A customer's paper trail starts with the first trade and lasts six years beyond the account itself. Exam questions test both ends: what each document must tell the customer, and how long the firm must keep it.
A trade confirmation is the written notice describing one completed transaction. It lets the customer check the trade against the order and see how the firm was paid. Securities and Exchange Commission (SEC) Rule 10b-10 requires trade confirmations sent at or before completion of the trade. Completion generally means settlement. A regular-way confirmation therefore goes out no later than T+1, one business day after trade date under SEC Rule 15c6-1.
Under Rule 10b-10, the confirmation shows:
- Trade terms: The trade date and time (or a note that the time is available on written request), the security, the price, and the number of shares or principal amount.
- Capacity: The firm's capacity as agent or principal. An agent, or broker, arranges the trade between the customer and someone else.
Common mistakes
- Address-change notice: Sending it to the new address is the trap. It goes to the old address, or to each joint owner, within 30 days.
- ACATS arithmetic: Six business days, or three in total, are both wrong. The carrying firm gets one business day to validate and three more to complete, about four in all.
- Monthly statements: FINRA does not require monthly statements for active accounts. Its floor is quarterly. Monthly statements come only from Cboe Rule 9.6, for options accounts with an entry, and SEC Rule 15g-6, for penny stocks.
Bottom line
- Confirmations go out at or before completion of the trade, which is settlement on T+1.
- A confirmation shows trade date, time, price, capacity, any agency commission and bond yield and call data, with the settlement date where FINRA Rule 2232, MSRB Rule G-15 or Cboe Rule 9.5 asks for it.
- Every retail corporate, agency or municipal bond confirmation shows the execution time and a TRACE or EMMA link.
- The markup, in dollars and as a percentage of PMP, appears only after a same-day, principal, offsetting trade of at least the customer's size.
Exam shortcut
When a stem gives a deadline, first ask who is acting: In a transfer, the old firm counts in business days, one then three. A notice about a record change counts 30 days. Storage counts in years. For a confirmation question, cross out any choice listing customer facts such as objectives or net worth.
The full lesson (about 4,658 words, 31 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- C30
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