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Zorluk: OrtaSettlement Dates, Trade Confirmations, and Corporate Actions

On Thursday, April 9, a retail investor purchases 500 shares of a listed equity security. The broker-dealer executes the transaction out of its own inventory, charging a mark-up. Under SEC and FINRA rules, which of the following correctly describes the required trade confirmation disclosures and the regular-way settlement date for this transaction?

  1. The confirmation must disclose that the broker-dealer acted as a principal, state the mark-up charged, and specify a regular-way settlement date of Friday, April 10.Cevap
  2. B
    The confirmation must disclose that the broker-dealer acted as a principal, state the mark-up charged, and specify a regular-way settlement date of Monday, April 13.
  3. C
    The confirmation must disclose that the broker-dealer acted as an agent, state the commission charged, and specify a regular-way settlement date of Friday, April 10.
  4. D
    The confirmation must disclose that the National Securities Clearing Corporation (NSCC) acted as the principal counterparty holding custody of the shares, with a regular-way settlement date of Monday, April 13.

Cevap

The confirmation must disclose that the broker-dealer acted as a principal, state the mark-up charged, and specify a regular-way settlement date of Friday, April 10.
Under FINRA and SEC rules, when a broker-dealer executes a customer trade out of its own inventory, it is acting in a principal (dealer) capacity and must disclose that capacity along with the mark-up on the trade confirmation. Furthermore, standard regular-way settlement for corporate equity securities is T+1 (one business day after the trade date). For a transaction executed on Thursday, April 9, the regular-way settlement date is Friday, April 10.

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1
Determine the capacity of the broker-dealer and required remuneration disclosure
Because the firm sold the shares directly to the client from its own proprietary inventory, it acted in a principal (dealer) capacity and must disclose this capacity and the mark-up on the trade confirmation.
Broker-dealers operating as dealers trade for their own account and charge mark-ups or mark-downs, whereas agents match buyers and sellers and charge commissions.
2
Determine the regular-way settlement timeline under SEC rules
The trade occurred on Thursday, April 9. Adding one business day (T+1) yields a regular-way settlement date of Friday, April 10.
SEC Rule 15c6-1 establishes T+1 as the standard regular-way settlement cycle for corporate equities, corporate bonds, and municipal securities.

Anahtar Kavram

Broker-Dealer Capacity Disclosures and T+1 Regular-Way Settlement
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Konular

Settlement Dates, Trade Confirmations, and Corporate Actions