Function 3: Retail and Institutional Customer Activities
FINRA gives this function 32 of 150 scored items. It covers account opening and maintenance, communications with the public, and the review of recommendations, trades and disclosures. The PrepPass Series 24 Study Guide teaches this function in depth, with the rule text, worked examples and a chapter quiz.
Opening and protecting accounts
Account opening combines know-your-customer duties, a customer identification program, beneficial ownership for legal entities, sanctions screening, privacy and identity-theft programs, and a request for a trusted contact person. Rule 2165 lets firms place temporary holds when they suspect exploitation of a specified adult.
Anti-money laundering
Each member has a written AML program with independent testing, a named compliance person, training and customer due diligence. Suspicious activity reports cover transactions of at least $5,000 and are confidential; currency transaction reports cover cash transactions over $10,000.
Communications with the public
Communications are correspondence (25 or fewer retail investors in 30 days), retail communications (more than 25) or institutional communications. Retail communications need principal approval before use, and some must be filed with FINRA. No communication may project performance. Telemarketing rules set calling hours and do-not-call duties.
Recommendations and disclosures
Regulation Best Interest governs recommendations to retail customers; FINRA's suitability rule covers others. Principals review for excessive trading, discretionary-account compliance, fair markups and required disclosures such as Form CRS, margin disclosure statements and trade confirmations.
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