Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records
Providing Information and Making Recommendations
Explain the product, including how it can lose money
Before recommending, a rep must know what the investment pays, what can go wrong, and what it costs. For equities: earnings, P/E versus peers, dividends, share classes. For bonds: coupon, maturity, credit rating, call features, duration and the three yields candidates are tested on - coupon (nominal), current yield (annual interest ÷ price), and yield to maturity (total return if held to maturity with interest reinvested at the YTM). For packaged products, share class and fee structure decide most questions: A shares carry a front-end load reduced by breakpoints, letters of intent (13 months, backdatable up to 90 days) and rights of accumulation; B shares carry a declining CDSC and usually convert to A; C shares use a level load; I shares are institutional. ETFs trade intraday at market price, closed-end funds trade at premiums or discounts to NAV, and UITs are unmanaged with fixed maturities.
Explaining risk means naming it: market, interest rate, credit, call, reinvestment, inflation, liquidity, currency and opportunity cost. Variable annuities and variable life need a prospectus; options need an ODD. Communications must be fair and balanced, and performance may not be projected.
Worked example. A 5% coupon bond priced at 105. Current yield = 5 ÷ 105 = 4.76%. Because the bond matures at par, YTM is below 4.76%. Rule: premium bond → coupon > current yield > YTM; discount bond → coupon < current yield < YTM; par → all three equal.
Transferring Assets and Maintaining Records
Moving the account, then proving you did it right
Most transfers run through the Automated Customer Account Transfer Service. The customer signs a Transfer Instruction Form, which the receiving firm submits; the carrying (delivering) firm must validate, take exception, or refuse within 3 business days, and assets generally move shortly after validation. Assets that cannot be transferred in kind (proprietary funds, certain annuities) must be liquidated or handled by exception. Partial transfers and transfers of retirement accounts carry extra documentation. Non-ACAT transfers use the same paperwork but manual processing.
Records are governed by SEA Rules 17a-3 (what to create) and 17a-4 (how long to keep it). The default retention period is 6 years, with the first 2 years in an easily accessible place. Order tickets and trade records are kept 3 years; correspondence and communications are kept 3 years. Written customer complaints are the famous exception - FINRA Rule 4513 requires 4 years. Electronic records must be preserved in a non-rewritable, non-erasable format.
Confirmations under SEA Rule 10b-10 must be delivered at or before completion of the transaction and must state the security, price, capacity (agent or principal), the firm's remuneration, the date and time of execution, and whether the trade was solicited. Account statements go out at least quarterly.
Worked example. A customer emails a complaint about a trade. That written complaint is preserved 4 years - one year longer than the 3-year rule that covers ordinary correspondence.