Quick Answer
Firms must send customers records after trades and on a regular schedule. Trade confirmations report each transaction's price, quantity, and the firm's capacity, and go out no later than settlement. Account statements summarize positions and activity, usually sent quarterly, though penny stock accounts require monthly statements instead.
Now that you understand what records firms must keep, let's look at what they must send to customers: trade confirmations and account statements.
Trade Confirmations
A trade confirmation is the official record of a completed transaction sent to the customer. Think of it as a receipt for every trade.
When it must be sent:
- At or before the completion of the transaction (settlement date)
What it must include:
| Required Disclosure | Details |
|---|---|
| Date and time | When the transaction occurred |
| Security name and CUSIP (Committee on Uniform Securities Identification Procedures) number | Identifies the exact security |
| Quantity | Number of shares or units |
| Price and total amount | What the customer paid or received |
| Firm's capacity | Whether the firm acted as agent or principal |
| Commission or markup | Agent trades disclose commission; principal trades disclose markup/markdown |
| Settlement date | When the trade officially settles |
Think of it this way: A confirmation is like a detailed receipt. It answers the key questions: what was traded, when, at what price, and how the firm got paid.
Exam Tip: Gotchas
- The confirmation must disclose whether the firm acted as agent (earning a commission) or principal (earning a markup/markdown). This tells the customer how the firm was compensated.
- Confirmations are sent at or before settlement, not at trade date. These are different dates.
- Every order ticket must be marked solicited (broker recommended) or unsolicited (customer's idea). This distinction affects the firm's suitability obligations.
Account Statements
Account statements provide a periodic summary of a customer's entire account, including positions, balances, transactions, and fees. FINRA sets the timing and content standards.
Frequency requirements:
| Account Status | Statement Frequency |
|---|---|
| Account has a security position, money balance, or activity in the period | At least quarterly |
| Account is empty, with no position, balance, or activity | No statement required |
What must be included:
- All securities positions
- Account balances (cash and margin)
- All transactions during the period
- Fees and charges
Exam Tip: Gotchas
- The rule sets a minimum of once every calendar quarter. Many firms send monthly statements when an account is active, but for a general securities account that is firm practice, not a FINRA requirement.
- "Activity" includes purchases, sales, dividend payments, interest credits/debits, deposits, and transfers. A simple price change in a held security does not count as activity.
- A cash deposit with no trades still counts as activity, but it does not speed anything up. The account stays on the standard quarterly cycle; the deposit is simply covered on the next quarterly statement.
- Customers holding penny stocks are the notable exception: those accounts get monthly statements.
What Should You Check on Exam Day?
- Can you state when a trade confirmation must be sent to the customer?
- Do you know the difference between an agent trade and a principal trade on a confirmation?
- Can you explain how often account statements are required for an active account?
- Do you know which type of account requires monthly, not quarterly, statements?
- Can you explain what counts as account activity for statement timing purposes?