Confirmations and Account Statements
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 (SEC Rule 10b-10)
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 |
| Whether the trade was solicited or unsolicited | Indicates if the broker recommended the trade or the customer initiated it |
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 (FINRA Rule 2231)
Account statements provide a periodic summary of a customer's entire account, including positions, balances, transactions, and fees.
Frequency requirements:
| Account Activity | Statement Frequency |
|---|---|
| Account had activity during the month | Monthly |
| Account has holdings but no activity | Quarterly (at minimum) |
What must be included:
- All securities positions
- Account balances (cash and margin)
- All transactions during the period
- Fees and charges
Exam Tip: Gotchas
- Monthly statements are required only when there is activity. Otherwise, quarterly is the minimum.
- "Activity" includes purchases, sales, dividend payments, interest credits/debits, and transfers. A simple price change in a held security does not count as activity.