Confirmations and Account Statements

Confirmations and Account Statements
A trade confirmation confirms a transaction for the customer's review:

This document is called a trade confirmation because it confirms the trade, showing the customer everything material about the transaction: the stock, the number of shares, the price of the stock, the commission, and the total price paid or received on the transaction, etc. It is the invoice for the transaction.

Trade confirmations must be delivered no later than settlement, which is the completion of the transaction (T + 2 regular-way for stock, corporate bonds, and municipal bonds).

Confirmations are often delivered by email, a faster and cheaper method. Whether on paper or PDF, customers should save their trade confirmations. If the broker-dealer fails, SIPC protection may require investors to prove they held positions with the firm.

An SEC rule under the Securities Exchange Act of 1934 requires that a customer trade confirmation contain:

The date and time of the transaction (or the fact that the time of the transaction will be furnished upon written request to such customer) and the identity, price, and number of shares or units (or principal amount) of such security purchased or sold by such customer

For a transaction in an NMS stock, a statement of whether payment for order flow is received by the broker or dealer and a statement that the source and nature of the compensation will be provided upon request

In the case of any transaction in a debt security subject to redemption before maturity, a statement to the effect that such debt security may be redeemed in whole or in part before maturity, that such a redemption could affect the yield represented and the fact that additional information is available upon request

That the broker or dealer is not a member of the Securities Investor Protection Corporation (SIPC), or that the broker or dealer clearing or carrying the customer account is not a member of SIPC, if such is the case

Whether the broker or dealer is acting as agent for such customer, as agent for some other person, as agent for both such customer and some other person, or as principal for its own account; and if the broker or dealer is acting as principal, whether it is a market maker in the security
If the broker or dealer is acting as agent for such customer, for some other person, or for both such customer and some other person:
      •  The name of the person from whom the security was purchased, or to whom it was sold, for such customer or the fact that the information will be furnished upon written request of such customer
      •  The amount of any remuneration received or to be received by the broker from such customer in connection with the transaction unless remuneration paid by such customer is determined pursuant to written agreement with such customer, otherwise than on a transaction basis
     •  If acting in a principal capacity and not a market maker, the firm must disclose:

the difference between the price to the customer and the dealer's contemporaneous purchase (for customer purchases) or sale price (for customer sales) when executing riskless principal transactions
for stocks trading on an exchange or subject to last sale price reporting, the difference between the price to the customer and the last reported price

We mentioned account statements earlier and compared them to the performance reports an investment adviser provides its clients. At the least, a broker-dealer must send account statements to their customers quarterly. It would only be that infrequently if there had been no activity in the account    an inactive account. If any of the following had occurred, a monthly statement would be sent:
•    Purchases or sales of securities
•    Dividend and/ or interest received
•    Addition or withdrawal of cash or securities
•    Margin interest charged to a margin account

The account statement shows:
•    All positions in the account
•    All activity since the last statement
•    All credit and debit balances

Account statements must contain a message to customers asking them to verify the statement and promptly report any discrepancy or error. This way, unauthorized transactions or mistakes can be spotted and fixed sooner. Some firms take the position that after 10 days of the account statement being received the customer is bound by the positions revealed in the statement.


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