Regulations — Quick Reference

Core Concepts at a Glance

• Reg BI (2020) replaced old suitability standard; broker-dealers must act in BEST INTEREST of retail customers

• Form CRS required before or at time of first recommendation to retail customers (2-page max)

• CTR: cash >$10,000 -- mandatory filing; no suspicion needed; DO NOT notify customer

• SAR: suspicious activity $5,000+ -- mandatory filing; STRICTLY confidential; DO NOT notify customer

• Structuring = illegal even if underlying money is clean

• JTWROS: survivorship bypasses estate; TIC: owner's share goes through their estate

• UGMA/UTMA: irrevocable gifts; custodian manages until age of majority; one custodian, one minor

• Discretionary accounts: WRITTEN authorization required before any discretionary trade

• Retail communication: >25 retail investors in 30 days; requires PRINCIPAL PRE-APPROVAL

• Correspondence: <=25 retail investors in 30 days; no pre-approval; supervised

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Reg BI: Four Obligations

|---|---| Best interest vs. suitability: Old suitability merely required the product be "suitable" -- Reg BI requires it be the BEST option when conflicts could influence the recommendation. Form CRS: 2 pages (4 for dual registrants); covers services, fees, conflicts, legal standard, disciplinary history; delivered before or at time of first recommendation. ---

CTR vs. SAR Comparison

|---|---|---| Structuring: Breaking up transactions to stay below $10,000 is a federal crime -- even with legitimate money. Safe harbor: Firms filing SARs in good faith have legal protection even if the transaction turns out to be innocent. Beneficial Ownership Rule: Identify individuals owning 25%+ of legal entity customers; plus one control-prong individual. ---

Account Type: Survivorship vs. Estate

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UGMA vs. UTMA

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Communication Category Requirements

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Obligation	What It Requires
Disclosure	Disclose material facts and conflicts of interest before/at time of recommendation; deliver Form CRS
Care	Exercise reasonable diligence; ensure recommendation is in best interest considering costs, risks, rewards
Conflict of Interest	Identify, disclose, and mitigate conflicts; eliminate those that cannot be managed
Compliance	Written policies and procedures to achieve Reg BI compliance
Feature	CTR (Currency Transaction Report)	SAR (Suspicious Activity Report)
Trigger	Cash transaction EXCEEDS $10,000	Suspicious activity; transaction $5,000+
Suspicion required?	NO -- purely dollar-amount trigger	YES -- firm must have reason to suspect
Filed with	FinCEN	FinCEN
Notify customer?	No	ABSOLUTELY NOT -- criminal violation
Trigger basis	Objective (amount)	Subjective (judgment)
Structuring applicable?	CTR filed on original amount	SAR ALSO filed for structuring request
Account Type	On Death of Owner	Key Feature
JTWROS	Entire account to surviving co-owner(s); bypasses will/estate	Survivorship; equal ownership required
TIC	Deceased's share goes to their ESTATE (per will or intestacy)	Pro-rata ownership; passes through estate
Custodial (UGMA/UTMA)	N/A -- minor is owner; custodian manages	Irrevocable gift; one custodian, one minor
Trust account	Per trust document	Trustee has fiduciary duty; controlled by trust terms
Feature	UGMA	UTMA
Asset types allowed	Cash and securities	Any asset (real estate, patents, art, securities)
Age of majority	18 in most states	18–25 depending on state (may be extended)
Irrevocable?	Yes	Yes
Custodian setup	One custodian per one minor	Same
Federal law?	Older, narrower law	Broader, more modern
Category	To Whom	Volume	Pre-Approval	Recordkeeping
Retail communication	Retail investors	>25 in 30 days	YES -- qualified principal	3 years
Institutional communication	Institutional investors only	Any	No (supervised per WSPs)	3 years
Correspondence	Retail investors	<=25 in 30 days	No (supervised)	3 years

IPO quiet period: Managing underwriter = 10-day quiet period before research; syndicate members = 3-day quiet period. Social media:

• Static posts (blogs, pre-scripted content) = retail communication = pre-approval required

• Interactive content (real-time chat) = correspondence = no pre-approval, supervised

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Suitability / Reg BI: Customer Profile Factors

• Age and time horizon

• Investment objectives (preservation, income, growth, speculation)

• Risk tolerance (ability AND willingness to take risk)

• Liquidity needs

• Tax status and tax bracket

• Financial situation (income, net worth, other assets)

• Investment experience and sophistication

Churning: Excessive trading to generate commissions; violates quantitative suitability + Reg BI + FINRA rules. ---

Common Exam Traps

• CTR vs. SAR trigger: CTR = cash >$10,000 (no suspicion needed); SAR = suspicious activity $5,000+ (subjective)

• Tipping off: Telling a customer a SAR was filed is a criminal violation -- not just a FINRA rule violation

• Structuring with legitimate money: Still illegal regardless of the source of funds

• JTWROS vs. TIC: JTWROS = will does NOT control; TIC = will DOES control the deceased's share

• UGMA/UTMA irrevocability: Custodian cannot return gifted assets to themselves

• Discretionary authority: Written only -- verbal agreement is NEVER sufficient

• Time and price discretion: Choosing ONLY when to execute and at what price is NOT discretionary trading

• Retail communication: The 25-person/30-day threshold is the dividing line between retail and correspondence

• Form CRS delivery: Must be BEFORE or AT THE TIME of first recommendation (not after)

• Reg BI best interest: Not the same as the RIA fiduciary standard (investment advisers have a broader fiduciary duty under the Investment Advisers Act); Reg BI applies specifically to broker-dealer recommendations