Series 7 practice questionhardAccount Documentation — Beneficial Ownership
Under the FinCEN Customer Due Diligence (CDD) Rule, when opening an account for a legal entity, a broker-dealer must identify and verify the identity of each beneficial owner who owns what percentage or more of the entity?
- A25%✓ Correct answer
- B10%
- C50%
- D5%
Explanation
Why A — 25%
The FinCEN Customer Due Diligence (CDD) Rule requires financial institutions, including broker-dealers, to identify and verify the identity of any individual who owns 25% or more of a legal entity customer. Additionally, at least one individual who has significant responsibility for managing the entity (such as a CEO or CFO) must also be identified, regardless of ownership percentage.
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