What must a firm do when a registered representative opens a brokerage account with another member firm?

When a registered representative opens a brokerage account with another member firm, it is essential for the registered representative's employer to be informed. This requirement is in place to ensure that the employer is aware of any outside business activities that could affect the representative's work or the firm itself.

The reason for this policy is rooted in regulatory compliance and firm policies designed to manage potential conflicts of interest, supervision requirements, and adherence to the ethical standards set forth in the securities industry. By informing the employer, the firm can ensure oversight of the representative’s activities, assess the potential for any conflicts, and maintain the integrity of its operations.

In contrast, the other choices do not align with the regulatory requirements for this situation. Notifying the securities exchange is not necessary, as the transaction does not need to be approved by them. Approval of the transaction before execution is typically handled internally by the member firm to which the account is opened rather than being mandated for approval by the representative’s primary employer. Sending a confirmation to the client is a standard procedure in brokerage practices but does not meet the specific compliance obligation regarding communication with the employer about outside accounts.