Quick Answer
Confirmations go out by settlement date and must disclose capacity (agent equals commission, principal equals markup). Statements are quarterly minimum, monthly when there is activity. Only realized gains are taxable. Account transfers run through the Automated Customer Account Transfer Service on a 1-then-3 business-day clock, and records keep for lifetime, 6, 4, or 3 years.
The whole unit on one sheet: what goes on a confirmation, how often statements go out, the transfer clock, and the retention periods the exam loves.
Core Concepts at a Glance
- Confirmations: written, sent to the customer no later than the settlement date, for every transaction. Must show trade date, settlement date, security, quantity, price, capacity, commission or markup/markdown, net amount, and accrued interest on debt.
- Capacity: agent (broker) = commission; principal (dealer) = markup or markdown. A firm cannot act as both in the same transaction.
- Statements: at least quarterly for any account with a position, balance, or activity; monthly when there is activity (active, options, margin with a debit, penny stock accounts).
- Account value: statements show current market value (unrealized). Only realized gains and losses are taxable, reported on Form 1099-B.
- Transfers: the customer initiates at the receiving firm through the Automated Customer Account Transfer Service (ACATS); the carrying firm validates in 1 business day and delivers in 3 business days after validation.
The One-Liners That Win Points
- Deadline is settlement date, not trade date. A confirmation sent after execution but before settlement is on time.
- Accrued interest is a debt-confirmation item, not an equity one.
- Commission = agent; markup = principal. Both on the same trade is a violation.
- Unrealized gains are not taxable. Only a sale (realized) triggers the tax event.
- Free credit balances must be available on request; margined securities stay pledged until the debit is repaid.
- Tendering capacity = net long position (long minus short, across all accounts). Short tendering is prohibited.
- Address-change notice goes to the OLD address, within 30 days, as a fraud early-warning.
- ACATS: 1 business day to validate, 3 to complete. The receiving firm cannot cherry-pick; it takes or rejects the whole account.
- Written complaints = 4 years (the odd one out); MSRB complaints = 6 years.
Numbers to Lock In
| Item | Value |
|---|---|
| Confirmation delivery | No later than settlement date |
| Statement baseline | Quarterly minimum (monthly with activity) |
| Penny stock statement delivery | Within 10 days after period end |
| Penny stock quiet-period switch | Quarterly after 6 consecutive months of no transactions |
| Free credit balance notice | At least quarterly |
| Address-change notice to old address | Within 30 days |
| ACATS validation | 1 business day |
| ACATS completion | 3 business days after validation |
| ACATS nontransferable assets | 5 business days after disposition instructions |
| Fail-to-receive contracts | 10 business days (30 for munis/mutual funds) |
| Educational communication window | 3 months after rep's start date |
| Corporate charter/bylaws | Life of enterprise + 6 years |
| Customer account records, statements, agreements, blotters, general ledger, U4/U5 | 6 years |
| Written complaints (FINRA) | 4 years |
| Confirmations, order tickets, trial balances, correspondence, advertising, written supervisory procedures | 3 years |
| Records readily accessible | First 2 years |
| Reg FD unintentional disclosure | Prompt (within 24 hours or before next trading session, whichever is later) |
Memory Aid: Sorting 3 Years vs. 6 Years
- Records about who the customer is or how the firm operates (account cards, agreements, statements, blotters, general ledger, employment records) = 6 years.
- Records about individual transactions or communications (confirmations, order tickets, trial balances, correspondence, advertising, written supervisory procedures) = 3 years.
- Advertising and written supervisory procedures run from last use / termination of use, not creation.
- Default when no specific rule applies = 6 years.
Top Gotchas
- Blotters are 6 years even though they record transactions; they are aggregate firm-level daily summaries.
- Written complaints = 4 years under FINRA, the only major record outside the 3/6-year buckets; MSRB complaints = 6 years.
- An account with no trades but a cash balance still gets a quarterly statement; only DVP/RVP accounts meeting all four exemption criteria can skip.
- The firm cannot tender customer shares without authorization, even "in the customer's best interest."
- Address-change notice goes to the former address, not just the new one.
- A trusted contact person can be declined; the firm makes reasonable efforts and may still open the account. Institutional accounts are exempt.
- The receiving firm initiates ACATS and cannot partially reject; transfer agents answer to the SEC, not FINRA.
- Dividends and interest count as account activity, so an account receiving them is not dormant for escheatment.
- Reg FD applies to issuers, not broker-dealers: intentional selective disclosure = simultaneous, unintentional = promptly.
One-Breath Recap
Confirmations disclose capacity by settlement date, statements run quarterly unless there is activity, and only realized gains are taxable. Account transfers move through the Automated Customer Account Transfer Service on a one-then-three business-day clock, address changes ping the old address within thirty days, and records keep for lifetime, six, four, or three years. Nail the capacity split, the transfer clock, and the retention ladder, and this unit answers itself.
Need more than the recap? This is a condensed summary. If it is not enough, read the full Account Communications and Records unit for the complete lesson.