Quick Answer
A firm must deliver a written confirmation at or before completion of a transaction. The confirmation-disclosure rule and the SEC's confirmation rule together require disclosing transaction identity, capacity, contra-party identity, Securities Investor Protection Corporation (SIPC) membership, market-maker status, remuneration, and additional debt-security, mark-up, and settlement-date content depending on the trade.
A confirmation is not one fixed form. What it must say depends on the firm's capacity, the security type, and the customer type, so treat each row below as its own testable trigger.
When Must a Firm Send the Confirmation?
- The confirmation-disclosure rule requires a member to give or send a customer a written confirmation at or before the completion of any transaction, in conformity with the SEC's confirmation rule.
- The SEC's confirmation rule sets that same timing directly: a broker-dealer must give or send the written notification at or before completion of the transaction.
- The SEC's rule carries two exclusions from its own scope. It reaches any security other than a United States Savings Bond and other than a municipal security. The confirmation-disclosure rule reaches any security and is not narrowed the same way.
How Fast Must a Firm Answer a Request the Confirmation Invites?
Several items below may be satisfied by saying the information is available on request. The SEC's confirmation rule sets the deadline for answering:
- 5 business days from receiving the request, normally.
- 15 business days where the request concerns a transaction effected more than 30 days before the request arrived.
What Must Every Confirmation Show About the Trade?
| Confirmation content | What it discloses |
|---|---|
| Transaction identity | The date and time of the transaction, or the date plus a statement on the confirmation that the time will be furnished on written request, and the identity, price, and quantity of the security purchased or sold. A confirmation showing neither the time nor that statement is deficient, whether or not the customer asks. The rule defines "time of the transaction" as the time of execution of the customer's order to the extent feasible |
| Capacity | Whether the firm acted as agent for the customer, as agent for another party, as agent for both, or as principal for its own account |
| Contra-party identity (if acting as agent) | The name of the person the security was purchased from or sold to, or that this information is available on written request |
| Securities Investor Protection Corporation (SIPC) membership | A statement that the firm, or the firm that clears or carries the account, is not a member of SIPC, if that is the case |
| Market-maker status and remuneration | If the firm acted as principal, whether it is a market maker in the security, except that acting only as a block positioner does not count. If it acted as agent, the amount of any remuneration it received or is to receive from the customer, and the source and amount of any other remuneration received or to be received. Two carve-outs apply. The customer-paid item drops out where a written agreement sets that pay on a basis other than per transaction. The other-remuneration item can shrink to a statement that source and amount follow on written request, where the firm was not in a distribution on a purchase, or a tender offer on a sale |
| Payment for order flow | Agent transactions only, and only for a National Market System (NMS) stock or a security quoted on a qualifying interdealer quotation system: whether the firm receives payment for order flow, and that the source and nature of the compensation is available on written request |
Exam Tip: Gotchas
- A firm that receives no payment for order flow on any transaction has no disclosure duty here. The add-on also never reaches a private placement transaction itself, because a privately placed security is neither an NMS stock nor interdealer-quoted.
What Extra Disclosures Apply in Special Situations?
| Confirmation content | What it discloses |
|---|---|
| Principal that is not a market maker (equity) | If the firm acted as principal, was not a market maker in an equity security, and bought or sold that security to offset a contemporaneous opposite trade with the customer, the confirmation must show the difference between the customer's price and the firm's contemporaneous price. This branch names no listing or quotation test, so a privately placed equity security can fall inside it. The second branch reaches any other transaction, meaning one the first branch does not already cover, so a trade that meets the first branch's own conditions stays there. That second branch adds a quotation test a private placement would fail anyway: for a National Market System (NMS) stock, or an exchange-traded equity subject to last-sale reporting, that branch requires the reported trade price, the price to the customer, and the difference between them |
| Odd-lot differential | Whether an odd-lot differential or equivalent fee was charged, and that its amount is available on oral or written request. Not required where the fee already sits inside the remuneration disclosure, or is excused by the written-agreement carve-out above |
| Callable equity flag | A callable equity security's confirmation must flag it as callable, with a note that the customer may ask for more information |
Exam Tip: Gotchas
- The odd-lot differential's rule text is the only one in this unit that names an oral request option. Contra-party identity, payment for order flow, and asset-backed yield factors all explicitly require a written request instead; the callable-debt "available on request" line does not specify a channel at all.
What Must a Debt Security's Confirmation Show?
| Debt confirmation content | What it must show |
|---|---|
| Callable debt | The confirmation must say the security may be redeemed in whole or in part before maturity, that a call can affect the yield, and that additional information is available on request |
| Dollar-price trade | For a trade effected exclusively on a dollar price: the dollar price, and the yield to maturity computed from it. Two debt types sit outside the yield-to-maturity item alone, and outside the both-yields rule below: one whose maturity the issuer may extend with a variable rate, and an asset-backed security. The dollar price itself is still required for both of them |
| Yield-traded | The yield, including the percentage amount and how it was characterized (current yield, yield to maturity, or yield to call), the dollar price computed from it, and, if effected at yield to call, the type of call, the call date, and the call price. If effected on a basis other than yield to maturity and the yield to maturity is lower than the represented yield, both yields must appear |
| Asset-backed | A statement that the yield may vary with prepayment speed, and that the factors affecting yield are available on written request. The rule names what that list must cover at a minimum: the estimated yield, the weighted average life, and the prepayment assumptions underlying yield |
When Must a Confirmation Show the Settlement Date?
- Required only if the security is a National Market System (NMS) stock, or is subject to FINRA's over-the-counter equity trade-reporting requirements other than a direct participation program. Read that carve-out where it sits, inside the trade-reporting branch: it takes direct participation programs out of that branch, and it does not reach the NMS-stock branch beside it.
- The trigger is the security's NMS or over-the-counter equity reporting status. It has nothing to do with whether the security is a debt instrument.
- The settlement-date item is an addition the confirmation-disclosure rule layers on top of the SEC's confirmation rule's base list; the base rule does not require it on its own.
- This equity trade-reporting trigger is a different system from FINRA's public trade-data page for debt, which the mark-up section below and the portfolio-disclosures unit both discuss. Do not treat them as one rule.
How Does the Mark-Up Disclosure Fit a Private Placement?
- When the firm trades a corporate or agency debt security as principal with a non-institutional customer, and it made offsetting trades of at least that size the same trading day, the confirmation must state the firm's mark-up or mark-down, calculated under the fair-price and commission rule, as both a dollar amount and a percentage of the prevailing market price. Two exceptions apply.
- The first is the functionally separate desk. The customer trade and the firm's own offsetting trade ran through two principal trading desks inside the same firm, and the firm had policies and procedures reasonably designed to ensure the offsetting desk knew nothing of the customer transaction. Both halves are needed. A separate desk on its own does not excuse the disclosure.
- The second is the fixed-price exception, in the gotcha below.
- A separate pair of items travels with every corporate or agency debt confirmation sent to a non-institutional customer: a reference to FINRA's Trade Reporting and Compliance Engine (TRACE) data page for the security, with a hyperlink if the confirmation is electronic and a brief description of what that page holds, plus the execution time of the transaction stated to the second.
- That pair turns on the security type and the customer type alone. It does not need the same-day offsetting trade the mark-up disclosure needs, and the mark-up disclosure's two exceptions do not reach it.
- Two further pieces sit in the portfolio-disclosures unit's lesson on what a transaction really costs: how the firm looks through an offsetting trade made with an affiliate, and what makes an account an institutional one.
- "Corporate debt security" includes debt resold under the qualified institutional buyer (QIB) private resale safe harbor, so a privately placed debt security sold as principal to a non-institutional customer can trigger this disclosure.
- The same definition excludes a money market instrument and an asset-backed security. Neither the mark-up disclosure nor the trade-data-page pair reaches a transaction in either one.
Exam Tip: Gotchas
- Watch the fixed-price exception on this exam: a private placement is normally a fixed-price offering, and selling at that price the same day the firm acquired the security escapes the disclosure. Sell it the next day, or at a different price, and the disclosure duty returns.
What Should You Check on Exam Day?
- Confirm delivery happens at or before completion of the transaction, not after.
- Remember the odd-lot differential is the only item whose rule text names an oral request; several others require written, and the callable-debt line does not name a channel.
- Apply the settlement-date add-on only to an NMS stock or a security subject to FINRA's over-the-counter equity trade-reporting rules, and never to a direct participation program.
- Keep the trade-data-page pair separate from the mark-up disclosure. The pair needs only a corporate or agency debt security and a non-institutional customer.
- Answer a request within 5 business days, or 15 business days if it concerns a transaction effected more than 30 days earlier.