Options Account Opening: ODD Delivery, Principal Approval, and 15-Day Rule
A retail customer is approved to trade options by a registered options principal (ROP) and receives the Options Disclosure Document (ODD) on day 1. The customer executes several call and put transactions over the next two weeks. However, by day 16, the customer has failed to return the signed Options Account Agreement. What action must the broker-dealer take regarding the account?
The Options Agreement must be signed and returned within 15 days of account approval. If not returned, only CLOSING transactions are permitted.
Complete Analysis & Legal Rationale
FINRA options rules require: (1) Delivering the Characteristics and Risks of Standardized Options (ODD) at or prior to account approval; (2) Account approval by a Registered Options Principal (ROP) before trading commences; and (3) The customer must return the signed Options Account Agreement within 15 calendar days of approval. If the customer fails to return the signed agreement within 15 days, no new opening transactions are allowed; the account is restricted to CLOSING transactions only to manage existing risk.
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:
The firm cannot automatically liquidate customer positions; the customer retains ownership and can enter closing orders.
If unsigned after 15 days, FINRA Rule 2360 restricts the account to closing transactions only.
Broker-dealers cannot charge arbitrary regulatory late fees or allow new opening trades.
Settled trades are legally valid contracts and cannot be rescinded simply due to paperwork delay.
Official Standard: Mandates 15-day return of options agreement and restricts delinquent accounts to closing transactions.