Customer Confirmations

The trade confirmation is the first document the customer receives after the transaction. It memorializes the essential terms of the trade, identifies the broker-dealer's (BD's) capacity, and triggers the customer's right to dispute the trade. Three parallel rules govern confirmation delivery: SEA Rule 10b-10 (the federal foundation), FINRA Rule 2232 (the member-firm parallel), and MSRB Rule G-15 (the municipal-securities parallel that applies to Series 6 municipal fund securities).

What is a trade confirmation and when is it required?

• Trade confirmation: a written or electronic notice of a securities transaction delivered to the customer that memorializes the essential terms of the trade
• SEA Rule 10b-10: the foundational federal rule; requires BDs to send a confirmation at or before completion of the transaction
• FINRA Rule 2232: applies to all FINRA members executing transactions for customers in any security
• MSRB Rule G-15: parallel rule for municipal securities transactions, including Series 6 municipal fund securities (529 plans, Achieving a Better Life Experience (ABLE) accounts, Local Government Investment Pools (LGIPs))
• "Completion of transaction": defined under Exchange Act standards; generally the settlement date for purchases and sales
• Mutual fund and variable annuity transactions have different settlement timing than traditional equities and are typically sent within 1 to 3 business days after the trade

Delivery format:

• Paper or electronic (electronic delivery requires customer consent under Securities and Exchange Commission (SEC) e-delivery guidance)

Think of it this way: A confirmation is not just a receipt. It is the document the customer uses to check that the rep executed the trade the way the rep promised. Capacity, price, commission, and remuneration source all have to reach the customer in writing so the customer can spot a mismatch between the pitch and the execution.

Exam Tip: Gotchas

• The confirmation must be sent at or before completion of the transaction. For most equity trades, completion has historically meant by settlement date. For mutual funds and variable annuities, the confirmation is typically sent within 1 to 3 business days after the trade; these products are excluded from the fixed-income settlement-date provisions added to Rule 2232 for debt securities.
• Municipal fund securities are confirmed under MSRB Rule G-15, not FINRA 2232. A 529-plan contribution sold by a Series 6 rep falls under MSRB because these are municipal securities under MSRB Rule D-12. The content requirements look similar, but the rule source is different.

What components must be included on a trade confirmation?

Every confirmation must include:

• Customer name and account number
• Trade date and (for most securities) settlement date
• Identity of the security: issuer, Committee on Uniform Securities Identification Procedures (CUSIP), share class for mutual funds
• Number of shares or units (or principal amount for debt securities)
• Price per share or unit (or dollar price / yield for debt)
• Capacity in which the BD acted (agent vs. principal)
• Commission on agency trades, or markup / markdown / net price indicator on principal trades
• Source and amount of remuneration if the BD is paid by a third party (e.g., 12b-1 fees paid by the fund)
• Control relationship disclosure if the BD or an affiliate has a control relationship with the issuer
• Settlement instructions: delivery requirements, payment due date

Capacity Disclosure

Exam Tip: Gotchas

• A confirmation must disclose whether the firm acted as agent (commission) or principal (markup / markdown). Failing to disclose capacity is a direct 10b-10 and 2232 violation.
• A net transaction must be labeled "net" on the confirmation. A single all-in price without the "net" label hides the fact that the customer is paying a markup embedded in the price. The net label is mandatory, not optional.

Debt-Security Markup Disclosure

For debt securities with non-institutional customers, the markup or markdown must be expressed as:

• Both a dollar amount and a percentage of the prevailing market price (PMP)
• With a reference and hyperlink to FINRA's Trade Reporting and Compliance Engine (TRACE), or to MSRB's Electronic Municipal Market Access (EMMA) for municipals
• With the execution time expressed to the second

This debt-specific disclosure is not core Series 6 territory (Series 6 candidates sell investment company and variable contracts products, not individual bonds), but you should recognize the structure if a question references it.

What confirmation details apply to each Series 6 product?

Each Series 6 product has distinct confirmation elements:

Mutual Fund Confirmations

• Show the net asset value (NAV), sales charge (if any), public offering price (POP), share class, and 12b-1 fee arrangement (often disclosed as a remuneration source)
• Mutual fund transactions use forward pricing: the customer sees the price only on the confirmation, not at order entry

Variable Annuity Confirmations

• Show the sub-account allocation, accumulation units purchased, sales charge schedule (Contingent Deferred Sales Charge (CDSC)), and rider elections

Municipal Fund Security Confirmations (529, ABLE, LGIP)

• Must comply with MSRB Rule G-15
• Show the contribution amount, beneficiary, portfolio selection, fees, and breakpoint schedule
• For callable municipal securities inside a 529 underlying portfolio, the call features must be clearly described (though this is more a Series 7 / Series 52 focus)

When can a confirmation be mailed to a third party?

A confirmation may be sent to a third party only if:

• The customer provides written authorization, AND
• The firm simultaneously sends duplicate confirmations directly to the customer

Third-party delivery does not relieve the customer-delivery obligation. Common third-party scenarios:

• Investment adviser (duplicate confirm to adviser of record)
• Custodian or trustee (IRA custodian)
• Attorney or Certified Public Accountant (CPA) (for tax reporting)
• Trusted Contact Person (TCP) or power-of-attorney (POA) holder

Exam Tip: Gotchas

• Third-party mailings require written customer authorization AND duplicate delivery to the customer. A firm that sends confirmations to an adviser without also sending them to the customer, even with the customer's verbal approval, has violated Rule 2232 and Rule 10b-10's delivery-to-the-customer standard.
• Verbal authorization for a third-party mailing is not enough. The authorization must be in writing. This is a frequent trap on the exam where the fact pattern shows a customer agreeing over the phone and the firm acting on that agreement.