Numbered Account

A prospective subscriber asks the firm to open a private-placement account identified only by a numbered code, declining to have his name appear anywhere on the account documentation that the issuer or its counsel might see, though he is willing to provide his identity confidentially to the firm's back office. May the firm open the account on this numbered, name-withheld basis?

1. A.Yes -- as long as the firm's back office privately maintains a record linking the numbered account to the customer's real identity.Wrong. An informal, back-office-only identity record does not substitute for opening and documenting the account in the customer's actual name.
2. B.Yes -- because confidentiality preferences of private-placement investors are routinely accommodated through numbered or coded account titling.Wrong. Confidentiality preferences do not permit numbered or coded account titling that withholds the subscriber's identity from the account's own documentation.
3. C.Yes -- but only if the customer is a qualified institutional buyer rather than an individual, since QIBs are permitted enhanced confidentiality in account titling.Wrong. QIB status does not create an exception allowing anonymous or numbered account titling.
4. D.No -- the account must be opened and documented in the actual subscriber's name; withholding identity from the account's core documentation is not permissible regardless of the customer's confidentiality preference.Correct. The account must be documented in the actual subscriber's name; a numbered, name-withheld arrangement is not an acceptable substitute.

Why: A private-placement account must be opened and documented in the actual subscriber's name; a numbered account that withholds the subscriber's identity from the account's own core documentation is not a permissible way to open a securities account, regardless of the customer's confidentiality preference or willingness to identify himself informally to firm staff.

A client of Bellmartin Quay Securities asks that her account be carried under the designation "Account 4471" rather than under her name, because she does not want branch staff to see the size of her holdings on screen. The branch manager is willing but wants to know what the firm must have on file before it may identify the account by number alone. What is required?

1. A.A written statement signed by the customer attesting that she is the owner of the account.Correct. The signed attestation of ownership is the condition on which an account may be designated by number or symbol.
2. B.Nothing beyond the branch manager's approval, since the designation is an internal firm convenience.A signed customer attestation of ownership is required. Internal approval alone is not enough.
3. C.Numbered accounts are prohibited outright, because they conceal the identity of the beneficial owner.They are permitted. Full identifying records remain on file behind the designation, so nothing is concealed from the firm or regulators.
4. D.The prior written consent of the Administrator, renewed annually for each numbered account.No Administrator consent is required for a numbered account, whether initially or annually.

Why: A firm may carry an account under a number or symbol rather than the customer's name, but only if it holds a written statement, signed by the customer, attesting that she is the owner of the account. The firm must of course still know exactly who the customer is: the full customer identification and account records sit behind the designation and are available to the firm and to regulators on request. What the number does is keep the client's name off routine screens and paperwork, which is a legitimate privacy interest. What it must never do is obscure ownership from the firm itself, and the signed attestation on file is precisely what prevents that.