SIE Exam: Customer Accounts
Section 3 — Understanding Trading, Customer Accounts and Prohibited Activities (31% of exam)
The SIE exam tests your knowledge of the different types of customer accounts broker-dealers maintain and the regulatory requirements for opening and managing them. You need to understand individual accounts, joint accounts (Joint Tenants with Right of Survivorship versus Tenants in Common), custodial accounts under UGMA/UTMA, trust accounts, corporate accounts, and estate accounts. The Customer Identification Program (CIP) under the USA PATRIOT Act requires firms to collect four pieces of identifying information at account opening: name, date of birth, address, and taxpayer identification number. Specialized account types include prime brokerage accounts for institutional investors, discretionary accounts requiring written authorization and principal approval, delivery versus payment (DVP) accounts, and numbered accounts where the customer's identity must still be on file. The exam also covers fiduciary accounts and the documentation required for each account type, such as corporate resolutions for corporate accounts and trust documents for trust accounts. Understanding who has authority to direct trading in each type of account is essential.
Key Concepts
JTWROS
Joint Tenants with Right of Survivorship — when one owner dies, their interest passes directly to the surviving owner(s), bypassing probate.
Tenants in Common (TIC)
Joint account where owners can hold unequal shares and there is no right of survivorship. A deceased owner's share passes to their estate.
UGMA/UTMA Custodial Account
An account for a minor where the custodian has full investment authority. Only one custodian and one minor per account. Assets transfer to the minor at the age of majority.
Customer Identification Program (CIP)
Required under the USA PATRIOT Act. Firms must collect name, date of birth, address, and taxpayer identification number at account opening.
Discretionary Account
An account where the representative can make investment decisions without prior customer approval for each trade. Requires written authorization and principal approval.
Corporate Resolution
A document authorized by the board of directors designating which individuals may act on behalf of the corporation in a brokerage account.
Practice Questions
Question 1 of 4
In a joint tenants with right of survivorship (JTWROS) account, what happens when one account holder dies?
Question 2 of 4
Which of the following pieces of information is required on a new account form under the Customer Identification Program (CIP)?
Question 3 of 4
A customer asks their registered representative to place trades in their account without prior approval for each transaction. What type of authorization is required for this arrangement?
Question 4 of 4
A prime brokerage arrangement primarily benefits which type of customer?
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What account types are tested on the SIE exam?
The SIE covers individual accounts, joint accounts (JTWROS and TIC), custodial accounts (UGMA/UTMA), trust accounts, corporate accounts, estate accounts, numbered accounts, discretionary accounts, DVP accounts, and prime brokerage accounts.
What is the difference between JTWROS and tenants in common?
In JTWROS, ownership passes automatically to the surviving owner(s) upon death, bypassing probate. In TIC, owners can hold unequal shares and a deceased owner's share passes to their estate, not the surviving owners.