General Securities Sales Supervisor (Series10) Practice Exam

What is the requirement when opening a corporate account?

1. A shareholder resolution is necessary

2. A corporate charter must be filed

3. A corporate resolution must be completed

4. No documentation is needed

The correct answer is: A corporate resolution must be completed

When opening a corporate account, the completion of a corporate resolution is essential. This document serves as a formal record indicating that the corporation's board of directors has authorized the opening of the account and designates who is permitted to transact on behalf of the corporation. This resolution helps ensure that the broker-dealer is dealing with the proper individuals who have the authority to act for the corporation, thereby providing legal protection to both the corporation and the financial institution. In the context of corporate governance and compliance, this requirement is important for establishing clear lines of authority within the company. By having a corporate resolution, financial institutions can verify that the transactions conducted in the account are backed by the corporation's governing body, ensuring accountability and adherence to the corporation's established protocols. Other options, such as requiring a shareholder resolution or filing a corporate charter, do not align with the standard practices necessary for opening a corporate account. Similarly, claiming that no documentation is needed overlooks the legal requirements necessary to adequately confirm authority and prevent unauthorized transactions.