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Understanding Established Customer: Legal Insights and Importance
Definition & Meaning
An established customer is an individual for whom a broker or dealer maintains an account. This status is typically granted to clients who have engaged in financial transactions, such as buying or selling securities, for over a year. Additionally, established customers are characterized by their history of making multiple transactions, including at least three purchases of penny stocks on different days and from various issuers. The concept of established customers is significant in the context of business relationships, especially when it comes to protecting goodwill, which refers to the value derived from the likelihood that existing customers will continue to do business with a company.
Table of content
Legal Use & context
The term "established customer" is primarily used in the financial and securities industries. It is relevant in legal discussions concerning brokerage agreements, customer rights, and the transfer of goodwill when employees leave a firm. Understanding this term is essential for brokers, dealers, and legal professionals involved in financial transactions and customer account management. Users can manage related forms and agreements with the help of US Legal Forms templates, which are designed by experienced attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: Jane has had an investment account with Broker A for two years. During this time, she has made several stock purchases, including three different penny stocks on separate occasions. As a result, she qualifies as an established customer.
Example 2: John, who has been a client of Dealer B for over a year, has consistently traded various securities and engaged in multiple transactions. His status as an established customer is recognized, which may affect any agreements related to goodwill should he decide to switch brokers. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Notable Differences
California
Specific regulations may apply to penny stock transactions.
New York
Higher scrutiny on broker-dealer relationships and customer transactions.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
New Customer
A person who has recently opened an account and has not yet established a trading history.
Goodwill
The intangible value derived from customer loyalty and ongoing business relationships.
Common misunderstandings
What to do if this term applies to you
If you believe you qualify as an established customer, it is important to understand your rights and obligations. Review your account agreements and transaction history. If you are considering changing brokers or have questions about your status, consulting a legal professional can provide clarity. Additionally, users can explore US Legal Forms for templates that may assist in managing related legal documents.
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