Careers in this business rarely end over the first mistake. They end over what came next: the bad trade moved into another account, the angry email left in a drawer, the regulator's letter ignored.
Trade errors are executions with a wrong term: the wrong account, price, quantity or security. Whatever the error, tell your supervisor at once. Don't try to fix it yourself, for example with an offsetting trade. That usually adds a second error and hides the first.
The correct fix is a cancel and rebill. The firm cancels the trade where it was booked and rebills it to the right account. A position no customer should own goes to the firm's error account, a firm-owned account that holds mistaken trades until they are closed out. The customer receives a corrected confirmation showing the trade as it should have been.
If accounts could be reassigned after the price moved, a representative could hand winners to favored customers and push losers onto others, so the account is fixed before execution.
Common mistakes
- Wrong disqualification clock. A statutory disqualification amendment is due 10 days after the disqualification occurs, not 30 days after the firm learns of it. A felony charge runs on 30 days, and the conviction runs on 10.
- Termination on the U4. The departure itself goes on Form U5 within 30 days. The U4 asks only about leaving after allegations.
- Three arbitrators at $75,000. A claim over $50,000 up to $100,000 gets one arbitrator unless the parties agree in writing to three.
Bottom line
- Tell a supervisor about any trade error at once; a qualified registered principal approves the cancel and rebill in writing (Rule 4515), and the loss or gain stays in the firm's error account.
- An execution binds at its actual price despite an erroneous report (Cboe 5.11); a FINRA officer may declare a clearly erroneous OTC trade null and void but cannot reprice it (Rules 11892, 11893).
- Written complaints include email and other electronic messages; send each to a supervisor right away, keep records at least four years (Rule 4513), and forward options complaints to the central file within 30 days (Cboe 9.17, FINRA 2360(b)(17)).
- Rule 4530: report theft, misappropriation or forgery complaints within 30 calendar days, file quarterly statistics on all written complaints by the 15th of the next month, and reps report events to the firm promptly.
Exam shortcut
Find the trigger word before you read the choices: "Theft," "misappropriation" or "forgery" adds a 30-calendar-day report. Every written complaint goes into quarterly statistics. "Statutory disqualification" means 10 days. Other U4 changes mean 30. "Terminated" means Form U5. "Class action" means court. For arbitration, place the claim amount in its tier before weighing anything else.
The full lesson (about 3,783 words, 25 min read) adds 2 worked examples, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- D34
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