Quick Answer
An error account is a separate account used to record and control a trading error while the firm addresses it. A trading error may arise from handling, execution, reporting, or correction of a transaction. Separating the error supports control while the underlying transaction issue is resolved.
An error account keeps an unresolved trading error distinct from ordinary transaction activity.
How Does an Error Account Control a Trading Error?
- An error account records and controls a trading error separately while the error is addressed.
- A trading error can arise in the handling, execution, reporting, or correction of a transaction.
Think of it this way: The error account is a clearly marked holding area. It keeps the error visible and separate while the firm works through what happened.
Exam Tip: Gotchas
- The error account does not describe the source of the mistake. The trading error may originate in handling, execution, reporting, or correction.
- Its defining purpose is separate recording and control while the error is being addressed.
What Should You Check on Exam Day?
- Identify the underlying handling, execution, reporting, or correction error.
- Record the error separately from ordinary transaction activity.
- Keep the item controlled while the firm resolves it.