Types of Customer Accounts Explained for the SIE Exam

Brokerage accounts differ along three lines: who OWNS the account (individual or joint), who it’s held FOR (a minor or a trust), and who gets to DECIDE what happens in it (the customer, or a rep with discretion). On the SIE — 75 scored questions in 105 minutes, passing score 70 — account types sit in “Understanding Trading, Customer Accounts and Prohibited Activities,” the second-largest section at 31% of the exam. The single most-tested split: in a JTWROS account, a deceased owner’s share passes automatically to the survivor; in a tenants-in-common account, it passes to the deceased’s estate.

Individual accounts

An individual account is owned and controlled by one person. That owner makes the investment decisions, or authorizes someone else to act through a power of attorney. There’s no survivorship feature: if the owner dies, the account passes to their estate or heirs — unless it carries a Transfer on Death (TOD) designation, which names beneficiaries who receive the assets outside probate. One owner, one decision-maker.

Joint accounts: JTWROS vs TIC

A joint account has two or more owners who share rights to the securities. Two types matter for the SIE, and the difference is entirely about what happens when an owner dies.

JTWROS (Joint Tenants with Rights of Survivorship). All owners have an equal, undivided interest, and survivorship applies: if one owner dies, the surviving owner(s) automatically inherit the deceased’s share, bypassing probate. (It avoids probate, but not estate tax — the deceased’s share is still part of their taxable estate.) Spouses often use JTWROS so the survivor keeps the whole account. Any owner can trade or withdraw on their own authority, but checks and distributions must be made out to all owners.

TIC (Tenants in Common). Each owner holds a specific percentage, which can be unequal, and there is no right of survivorship. When an owner dies, that person’s share passes to their estate and heirs — not to the other owners. If Jim and Jane own a TIC account 60/40 and Jane dies, her 40% goes to her heirs while Jim keeps his 60%. As with JTWROS, any co-owner can trade, and checks are payable to all owners.

The exam hook, stated plainly: JTWROS = the surviving owner inherits; TIC = the deceased owner’s share goes to the estate. Don’t mix them up.

Custodial accounts (UGMA/UTMA)

A custodial account holds assets for a minor. The minor is the legal owner — the account is in the child’s name and Social Security number — while an adult custodian manages it for the child’s benefit. The funding is an irrevocable gift to the child; the custodian can never take it back. Only one custodian and one minor are allowed per account, and the custodian must invest prudently for the child.

Custodial accounts must be cash accounts — no margin and no borrowing against the assets. When the minor reaches the age of majority (18 or 21, depending on the state, and sometimes later under UTMA), the custodianship ends and everything transfers to the now-adult child.

The two types differ in what they can hold. UGMA (Uniform Gifts to Minors Act) accounts hold financial assets — cash, securities, and insurance. UTMA (Uniform Transfers to Minors Act) accounts can hold almost any kind of property, including real estate and other physical assets. Either way, the minor owns the assets and receives them at majority.

Discretionary vs non-discretionary

In a discretionary account, the rep can make trading decisions without getting the customer’s approval on each order — but only with prior written authorization (a limited power of attorney) on file first.

What counts as discretion is a favorite exam point. Think of the three A’s — Action, Asset, and Amount: whether to buy or sell, which security, and how many shares. If the rep decides any one of those without the customer’s specific say-so, the order is discretionary and requires that written authorization. Choosing only the time or price of an order is not discretion — a customer can tell a rep “buy 100 shares of XYZ, you pick the moment today” without it being a discretionary account.

A non-discretionary account is the opposite: the customer makes every investment decision, and the rep only acts on explicit instructions. In a discretionary account, every order is marked “discretionary” and reviewed by a principal under firm rules.

Fiduciary and entity accounts

Several account types put someone in charge of assets for someone else, and each requires the right governing document:

• Trust account — a trustee manages assets for beneficiaries under the trust agreement and a prudent-investor standard.
• Estate account — an executor or administrator settles a deceased person’s securities through probate.
• Guardianship account — a court-appointed guardian manages assets for a minor or incapacitated person, under court supervision.
• Corporate account — requires the corporate charter plus a corporate resolution naming who may trade for the company.
• Partnership account — requires the partnership agreement showing who can trade for the partnership.

In each, the person in charge is a fiduciary: they must act for the benefit of the owners or beneficiaries and follow the governing documents.

Account types at a glance

Account type	Who owns it	Who decides	On death / key feature
Individual	One person	The owner (or an agent under POA)	Passes to the estate or a named TOD beneficiary
JTWROS	All owners, equal interest	Any co-owner trades; withdrawals payable to all	Survivor automatically inherits the deceased’s share (avoids probate)
TIC	Owners in set percentages (can be unequal)	Any co-owner trades; withdrawals payable to all	Deceased’s share goes to their estate, not the co-owners
Custodial (UGMA/UTMA)	The minor	Custodian manages for the child; cash only	Transfers to the child at majority; gift is irrevocable
Discretionary	The customer	Rep chooses Action, Asset, or Amount (with written POA)	Authority ends at the owner’s death
Trust / fiduciary	The trust, estate, or entity	Trustee, executor, officer, or partner per the documents	Assets follow the trust terms, will, charter, or agreement

Opening an account

Opening any account starts with a New Account Form capturing the customer’s name, address, date of birth, and Social Security or tax ID number. Under the USA PATRIOT Act’s Customer Identification Program (CIP), the firm must verify the customer’s identity. It also gathers financial and background details — income, net worth, employment, investment objectives, and risk tolerance — to satisfy suitability and Regulation Best Interest. In short, the firm collects enough “know your customer” information to recommend suitable investments before the account goes live. (IRAs and retirement plans have their own opening rules and are covered separately.)

Exam traps to avoid

• JTWROS vs TIC. JTWROS has automatic survivorship (the survivor gets it); TIC does not (the deceased’s share goes to the estate). Don’t swap them.
• The minor owns the custodial account. The child — not the custodian — is the owner. The gift is irrevocable, only one custodian and one minor per account, and it’s cash-only (no margin).
• The three A’s. Discretion means choosing Action, Asset, or Amount. Deciding any one of them requires prior written authorization; picking only time or price does not.
• Written authorization comes first. A discretionary account needs the written trading authorization on file before the first discretionary trade — never after the fact.
• Any joint owner can trade. In both JTWROS and TIC, any owner can enter orders alone — but checks must be made out to all owners.

Once JTWROS vs TIC, the three A’s, and the custodial-account rules feel automatic, test yourself with the free SIE diagnostic to see how the SIE actually frames account-type questions.

Frequently asked questions

What’s the difference between JTWROS and tenants in common?

JTWROS (Joint Tenants with Rights of Survivorship) gives all co-owners an equal interest with survivorship: when one owner dies, the survivor(s) automatically inherit the whole account, avoiding probate. In a TIC (Tenants in Common) account, each owner holds a set percentage and there’s no survivorship — a deceased owner’s share passes to their estate and heirs. Plainly: JTWROS = survivor gets it; TIC = the estate gets it.

Who owns a UGMA/UTMA custodial account?

The minor is the legal owner. An adult custodian manages the account for the child’s benefit until the child reaches the age of majority (18 to 21, depending on the state, sometimes later under UTMA), at which point full control passes to the child. All contributions are irrevocable gifts.

What makes an account discretionary?

An account is discretionary when the rep can decide the Action (buy or sell), the Asset (which security), or the Amount (how many shares) without the customer’s approval on each order. That authority requires prior written authorization — a limited power of attorney. If the rep only chooses the time or price of a trade, it isn’t discretionary.

What happens to a joint account when one owner dies?

It depends on the type. In a JTWROS account, the deceased’s interest passes immediately to the surviving owner(s). In a TIC account, the deceased’s percentage goes into their estate for distribution, and the surviving owners keep only their own shares.

Can a custodial account use margin?

No. A UGMA/UTMA custodial account must be a cash account — no margin loans and no borrowing against the assets. The custodian can only buy with cash available in the account.

What is required to open a new brokerage account?

A New Account Form with the customer’s identifying information — name, address, date of birth, and Social Security or tax ID. Under the USA PATRIOT Act’s CIP, the firm verifies the customer’s identity, and it collects financial and background details (income, net worth, objectives, risk tolerance) to meet suitability and Regulation Best Interest before activating the account.

The quick hook to carry in: ownership answers “who gets it” (JTWROS = survivor, TIC = estate), custodial accounts belong to the minor and stay in cash, and discretion is Action, Asset, or Amount — in writing, first.