Generally, a financial institution is required to ascertain if securities certificates they have taken by pledge, transfer, or otherwise have been reported as missing, lost, counterfeit, or stolen. When is it NOT required to take such actions?
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A. B. C. D.A
The requirement to ascertain if securities certificates are missing, lost, counterfeit, or stolen is a part of the financial institution's obligations to protect its customers and prevent fraudulent activities in the financial market. This requirement is based on the laws and regulations imposed by regulatory agencies like the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Regarding the given options, the correct answer is A. When a financial institution receives securities certificates directly from the issuer or issuing agent at issuance, there is no need to verify their authenticity or whether they have been reported as missing, lost, counterfeit, or stolen. This is because the issuer or issuing agent is responsible for ensuring the securities are genuine and have not been compromised.
Option B, which states that a bank officer's personal knowledge of the individual pledging the certificate exempts the institution from verifying the security's authenticity, is incorrect. Personal knowledge of an individual is not a reliable indicator of whether a security certificate is genuine or has been reported as missing, lost, counterfeit, or stolen. Thus, the institution must take all necessary steps to verify the security's authenticity.
Option C, which states that securities certificates received as part of a transaction with a face value of $20,000 or less are exempt from verification, is also incorrect. There is no minimum value for securities certificates exempt from verification. The verification requirement is based on the type of transaction and the parties involved, not on the face value of the securities.
Option D, which states that a financial institution can rely on an insured delivery service to verify the authenticity of the securities, is also incorrect. The responsibility for verifying the securities' authenticity lies with the financial institution, not with the delivery service. The insured delivery service only provides insurance coverage for any loss or damage during transportation.
In summary, financial institutions must take all necessary steps to verify the authenticity of securities certificates received, regardless of the face value, unless the securities are received directly from the issuer or issuing agent at issuance.