SIE: “Know Your Customer” Rule

“Know Your Customer” Rule

The “Know Your Customer” rule requires broker-dealers to use “reasonable diligence” to collect and maintain essential information on their clients when they open accounts. The rule requires that firms check their customers’ identities, investment histories, investment objectives, and sources of funds. This information provides the broker-dealer with some assurance that its customers are not laundering money and assists the broker-dealer in making suitable recommendations for the customers’ accounts.

If the client does not provide all the information required on a new account form, the account may still be opened, as long as the firm collects certain