Customer Account Statements

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.

How Often Must a Statement Go Out?

• 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, identify the introducing and carrying firm (where applicable) with their customer-service contacts, state the carrying firm's SIPC membership, and show the opening and closing balances
• Must include an advisory that customers should report promptly any inaccuracy or discrepancy

Key point: Quarterly is the only frequency the rule sets. Trading activity determines whether a statement is owed, not how often one must be sent.

Does Account Type Change the Frequency?

Exam Tip: Gotchas

"Monthly whenever the account had activity" is the trap answer on this topic. It is industry convention, not a rule: firms commonly send monthly statements to active and margin accounts, but no statement rule sets a monthly floor for them. The only genuine monthly requirements are penny stock positions and, at an options exchange member, a month in which an options account had an entry. Holding open options with no entry is quarterly.

Which Accounts Can Skip a Statement?

• 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.

What Does the Penny Stock Statement Require?

• 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; if no estimated market value can be determined, the statement must say there is "no estimated market value" rather than substitute another figure
• 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.

Can Statements Be Mailed to Someone Other Than the Customer?

• A firm may not send account statements to another person or entity unless the customer gave written instructions to do so, and the firm still continues sending statements directly to the customer as well
• Exception: a court-appointed guardian, conservator, trustee, or other fiduciary can instruct the firm in writing to stop sending statements to the customer, if the fiduciary provides an official copy of the court appointment
• A firm may also send duplicate statements to a person entitled to them under other applicable rules (for example, an employer reviewing an associated person's outside account) without that being a violation of this general restriction

Exam Tip: Gotchas

• The customer's written instruction adds a recipient; it does not replace the customer as a recipient, unless a court-appointed fiduciary has taken over the account. A firm that stops mailing the customer's own statements just because a family member asked has violated this rule.

What Must a Statement Say About 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

What Should You Check on Exam Day?

• Quarterly is the only frequency the account-statement rule itself sets; activity determines whether a statement is owed, not how often
• The genuine monthly requirements are narrow: penny stock positions, and, at an options exchange member, an account with an entry during the month
• An account with no trades but a money balance or security position still gets a quarterly statement
• DVP/RVP accounts need all four exemption conditions, including written customer consent, to skip quarterly statements
• Discrepancies get confirmed in writing; a joint introducing/carrying firm relationship means the customer reports to both
• Statements identify the introducing/carrying firm, SIPC membership, and opening/closing balances
• A penny-stock statement with no determinable value says "no estimated market value", never a substitute figure
• Third-party mailing needs the customer's written instruction, and the customer keeps getting statements too, unless a court-appointed fiduciary has taken over