Quick Answer
Firms send customers records after trades and on a schedule. Trade confirmations, sent by settlement, report each trade's price, quantity, and the firm's capacity. Account statements summarize positions and activity at least quarterly, but a firm that sold a customer a penny stock owes monthly statements while it is held, until six months pass without a penny stock trade.
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; the time may be replaced by a statement that it will be furnished on written request |
| Security identity | Identifies the exact security; a CUSIP (Committee on Uniform Securities Identification Procedures) number is customary, and it is required on municipal securities confirmations |
| Quantity | Number of shares or units |
| Price | The price per share or unit; the total amount due is shown as standard practice (and is required on municipal confirmations) |
| Firm's capacity | Whether the firm acted as agent or principal |
| Applicable compensation | Customer-paid agency remuneration and principal pricing compensation are disclosed under their transaction-specific conditions and exceptions |
| Settlement date | When the trade officially settles; FINRA requires it on exchange-listed and over-the-counter stock trades |
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 or principal. Capacity alone does not make every confirmation display a commission or markup; the required compensation details depend on the transaction.
- 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.
- Penny stocks are the notable exception: a firm that sold a customer a penny stock must send a monthly statement for each month the customer still holds it. That duty is not permanent: after six consecutive months with no penny stock trade in the account, quarterly statements are enough until the firm makes another penny stock trade for that customer.
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 when a penny stock account needs monthly statements, and when it can drop back to quarterly?
- Can you explain what counts as account activity for statement timing purposes?