Customer Accounts - Types Of Accounts

Individual Account

An individual account is an account that is owned by one person. That person makes the determination as to what securities are purchased and sold. In addition, that person receives all of the distributions from the account.

Joint Account

A joint account is an account that is owned by two or more adults. Each party to the account may enter orders and request distributions. The registered representative does not need to confirm instructions with both parties. Joint accounts require the owners to sign a joint account agreement prior to the opening of the account. All parties must endorse all securities and all parties must be alive. Checks drawn from the account must be made out in the names of all of the parties.

Joint Tenants With Rights of Survivorship (JTWROS)

In a joint account with rights of survivorship, all the assets are transferred into the name of the surviving party in the event of one tenant’s death. The surviving party becomes the sole owner of all of the assets in the account. Both parties on the account have an equal and undivided interest in the assets in the account.

Joint Tenants in Common (JTIC)

In a joint account that is established as tenants in common, if one party dies all the assets of the tenant who has died become the property of the decedent’s estate. They do not become the property of the surviving tenant. An account registered as joint tenants in common allows the assets in the account to be divided unequally. One party on the account could own 60% of the account’s assets.

Note: Any securities registered in the names of two or more parties must be signed by all parties and all parties must be alive to be considered good delivery.

Transfer on Death (TOD)

An account that has been registered as a transfer on death account allows the account owner to stipulate to whom the account is to go to in the event of their death. The party who will become the owner of the account in the event of the account holder’s death is known as the beneficiary. The beneficiary may only enter orders for the account if they have power of attorney for the account. Unlike an account that is registered as JTWROS, the assets in the account will not be at risk should the beneficiary be the subject of a lawsuit, such as in a divorce proceeding.

Death of a Customer

If an agent is notified of the death of a customer the agent must immediately cancel all open orders and mark the account deceased. The representative must await instructions from the executor or administrator of the estate. In order to sell or transfer the assets, the agent must receive:

  • Letters testamentary
  • Inheritance tax waivers
  • Certified copy of the death certificate

The death of a customer with a discretionary account automatically terminates the discretionary authority.

Partnership Accounts

When a professional organization, such as a law partnership, opens an account, the registered representative must obtain a copy of the partnership agreement. The partnership agreement will state who may enter orders for the account of the partnership. If the partnership wishes to purchase securities on margin, it must not be prohibited by the partnership agreement.

Corporate Accounts

Corporations, like individuals, will purchase and sell securities. In order to open a corporate account, the registered representative must obtain a corporate resolution that states which individuals have the power to enter orders for the corporation. If a corporation wants to purchase securities on margin, then the registered representative must obtain a corporate charter and the by-laws that state that the corporation may purchase securities on margin. Finally, a certificate of incumbency must be obtained for the officers who are authorized to transact business for the corporation, within 60 days of the account opening.

Securities Training Materials

Trading Authorization
Related Articles
  1. Professionals

    Series 99

    FINRA/NASAA Series 99 Exam Guide
  2. Professionals

    Series 24

    FINRA/NASAA Series 24 Exam Guide
  3. Professionals

    Becoming A Registered Investment Advisor

    To become a registered investment advisor requires specific licensing, qualifications and regulations, but the greater freedom may be worth it.
  4. Investing Basics

    How To Handle A Serious Dispute With Your Broker

    Find out what to do if you have a dispute with your broker.
  5. Professionals

    Hedge Funds and the Law

    Learn how hedge funds have gotten in trouble for illegal insider trading. Read about questionable high-frequency trading (HFT) strategies.
  6. Professionals

    Career Advice: Financial Analyst Vs. Investment Banker

    Read an in-depth comparison about working as a Financial Analyst vs. working as an Investment Banker, two highly prestigious business careers.
  7. Professionals

    Who Needs to Take the Series 65?

    Most states require individuals to pass the Series 65 exam in order to act as investment advisors.
  8. Investing Basics

    How to Vet Financial Advisors Via BrokerCheck

    Many people research restaurants or movies, but few select brokers or financial advisors with much research. Here's how BrokerCheck can help.
  9. Professionals

    Career Advice: Financial Planner Vs. Stockbroker

    Read an in-depth review of a career as a financial planner as opposed to a career as a stockbroker, including how to decide which is best for you.
  10. Term

    Understanding the Maintenance Margin

    A maintenance margin is the minimum amount of equity that must be kept in a margin account.
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  2. Series 6

    A securities license entitling the holder to register as a limited ...
  3. Comprehensive Automated Risk Data ...

    The Comprehensive Automated Risk Data System (CARDS) is an initiative ...
  4. Corporate Financing Committee

    A regulatory group that reviews documentation that is submitted ...
  5. Series 79

    A examination to ensure a candidate is qualified to become a ...
  6. Research Analyst

    A person who prepares investigative reports on equity securities. ...
  1. How does FINRA differ from the SEC?

    With all the financial organizations out there, knowing what they all do can be as complicated as knowing where to invest. ... Read Full Answer >>
  2. How can I find out if my employer is a member of FINRA?

    To find out if your employer is a member of the Financial Industry Regulatory Authority or FINRA (previously the National ... Read Full Answer >>
  3. I have a CFA designation. Do I qualify for any exemptions from FINRA licensing exams?

    Unfortunately, a CFA charter does not qualify you for any FINRA exam exemptions. Read Full Answer >>
  4. Am I qualified once I complete my FINRA certification exam?

    Even if you have completed your Financial Industry Regulatory Authority or FINRA (previously the National Association of ... Read Full Answer >>
  5. Are hedge funds regulated by FINRA?

    Alternative investment vehicles such as hedge funds offer investors a wider range of possibilities due to certain exceptions ... Read Full Answer >>
  6. How are variable annuities regulated?

    The sale of a variable annuity is regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory ... Read Full Answer >>
Hot Definitions
  1. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  4. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  5. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  6. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
Trading Center