms a safe harbor to place a temporary hold on a disbursement if the firm reasonably believes the customer — particularly a senior investor (age 65 or older) or a specified adult (age 18 or older with diminished capacity) — is being financially exploited.

Key parameters:

• Initial hold: up to 15 business days
• Extension: up to 10 additional business days if an internal review is ongoing or a state regulator or court of competent jurisdiction has been notified

The trusted contact person may be notified of the hold. The hold can be lifted earlier if the firm determines exploitation is not occurring.

Account Update Obligations

Opening an account correctly is not a one-time event. FINRA rules require firms to update customer account information when:

• The firm becomes aware of a material change in the customer's financial situation or objectives
• The firm is updating contact information for routine compliance purposes
• There is a change in the customer's employment or affiliation status

For accounts with investment recommendations, the suitability obligation is ongoing. A representative who knows a customer's circumstances have changed must update the account record before making new recommendations based on outdated information.

---

Account-opening compliance questions appear on every Series 6 exam, and the rules are precise enough that small details matter. Advisor Exam Academy's Series 6 course covers CIP, KYC, and FINRA account rules with practice scenarios drawn from real exam content. Start your Series 6 prep at advisorexams.com/exams/series-6.