A retail customer places an order to purchase shares of a corporate equity security through a registered broker-dealer. The firm executes the trade in an agency capacity by acting as a broker on behalf of the customer and charging a commission. Under SEC and FINRA trade confirmation rules, which of the following details must be explicitly disclosed on the customer's trade confirmation?
- The exact amount of commission charged to the customer for executing the trade.Answer
- BThe total net mark-up added to the prevailing market price of the security.
- CA confirmation statement indicating that regular-way settlement will occur two business days after the trade date .
- DA disclosure that multilateral trade clearing and netting were executed by the Depository Trust Company (DTC).
Answer
When executing a customer order in an agency capacity (as a broker), a registered broker-dealer must disclose on the trade confirmation that it acted as agent and state the exact commission charged.
Under SEC Rule 10b-10 and FINRA rules, a broker-dealer acting in an agency capacity must disclose that it acted as agent for the customer and explicitly state the exact commission charged on the written trade confirmation sent at or before completion of the transaction.
Step-by-Step Solution
Key Concept
Trade Confirmation Capacity and Compensation Disclosures
Estimated Time:1m 0s