Securities Lawyer's Deskbook                          published by The University of Cincinnati College of Law

Rule 4 -- Initial Privacy Notice to Consumers Required

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1. Initial notice requirement. You must provide a clear and conspicuous notice that accurately reflects your privacy policies and practices to:
   
   
   1. Customer. An individual who becomes your customer, not later than when you establish a customer relationship, except as provided in paragraph (e) of this section; and
      
      
   2. Consumer. A consumer, before you disclose any nonpublic personal information about the consumer to any nonaffiliated third party, if you make such a disclosure other than as authorized by Rule 14 and Rule 15.
      
      
2. When initial notice to a consumer is not required. You are not required to provide an initial notice to a consumer under paragraph (a) of this section if:
   
   
   1. You do not disclose any nonpublic personal information about the consumer to any nonaffiliated third party, other than as authorized by Rule 14 and Rule 15; and
      
      
   2. You do not have a customer relationship with the consumer.
      
      
3. When you establish a customer relationship.
   
   
   1. General rule. You establish a customer relationship when you and the consumer enter into a continuing relationship.
      
      
   2. Special rule for loans. You do not have a customer relationship with a consumer if you buy a loan made to the consumer but do not have the servicing rights for that loan.
      
      
   3. Examples of establishing customer relationship. You establish a customer relationship when the consumer:
      
      
      1. Effects a securities transaction with you or opens a brokerage account with you under your procedures;
         
         
      2. Opens a brokerage account with an introducing broker or dealer that clears transactions with and for its customers through you on a fully disclosed basis;
         
         
      3. Enters into an advisory contract with you (whether in writing or orally); or
         
         
      4. Purchases shares you have issued (and the consumer is the record owner of the shares), if you are an investment company.
         
         
4. Existing customers. When an existing customer obtains a new financial product or service from you that is to be used primarily for personal, family, or household purposes, you satisfy the initial notice requirements of paragraph (a) of this section as follows:
   
   
   1. You may provide a revised privacy notice, under Rule 8, that covers the customer's new financial product or service; or
      
      
   2. If the initial, revised, or annual notice that you most recently provided to that customer was accurate with respect to the new financial product or service, you do not need to provide a new privacy notice under paragraph (a) of this section.
      
      
5. Exceptions to allow subsequent delivery of notice.
   
   
   1. You may provide the initial notice required by paragraph (a)(1) of this section within a reasonable time after you establish a customer relationship if:
      
      
      1. Establishing the customer relationship is not at the customer's election;
         
         
      2. Providing notice not later than when you establish a customer relationship would substantially delay the customer's transaction and the customer agrees to receive the notice at a later time; or
         
         
      3. A nonaffiliated broker or dealer or investment adviser establishes a customer relationship between you and a consumer without your prior knowledge.
         
         
   2. Examples of exceptions.
      
      
      1. Not at customer's election. Establishing a customer relationship is not at the customer's election if the customer's account is transferred to you by a trustee selected by the Securities Investor Protection Corporation ("SIPC") and appointed by a United States Court.
         
         
      2. Substantial delay of customer's transaction. Providing notice not later than when you establish a customer relationship would substantially delay the customer's transaction when you and the individual agree over the telephone to enter into a customer relationship involving prompt delivery of the financial product or service.
         
         
      3. No substantial delay of customer's transaction. Providing notice not later than when you establish a customer relationship would not substantially delay the customer's transaction when the relationship is initiated in person at your office or through other means by which the customer may view the notice, such as on a web site.
         
         
6. Delivery. When you are required to deliver an initial privacy notice by this section, you must deliver it according to Rule 9. If you use a short-form initial notice for non-customers according to Rule 6(d), you may deliver your privacy notice according to Rule 6(d)(3).
   
   

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