A retail investor purchases 200 shares of common stock through a registered broker-dealer. The firm executes the order on an exchange with an unaffiliated market maker on behalf of the customer, charging a fee for the transaction. According to SEC and FINRA trade confirmation rules, which of the following details MUST be disclosed on the customer's trade confirmation?
- The amount of commission charged and the firm's capacity as agentAnswer
- BThe dollar amount of markup or markdown embedded in the net transaction price
- CA regular-way settlement date specified as two business days following the trade date (T+2)
- DA statement indicating that the Depository Trust Company (DTC) cleared and netted the trade
Answer
The trade confirmation must disclose the commission charged and that the firm acted in an agency capacity.
When a firm acts in an agency capacity (as a broker), it executes trades on behalf of the customer with another market participant. SEC Rule 10b-10 requires the broker-dealer to state its capacity as agent and clearly disclose the commission charged on the customer's trade confirmation.
Step-by-Step Solution
Key Concept
Trade confirmation disclosure requirements for agency versus principal capacity under SEC Rule 10b-10 and FINRA rules.
Estimated Time:1m 0s