Why TD Ameritrade Asks for My SSN When Opening an Account?

If you are opening a TD Ameritrade account and this is your first brokerage account application, you may be wondering why they ask for your social security number (SSN). You may be asking yourself if they really need this, and whether or not you really need to provide it. The short answer is yes they are legally required to collect this information from you, and this article will explain why and what they do with it.

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All Brokers Are Required to Record Your SSN

We should start off by clarifying that it’s not just TD Ameritrade that will ask for your SSN. All U.S. brokers will ask you for it before opening your account. This is mainly because the U.S. government makes it a legal requirement for brokers to collect your SSN (among other personal details). Even besides the U.S. government, the finance industry’s self-regulating organizations, such as FINRA, also recommend collecting clients’ SSNs as a best practice. Next, we’ll get into why this is.

Record-Keeping Requirements

The Securities and Exchange Commission (SEC) is the federal agency that requires brokers to collect your SSN (in addition to other personal details) for record-keeping purposes before opening your account. The government uses this information in part to keep records on individual’s financial assets and to prevent money laundering and other illegal financial activities. This is why TD Ameritrade is required to ask for your SSN, and why they won’t let you proceed with their online application until you provide it.


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Customer Identification Rule

The SEC and the U.S. Treasury Department jointly implemented the customer identification rule in 2003. The purpose of this rule was to force banks and other financial institutions to “know their customer” by requiring them to collect personal information of individuals wishing to do financial business with them. The goal of this was primarily to help fight money laundering and illegal financial activities by requiring the banks to take a more proactive effort in fighting illegal activities happening among their client accounts.

Money laundering is a primary method that terrorist organizations and drug cartels use to finance their operations. This rule also allows the government to bump up the identity of account holders against government lists of known terrorists and criminals. So even if TD Ameritrade didn’t want to collect your SSN for record-keeping purposes, they would still be required to collect it in order to be in compliance with the customer identification rule. If TD Ameritrade ignored this rule, they could face punitive measures from the federal government, including fines.

Personal Information to Determine Investment Suitability

In addition to the customer identification rule, FINRA, the leading self-regulating organization in the industry, advises its broker members (and all major U.S. brokers are FINRA members) to collect your SSN and other personal details in order to better serve their clients. TD Ameritrade’s application process includes a few questions about your personal financial situation, risk appetite, and reasons for investing. In theory, this information puts Ameritrade in a better position to offer you the right kind of investment advice and to monitor your account for any suspicious activity that doesn’t align with your investing style.

TD Ameritrade Asking For SSN Summary

To summarize, if you are going to open a TD Ameritrade account (or an account with any U.S. broker), be prepared to provide your SSN as there is no way to open your account without it. It is a legal requirement for all financial institutions in the U.S. to collect this and by not doing so they would be unnecessarily exposing their business to potentially large fines and legal penalties.

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