Other Account Documentation
- • Suitability questionnaires. Under the new suitability and Know Your Customer rules previously described, FINRA members must evaluate whether each recommendation is suitable for the customer. This involves collecting information on a customer’s age, time horizon (length of investment time), liquidity needs, risk tolerance, tax status and other tax considerations, current and future financial needs, security holdings, other assets and liabilities, annual income, and net worth.
It may also include other information such as marital status, dependents, employment, home ownership and financing, investment experience, employee stock options, insurance, investment experience, and liquidity needs.
Customers should be asked about their investment objectives, such as preservation of capital, income, growth, or speculation.
Suitability questionnaires should be given at the opening of an account and kept within the customer’s account file. This questionnaire should be revisited and updated frequently with a minimum obligation of every 36 months.
- • Qualified institutional buyer forms. Customers who wish to buy or sell restricted securities under Rule 144A will need to be certified qualified institutional buyers. Customers will need to fill out a form reflecting this upon opening their account.
- • Private placement documents. Investors who are investing in a private placement will need to be given the following documents. These documents should be kept in the customer’s account file and a log should be kept of which documents have been given to customers. Detailed descriptions of these documents can be found in Chapter One.
- » Private placement memorandum—a long, detailed document, similar to a prospectus, that describes the private placement. This will be given to serious investors who have signed a confidentiality agreement.
- » Confidentiality agreement—a document that