Quick Answer
A trade error (wrong order entry) is fixed internally with a cancel and rebill, and the firm (not the customer) eats the loss. A clearly erroneous transaction (price far from market) is nullified only by the Financial Industry Regulatory Authority (FINRA) or the exchange. Complaints get reported up, recorded, and disclosed once claimed damages or settlements cross set thresholds.
The whole unit on one sheet: how errors get fixed, when trades get broken, who must be told, and how disputes actually get resolved.
Errors, Cancels, and Rebills
- Trade error: wrong security, quantity, price, account, or a buy/sell reversal. The firm absorbs the loss, never the customer or the rep personally; any accidental profit belongs to the firm unless written policy says otherwise.
- Cancel then rebill: cancel the wrong trade, rebill the correct one, through the operations department with supervisory approval; both appear on the blotter.
- Frequent cancels/rebills are a red flag for unauthorized trading or allocation fraud.
- Erroneous report (options exchanges): the actual execution price is binding; a misreported price does not void the trade.
Clearly Erroneous Transactions
- Execution price is substantially away from the prevailing market price; only FINRA or the exchange can nullify it. Parties cannot break a trade on their own.
- A FINRA officer reviews and decides whether to nullify; either party or the officer can request review, filed promptly.
- OTC (over-the-counter) equities use wider thresholds; FINRA must act no later than the start of trading the day following the transaction.
The One-Liners That Win Points
- Trade error = fixed internally (cancel/rebill). Clearly erroneous transaction = nullified by FINRA or the exchange.
- Erroneous report does not void the trade; the real execution price governs.
- After receiving any customer complaint, the rep's first move is always notify the supervisor; never settle it personally.
- Both written and verbal complaints count, but written complaints trigger recordkeeping.
- Mediation is voluntary and non-binding until a settlement is signed; arbitration is final and binding with extremely limited appeal.
- Class action claims go to court, never FINRA arbitration.
Numbers to Lock In
| Item | Value |
|---|---|
| Exchange clearly-erroneous thresholds | 10% ($0.01 to $25.00), 5% ($25.01 to $50.00), 3% (over $50.00) |
| Multi-stock event nullification | 20+ securities; break trades 30% or more from reference |
| Written complaint recordkeeping | 4 years, at the office of supervisory jurisdiction (OSJ) |
| Serious complaint reporting (theft, forgery) | 30 calendar days |
| Form U4 complaint disclosure | claimed damages of $5,000 or more |
| Settlement disclosure (associated person named) | $15,000 or more |
| Settlement disclosure (firm named) | $25,000 or more |
| FINRA reportable-event deadline | 30 calendar days |
| Statutory disqualification filing | 10 days |
| Simplified arbitration | $50,000 or less |
| Panel size flip to 3 arbitrators | over $100,000 |
| Arbitration timeline | 12 to 18 months |
Top Gotchas
- The $5,000 Form U4 trigger cares only about claimed damages, not merit; a baseless $10,000 complaint still gets reported, even if withdrawn (noted as withdrawn).
- Settlement disclosure is $15,000 when the associated person is named, $25,000 when the firm is named. Do not swap them.
- Failure to cooperate with a FINRA investigation is itself grounds for a bar, not just a fine or suspension.
- A suspension over 2 years is effectively a bar; unpaid fines can trigger suspension or expulsion if not paid within 7 days.
- Customers can request an all-public panel (no industry arbitrators); firms cannot include class action waivers.
- Complaint records live at the OSJ, not each branch; hiding or altering them can bring criminal charges.
One-Breath Recap
Trade errors get corrected internally with a cancel and rebill and the firm swallows the loss, while a price far off the market is a clearly erroneous transaction that only FINRA or the exchange can break. Complaints get reported to the supervisor, recorded at the office of supervisory jurisdiction, and disclosed on Form U4 once claimed damages or settlements cross their thresholds. Mediation is the voluntary, non-binding step; arbitration is the final, binding one; and class actions always head to court.
Need more than the recap? This is a condensed summary. If it is not enough, read the full Complaints and Dispute Resolution unit for the complete lesson.