General Securities Sales Supervisor (Series10) Practice Exam

Which statement is CORRECT regarding numbered accounts?

1. All correspondence must be sent in plain envelopes with no firm identification

2. The record of ownership must be verified using a third-party database

3. The account record must include a suitability determination

4. The account must be sent a negative consent letter

The correct answer is: The account record must include a suitability determination

Numbered accounts are designed to offer clients a higher level of privacy and confidentiality, and this can create unique compliance and regulatory obligations for the financial institution. One important aspect of managing these accounts is ensuring that they serve the best interests of the clients, which is where the suitability determination comes into play. When an account is opened, particularly for a numbered account where the client's identity may be less visible, the financial institution is required to conduct a suitability determination as part of its Know Your Customer (KYC) obligations. This process involves assessing the client's financial situation, investment goals, and risk tolerance to ensure that the products and services offered to the client are appropriate. Thus, the account record must indeed include a suitability determination to demonstrate that the institution has engaged in due diligence and is acting in the client's best interest. This requirement helps to protect both the client and the firm by ensuring that the financial advice provided is aligned with the client's needs and circumstances.