Why Firstrade Asks for My SSN When Opening an Account?

If you are opening a Firstrade brokerage account you’ve probably noticed that they ask for your SSN in order to complete the application. You may also be asking yourself if they really need this and for what. The fact is, all U.S. brokers are legally required to collect your SSN among other identifying information. This article will walk through why this requirement exists.


FirstTrade askx for SSN


All Brokers Are Required to Record Your SSN

All U.S. brokers, Firstrade included, will ask for your SSN before approving your account. This is primarily because it’s a legal requirement of the federal government, but is also recommended as a best practice by leading self-regulatory organizations such as FINRA.

Promotion


Open Firstrade Account

Record-Keeping Requirements

The Securities and Exchange Commission (SEC) is the federal agency that enforces securities laws and requires brokers to record your SSN. The government can then access the account records that Firstrade and other brokers maintain to help them fight money laundering and other illegal financial activities. By requiring each account holder to be tied to a valid SSN, this makes it harder for individuals with illicitly-earned cash to move it around the financial system without leaving a trail.

Customer Identification Rule

In 2003, the SEC and U.S. Treasury Department jointly implemented the customer identification rule, of which the purpose was to force banks, brokers, and other financial institutions to make greater efforts to “know their customer”. Prior to this rule, there wasn’t really an incentive to prevent banks from turning a blind eye to suspicious accounts and activity since every account they opened meant more revenue for them too, even if it was laundered money. This rule makes it clear that brokerages and banks are legally required to know who their clients are by collecting their personal details.

In doing so, they make it easier for the government to crack down on money laundering and other illicit financing activities. The federal government can take the personal details collected by banks and brokers and compare them to their list of known and suspected terrorists. And if illegal activity is uncovered, the identity of the account holders involved will be clearly visible. Firstrade could be subject to punitive measures, including monetary fines, if they are found to be in violation of this rule.

Personal Information to Determine Investment Suitability

While filling out Firstrade’s new account application, you may also notice that they will ask you a few questions on your investing experience and goals. Besides helping Firstrade better identify its customers, they collect these personal details in order to also better understand and serve their customers. Your answers to these questions helps the broker understand what investment types would be most appropriate for you and what kind of trading activity they might expect to see in your account. This puts Firstrade in a better position to monitor your account for suspicious activity and to recommend to you new features or investments that might be a good fit.

Judgment

In short, if you are opening a brokerage account with Firstrade (or any U.S. broker) you must be prepared to provide them with your SSN, or they will not approve your application. That said, there shouldn’t be anything alarming about this request as it is standard procedure, and a legal requirement of the federal government.

Open Account


Open Firstrade Account


Firstrade


Continue Reading