Washington State Department of Financial Institutions

Opening Your New Account

The first thing you will be asked to do after you have decided on an investment professional is to fill out the "New Account Form".  Read every line on the form, make sure all lines are properly filled out, and get a copy of the signed form for your records before leaving your investment professional’s office.  Do not sign the form if you don’t understand everything.

Fill out the new account forms honestly. Don't over inflate your financial status in order to impress your investment professional. If you don’t, your investment professional will not be able to make suitable recommendations. 

Investment professionals are bound by the "know their customer" rule. Simply stated, this means that your investment professional is forbidden to place you in an investment that is "unsuitable" for you. However, the only way that your investment professional can observe this rule and know what is suitable for you is for you to be absolutely honest with them.

If your investment strategy, level of income, or net worth changes over the years, be sure to update your account form. Always keep copies of everything you sign and all correspondence.

Two more items that should be considered are the margin account and discretionary authority. 

Margin account: allows you to borrow money from the brokerage firm against your securities. You must pay interest on the loan and if the securities drop in value, you're responsible for the full amount borrowed. Also, your investment professional may sell any security in your account to cover the shortfall without notice to you. This type of account involves a high degree of risk.

Discretionary authority: the power you may give to an investment professional to allow him or her to trade in your account without talking with you.  In other words, you give up control of your account. Discretionary authority must be given in writing and withdrawn in writing.

Do not make the decision to authorize discretionary authority until you have given the matter careful consideration. When you give up control of your account, you can be opening yourself up to serious problems.  Discretionary authority should only be given in very special situations.

Sample New Account Form (PDF)

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