A broker-dealer executes a buy order for a retail customer by filling the trade directly out of the firm's own inventory. Under SEC and FINRA trade confirmation rules, which of the following correctly describes how the firm's capacity and compensation must be disclosed on the customer's trade confirmation?
- The firm must disclose that it acted as a principal and state the mark-up charged on the transaction.Cevap
- BThe firm must disclose that it acted as an agent and state the commission charged on the transaction.
- CThe firm must disclose that regular-way settlement for the stock will take place two business days after the trade date ().
- DThe firm must disclose that trade clearing and central netting functions were provided directly by the Depository Trust Company (DTC).
Cevap
The firm must disclose that it acted as a principal and state the mark-up charged on the transaction.
Under SEC Rule 10b-10 and FINRA confirmation disclosure rules, when a broker-dealer fills a customer's order directly from its own inventory, it acts in a principal capacity. On the trade confirmation, the firm must disclose that it acted as a principal and specify the mark-up (for purchases) or mark-down (for sales) charged.
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Broker-Dealer Capacity and Trade Confirmation Disclosure Requirements