Master Corporate/Institutional Accounts Documentation

Understanding the documentation required for corporate and institutional accounts is crucial for anyone looking to excel in the securities industry. This article simplifies complex concepts into manageable sections, ensuring you grasp the essentials for your FINRA Securities Industry Essentials (SIE) Exam.

Detailed Explanations

What Are Corporate/Institutional Accounts?

Corporate accounts are accounts held by businesses such as corporations, partnerships, or sole proprietorships. Institutional accounts involve entities like mutual funds, pension funds, or insurance companies. These accounts differ from individual accounts because they involve intricate structures and large transactions.

Documentation Requirements for Entity Accounts

Setting up an entity account requires several critical documents to establish legal authority and comply with regulatory requirements. Documentation typically includes:

1. Corporate Resolution: Demonstrates who is authorized to operate the account and make decisions.
2. Articles of Incorporation: Legal document that delineates the establishment of the corporation.
3. Partnership Agreement: Required for partnerships to outline the roles and responsibilities within the business.
4. Trust Agreement: A necessity when the account is for a trust, detailing the terms under which the trust operates.
5. Financial Statements: Provide insight into the financial status and validate their capacity to engage in trading activities.

Each of these documents plays a vital role depending on the type of organization involved.

Practical Examples

Example 1: Opening a Corporate Account

Acme Corporation wants to open a brokerage account. They need a Corporate Resolution naming Jane Doe, their CFO, as the individual authorized to act on behalf of the corporation. They must also provide their Articles of Incorporation to verify their existence as a legal entity.

Example 2: Institutional Investment Management

A large pension fund decides to engage a broker-dealer for securities investment. They present a Trust Agreement indicating the board of trustees’ approval for such arrangements. Financial statements showcasing their funding status ensure compliance and facilitate proper assessment by the broker-dealer.

Visual Aid

    graph LR
	A[Start] --> B[Corporate/Institutional Account Application]
	B --> C{Type of Business}
	C -->|Corporation| D[Corporate Resolution + Articles of Incorporation]
	C -->|Partnership| E[Partnership Agreement]
	C -->|Trust| F[Trust Agreement]
	D & E & F --> G[Additional Documents]
	G --> H[Account Approval]
	H --> I[Trade Execution]

Summary Points

• Corporate and institutional accounts require comprehensive documentation to establish authority and comply with regulations.
• Key documents include Corporate Resolutions, Articles of Incorporation, Partnership Agreements, Trust Agreements, and Financial Statements.
• Thorough understanding and attentiveness to these requirements ensure smooth account initiation and management.

Glossary

• Corporate Resolution: A formal statement passed by a corporation’s board of directors allowing someone to act on behalf of the corporation.
• Articles of Incorporation: A document that establishes a corporation, outlining its structure and purpose.
• Partnership Agreement: A contract between partners detailing their rights, responsibilities, and profit-sharing.
• Trust Agreement: A legal document that outlines a trust’s terms.
• Financial Statements: Records that outline the financial activities and conditions of a business entity.

Additional Resources

• Books:
  • “The Intelligent Investor” by Benjamin Graham
  • “Securities Regulation” by Stephen J. Choi and A.C. Pritchard
• Online Resources:
  • Investopedia’s Guide to Corporate Accounts
  • FINRA’s Corporate Financing Rules
• Websites:
  • FINRA Official Site
  • SEC Investor.gov

Quiz Section

Test your understanding of the documentation required for corporate and institutional accounts with these practice questions!