Once a new account has been set up, the customer must establish service instructions for the payment and delivery of securities and the servicing of the account.

The registered representative gives the new account owner several options:

  • Transfer and Ship: This instruction means securities are transferred into the customer's name and delivered to the customer. These securities are not recorded on the firm's records, and the customer assumes full responsibility for them and for communication with the issuer. Also referred to as"Mail Securities in Customer Name".

  • Transfer and Hold: This instruction means securities are transferred into the customer's name, but held in segregation by the broker-dealer for safekeeping. The customer's name will appear on the issuer's stockholder records, so when the issuer distributes reports, pays dividends and mails proxies, they go directly to the customer. Also known as "Hold Securities in Customer Name".

  • Hold in Street Name: This instruction means securities are registered in the broker-dealer's name and held there, with the customer as beneficial owner. This is the most common form of delivery today; in fact, many new account forms will not have this option listed, as it is assumed that securities will be held in street name unless the customer specifies otherwise.

  • Hold or Mail Payments: This instruction means that when dividends and/or interest payments for street name securities are paid out, the customer can decide whether to have them credited to the account or sent to the address of record.

  • Forward to Another Address: This instruction means securities or checks can be forwarded to another address either permanently or temporarily, depending on the customer's instructions.

  • Delivery versus Payment: DVP securities are delivered to a bank of depository and settle COD. This type of delivery and payment is used primarily for institutional accounts.

Exam Tips and Tricks
Make sure you understand the differences between the first three types of service instructions, especially holding securities in street name, as these are the most common types of services.

Maintaining Customer Accounts

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