Joint Account

A customer wants to simultaneously (1) transfer her account from one firm to another and (2) change the account's registration from individual to joint with her spouse. Can both of these be accomplished through a single ACATS transfer instruction?

1. A.Yes -- ACATS instructions routinely combine a change in registration type with the transfer itself, since both are simply account maintenance events processed together.Wrong. A registration change is not combined with the transfer instruction; it requires separate new account documentation.
2. B.Yes, but only if the new joint owner is also a signatory on the original account at the delivering firm before the transfer instruction is submitted.Wrong. Being a signatory at the delivering firm does not allow the registration change to be combined with the ACATS transfer instruction.
3. C.No -- an ACATS transfer generally moves an account under its existing registration; changing the registration type is a separate action requiring its own new account documentation, and the two cannot be combined into a single instruction.Correct. A registration change is a separate action requiring its own documentation and cannot be combined with the transfer instruction.
4. D.No, because a registration change of any kind permanently bars the account from ever using ACATS again in the future.Wrong. A registration change does not permanently bar the account from future ACATS use.

Why: An ACATS transfer instruction is built to move an account as it currently exists, under its existing registration, from one firm to another. Changing the registration type itself, such as converting an individual account to a joint account, is a fundamentally different kind of change requiring its own new account documentation and the new co-owner's agreement to the account's terms, and it cannot simply be folded into the same instruction as the transfer.

Two sisters open a joint account and want each sister's share to pass automatically to the other if one dies. Which registration fits?

1. A.Tenancy in commonTIC sends a deceased owner's share to the estate, not automatically to the co-owner.
2. B.A custodial UTMA accountUTMA is for a minor beneficiary with a custodian, not two adult co-owners.
3. C.Joint tenants with right of survivorshipCorrect — JTWROS passes a deceased owner's share automatically to the surviving owner.
4. D.An individual account with a transfer-on-death beneficiaryThat is not a joint account; the sisters want joint ownership with survivorship.

Why: Joint tenants with right of survivorship (JTWROS) passes a deceased owner's share automatically to the surviving owner, which is exactly what the sisters want.

Marta and her brother Diego hold a joint brokerage account as TENANTS IN COMMON, with Marta owning 60 percent and Diego 40 percent. Marta dies. What happens to her 60 percent interest?

1. A.It passes to her estate and is distributed under her will or state intestacy law; it does not automatically go to Diego.Correct. Tenants in common has no survivorship feature, so the decedent fractional interest flows through the estate.
2. B.It passes automatically to Diego, who becomes the sole owner of the account.That is the result under joint tenants with right of survivorship, which is the other joint registration and not the one described here.
3. C.It is divided evenly between Diego and Marta estate, regardless of the stated percentages.The stated percentages control. Tenants in common allows unequal ownership, and the 60 percent stays 60 percent.
4. D.It is frozen permanently until Diego also dies.The account is restricted pending documentation, but the decedent share is settled to the estate rather than held indefinitely.

Why: Tenants in common is the joint form WITHOUT a right of survivorship. Each owner holds a defined fractional interest that belongs to that owner estate at death. Marta 60 percent passes under her will, or under state intestacy law if she left none, and Diego keeps only his own 40 percent. Review joint account registrations in the customer accounts topic.

A married couple holds a joint brokerage account. The account's risk tolerance field on file reflects the husband's stated moderate risk tolerance, though the wife, an equal joint owner, has separately told her representative in conversation that she is far more conservative. A representative recommends an aggressive strategy consistent with the moderate profile on file, and a principal approves it as suitable based on that file. What has this review overlooked?

1. A.There is no concern, since only one risk tolerance designation can be recorded per account, and the husband's stated profile on file is the operative one for suitability purposes.Wrong. The technical limitation of one recorded field does not mean the wife's known, differing tolerance becomes irrelevant to suitability.
2. B.A joint account with owners who have materially different risk tolerances presents a suitability question that isn't resolved by simply using one owner's profile as if it speaks for the account as a whole, and a principal approving based on only the husband's stated tolerance overlooks that the wife's differing, known tolerance is also relevant to what's actually suitable for this joint account.Correct. Both joint owners' known risk tolerances are relevant to what is actually suitable for a shared account.
3. C.The concern is limited to whether the wife should be removed from the account entirely so that only the husband's stated profile governs going forward.Wrong. Removing an account owner overreaches beyond what the actual suitability review gap calls for.
4. D.The concern is that the couple should be required to open two separate individual accounts instead of maintaining a single joint account.Wrong. Splitting the account is a bigger step than what the suitability review gap actually requires.

Why: A joint account with owners who have materially different risk tolerances presents a suitability question that isn't resolved by simply using one owner's profile as if it speaks for the account as a whole, and a principal approving based on only the husband's stated tolerance overlooks that the wife's differing, known tolerance is also relevant to what's actually suitable for this joint account.