With confirmations covering individual transactions, the next layer of customer communication is the periodic account statement. The customer-account-statement rule governs how often statements must be sent and what they must include.
Statement Requirements
- Firms must send account statements at least quarterly to every customer whose account had a security position, money balance, or account activity during that period
- Statements must include a description of all positions, balances, and activity
- Must include an advisory that customers should report promptly any inaccuracy or discrepancy
Key point: Quarterly is the minimum; many accounts require more frequent statements.
Statement Frequency by Account Type
| Account Type | Frequency | Why |
|---|---|---|
| Active accounts (monthly activity) | Monthly | Frequent trading requires timely reporting |
| Options accounts | Monthly | Frequent position changes and expirations |
| Margin accounts (with debit balance) | Monthly | Ongoing interest charges and margin requirements |
| Penny stock accounts | Monthly | SEC penny-stock disclosure rules require it |
| Standard accounts (some activity) | Quarterly (minimum) | Customer-account-statement rule baseline |
| Inactive accounts (holding positions) | Quarterly | Positions or balances still need reporting |
Inactive and DVP/RVP Accounts
- Accounts with no activity but holding security positions or money balances still require quarterly statements
- DVP/RVP accounts (delivery versus payment / receive versus payment) may be exempted from quarterly statements if all four conditions are met:
- Account is carried solely for DVP/RVP transactions
- All transactions conform to FINRA's COD/RVP-DVP customer-account requirements
- No security or money positions at quarter-end (temporary positions like fails to deliver do not count)
- Customer consents to suspension of statements in writing
- Even when exempt, the firm must provide any statement promptly upon request
Think of it this way: DVP/RVP accounts are institutional accounts where securities and payment change hands simultaneously. If nothing is left in the account at quarter-end and the customer agrees in writing, there is nothing to report.
Exam Tip: Gotchas
An account with no trades but holding a cash balance still receives a quarterly statement. The exam may describe an account with "no activity" and a small money balance: it still gets a statement. Only DVP/RVP accounts meeting all four exemption criteria can skip quarterly statements.
Penny Stock Statement Requirements (SEC Penny-Stock Disclosure Rules)
- Broker-dealers that have sold penny stocks must send account statements monthly to customers holding penny stock positions
- Statements must be delivered within 10 days after the end of the applicable period
- Must include the identity and number of shares of each penny stock held and its estimated market value
- Must include a conspicuous legend warning that the estimated value may be based on a limited number of trades or quotes, and that the customer may not be able to sell the securities at the stated price
- If the broker-dealer has not effected any penny stock transactions in the account for six consecutive months, the firm may switch to quarterly statements for subsequent quiet quarters
Exam Tip: Gotchas
Penny stock statements require a specific warning legend about limited pricing data, not just a generic "high-risk" notice. Also, the monthly requirement can drop to quarterly after six consecutive months of inactivity in that account.
Statement Content and Discrepancies
- Statements must advise customers to report promptly any inaccuracy or discrepancy to the brokerage firm
- Any oral communication about a discrepancy should be confirmed in writing to protect the customer's rights, including rights under the Securities Investor Protection Act (SIPA)
- When both an introducing firm and a carrying (clearing) firm service the account, the statement must direct the customer to report discrepancies to both firms