Investment Company and. Variable Contracts Products Principals (Series 26) Practice Exam

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Which action regarding the account record must occur at least every 36 months?

Account closure
Account update
Account deletion
Account suspension

The correct answer is: Account update

The requirement for an account update every 36 months is essential for maintaining current and accurate records in compliance with regulatory standards. This action ensures that the information held by the financial institution reflects any changes in the customer’s personal details, investment objectives, risk tolerance, or other relevant factors. Regular account updates help to prevent issues related to outdated or incorrect information, which could lead to compliance failures or miscommunications. Regulatory bodies often mandate such updates to enhance transparency and protect both the institution and clients from potential risks associated with incorrect account information. This practice also aids in adhering to anti-money laundering (AML) requirements, as it allows for the ongoing monitoring of customer behavior and transactions. While options like account closure, deletion, or suspension deal with more drastic measures regarding account status, they do not address the routine necessity of ensuring that customer records are up-to-date. An account update acts as a proactive measure, highlighting the importance of regular communication and reassessment of client needs, which is fundamental in the investment industry.