Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records
Provides Customers with Information About Investments, Makes Recommendations
Describing products accurately
For open-end funds, understand NAV, public offering price (POP), sales charges, and 12b-1 fees. POP = NAV ÷ (1 − sales charge). Forward pricing means the order fills at the next computed NAV, not the NAV quoted when the order was placed. A prospectus must be delivered to the buyer; for a variable contract the customer receives both the underlying fund prospectus and the contract prospectus.
Share classes: A (front-end load, breakpoint discounts), B (declining CDSC, usually converting to A), C (level load with a 12b-1 fee, often a 1% CDSC in year one). Breakpoints reward larger purchases; a Letter of Intent (13 months) or Rights of Accumulation can reach a breakpoint using existing holdings. A "no-load" fund charges no sales load but may impose a 12b-1 fee of up to 0.25%.
Variable products: premiums go into a separate account holding subaccounts; charges include mortality and expense risk, administrative, and fund expenses; growth is tax-deferred, but withdrawals before age 59½ may trigger a 10% IRS penalty, and annuitization applies an exclusion ratio.
Traps: quoting yield without the standardized SEC formula; implying a fund or separate account is guaranteed; showing a breakpoint the client has not qualified for; calling a class B share "no commission."
Worked example: NAV is $19.00 and the sales charge is 5%: POP = 19.00 ÷ 0.95 = $20.00. A client investing $50,000 reaches a $50,000 breakpoint and pays the lower charge - but only because the dollar amount qualifies.
Transfers Assets and Maintains Appropriate Records
Moving assets
Retail transfers of brokerage assets go through ACAT (Automated Customer Account Transfer Service, operated by NSCC). The customer signs a Transfer Initiation Form at the receiving firm, which submits the request; the delivering firm validates and then delivers the assets through the ACAT cycle. Non-ACAT assets - some annuities, shares held directly with a fund, certain alternative products - move manually and take longer.
IRA money moves two ways: a trustee-to-trustee transfer (direct, not a reportable distribution, no withholding, no 60-day clock) and a 60-day rollover (the client receives the money; 20% may be withheld on an eligible rollover distribution from an employer plan; missing the deadline creates a taxable distribution plus a possible penalty). Annuity exchanges may require the insurer's forms and surrender-charge disclosure.
Records
FINRA Rule 4511 requires books and records to be preserved for 6 years, with the first 2 years readily accessible. Correspondence is retained 3 years; complaint records 4 years. New account documents, order tickets, confirmations, statements, and business communications must be produced to regulators on request. Electronic storage is acceptable if records are non-rewritable and readily retrievable.
Traps: telling a customer a rollover has no deadline; assuming every asset transfers by ACAT; and confusing 6 years (general), 3 years (correspondence), and 4 years (complaints).
Worked example: A client wants her old 403(b) moved to an IRA at your firm without touching the money. Use a direct trustee-to-trustee transfer: no withholding, no distribution reported on a 1099-R, and no 60-day risk.