New Account Form: Required Signatures and Principal Approval Timeline
A new retail customer completes an application to open a standard cash brokerage account with a registered representative. Regarding the execution of the New Account Form, whose signature is legally required by FINRA rules before any transactions can settle?
Under FINRA Rule 4512, only the registered principal's signature is legally required on a cash account form. Customer signature is required on margin accounts, but not cash accounts.
Complete Analysis & Legal Rationale
FINRA Rule 4512 (Customer Account Information) requires that every new account be approved in writing by a registered principal before or promptly after the completion of any initial transaction. Surprisingly to many test takers, FINRA rules do NOT require the customer's signature on a standard cash account form (although most broker-dealers require it as a matter of firm policy). A customer's signature IS required by regulation on margin agreements and options agreements, but on a basic cash account form, only the principal's signature is legally required.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
A principal must sign the account form; the customer's signature is not a FINRA legal requirement for cash accounts.
The SEC does not review or sign individual retail brokerage account forms.
FINRA Rule 4512 specifically mandates the registered principal's acceptance signature.
Principal approval must occur promptly (prior to or at trade settlement), not delayed by 60 days.
Official Standard: Codifies requirements for new account information and mandates written principal approval.