Quick Answer
A confirmation is the customer's written record of what the firm did and in what capacity. Some disclosures follow from that capacity and others from the security or the execution. Qualifying plans and money market fund transactions report on a schedule instead.
When Must a Confirmation Be Given or Sent?
For a covered customer securities transaction, the broker-dealer must give or send written notification at or before completion of the transaction. Completion is the reference point, not the trade date, so the rule sets no fixed number of days after the trade.
An electronic confirmation is still the written transaction record. Electronic delivery changes the channel, but it does not remove the required content or the at-or-before-completion timing.
Exam Tip: Gotchas
Transaction completion controls the deadline under the general rule. Trade execution and transaction completion are different reference points, so an answer that waits a fixed number of days after execution does not state the general rule.
What Core Information Appears on Every Covered Confirmation?
Start with two questions: What happened, and in what capacity did the firm act?
| Category | What the confirmation discloses |
|---|---|
| Transaction details | Date; time, or notice that time is available on written request; security identity; price; and shares, units, or principal amount |
| Firm capacity | Whether the firm acted as agent for the customer, agent for another person, agent for both, or principal for its own account |
| Principal status | If the firm acted as principal, whether it was a market maker in the security |
Capacity matters because an agency trade and a principal trade do not use the same compensation and pricing disclosures.
How Do Agency and Principal Disclosures Differ?
| Firm's role | Additional information to recognize |
|---|---|
| Agent | The other party's name, or notice that the name is available on written request; customer-paid remuneration, unless a non-transaction-based written agreement determines it; and applicable order-flow or other remuneration disclosures |
| Principal in a contemporaneous offsetting equity trade | If the firm is not a market maker, the difference between the customer's price and the firm's contemporaneous purchase or sale price |
| Principal in another National Market System (NMS) stock or covered exchange-traded equity trade | The reported trade price, the customer's price, and any difference between them |
For an agency transaction in NMS stock or another covered automated-quotation security, a firm that receives payment for order flow discloses that fact. It also states that the source and nature of the compensation are available on written request. A firm that receives no payment for order flow has no disclosure duty for that item.
Exam Tip: Gotchas
Capacity determines the disclosure path. Agency questions focus on the other party and remuneration. Principal questions focus on market-maker status and applicable price differences.
Which Conditional Disclosures Should You Recognize?
The base information is not the entire list. The security or execution method can add another disclosure.
| Trigger | Additional disclosure |
|---|---|
| Debt redeemable before maturity | The security may be redeemed early, redemption may affect the stated yield, and more information is available on request |
| Debt traded only at a dollar price | The transaction's dollar price and the yield to maturity |
| Debt traded on a yield basis | The transaction yield and its type, the calculated dollar price, applicable call details, and a lower yield to maturity when required |
| Prepayable asset-backed debt | Actual yield may vary with prepayment speed; estimated yield, weighted average life, and underlying prepayment assumptions are available on written request |
| No Securities Investor Protection Corporation membership | That the broker-dealer, or the firm clearing or carrying the account, is not a member |
When Can Periodic Reporting Replace an Immediate Confirmation?
Certain periodic plans, investment company plans, and qualifying no-load stable-net-asset-value money market fund transactions may use periodic reporting instead of an immediate confirmation. The customer must first receive written notice that the firm intends to use this alternative.
The firm then sends the required statement within 5 business days after the period ends:
- For periodic plans and investment company plans, the reporting period is quarterly.
- For the other covered money market fund transactions, the reporting period is monthly.
The statement covers purchases, redemptions, and dividends or distributions credited or reinvested. It also includes transaction dates, security identity, quantity, price, total shares in the account, remuneration, and notice that other required information is available on written request.
The dividends and distributions are the clearest non-trade activity in this rule. The label non-trade confirmation does not create one delivery rule for every possible account event. Use the requirement tied to the actual activity.
The customer may designate another person to receive the statement for distribution to the customer. Third-party delivery does not remove the statement's required content or deadline.
What Special Notices Apply to a Group Investment Company Plan?
A group plan can route payments through a designated person. At or before completion of a purchase, the investment company or its agent sends the designated person written notice that it received the group's total payment.
The identifying third-party fact is a designated person handling group payments.
Exam Tip: Gotchas
A periodic statement can report more than trades. It can include credited or reinvested dividends and distributions. Electronic delivery, non-trade activity, and third-party delivery describe different features and are not interchangeable labels.
When Does a Prospectus Have Its Own Delivery Clock?
A confirmation does not replace a prospectus or registration notice.
For a sale by an issuer or underwriter, or another sale without a final-prospectus exclusion or exemption, each selling underwriter or dealer provides the purchaser with the final prospectus or an allowed registration notice no later than 2 business days after completion of the sale. For a direct issuer sale not made through an underwriter or dealer, the issuer has that responsibility.
For a registered distribution by an issuer that has not previously been required to file Securities Exchange Act reports, and is not exempt from that reporting requirement, the participating broker-dealer generally delivers a preliminary prospectus at least 48 hours before sending the confirmation.
These clocks answer different questions:
| Document | Core timing |
|---|---|
| Trade confirmation, general rule | At or before transaction completion |
| Preliminary prospectus in the covered distribution | At least 48 hours before the confirmation |
| Final prospectus or allowed registration notice in the covered sale | No later than 2 business days after sale completion |
What Should You Check on Exam Day?
- Use the agency or principal disclosure path that matches the facts.
- Look for added disclosures based on compensation, execution method, and security type.
- Apply the same content and timing rules when the confirmation is electronic.
- Separate immediate confirmations from permitted periodic reporting and third-party notices.
- Keep confirmation and prospectus delivery clocks separate.