Why can't I open a brokerage account...?

Question

...because one of my parents work at smith barney (citi group)? is this true?

I am 18, but my parent said something like its illegal (insider trading) for any financially dependent child to open a brokerage account any where else besides a smith barney account where there restrictions on the minimum time a stock can be held. I couldn't confirm all this though.

Answer 1

Depending on the stipulations in your parent’s contract, you might not be able to open a brokerage account outside the firm and/or buy certain securities. I work for Merrill Lynch and I know that I am not allowed to open any other brokerage account outside the firm because it is a conflict of interest. Since I am a financial advisor, the SEC feels that if I recommend to a client to invest with Merrill Lynch, why would I invest at a different company?!?!?! Also, depending on your parent’s position, you might be restricted from buying certain stocks. If they have access to “inside” information, there family can not purchase that stock either. There is no way to find out “if” they gave out any “inside” information, so the SEC just does not allow the family to buy stock, if the employee is restricted.

There are always exceptions to the rules. For example, my father is a director at a different finance firm. If I wanted to open an account with him, I would be able to, but I would have to have approval from my compliance department. (and vice versa)

I would look into what you will be able to open outside the firm, and/or if you are restricted from buying any securities. Smith Barney has a good trading platform; I would stick with them. They will be a “little” more expensive then an E*trade or ameritrade, but you have access to more mutual funds and better analysis. I would just trade with your parents.

Hoped that helped

Answer 2

I do not think your advisor is correct.

I opened brokerage accounts for both my kids when they were 19 years old. No problem. No strange restrictions, as long as the account is funded with enough cash to do what you want to do.

Answer 3

I'm sure you could open an account at an unrelated agency, but (assuming you're a minor) you'd need their co-signature, and maybe they're not allowed to do that because of their employment. At any rate, once you're 18, you can open one wherever you like. Happy trading!