On Thursday, October 15, an investor purchases 10 corporate bonds through a registered broker-dealer. The firm fills the transaction directly out of its own inventory. Under SEC and FINRA rules governing secondary market transactions, which of the following correctly identifies the regular-way settlement date and the primary compensation disclosure required on the customer's trade confirmation?
- Settlement occurs on Friday, October 16, and the confirmation must disclose the dollar amount of the markup.Cevap
- BSettlement occurs on Monday, October 19, and the confirmation must disclose the dollar amount of the markup.
- CSettlement occurs on Friday, October 16, and the confirmation must disclose the dollar amount of the commission.
- DSettlement occurs on Monday, October 19, and the confirmation must disclose the dollar amount of the commission.
Cevap
Settlement occurs on Friday, October 16, and the confirmation must disclose the dollar amount of the markup.
Under current SEC and FINRA settlement regulations, regular-way settlement for corporate bonds takes place on (one business day after the trade date), which makes Friday, October 16 the settlement date for a trade executed on Thursday, October 15. Furthermore, when a broker-dealer executes a customer trade out of its own inventory, it is acting in a principal capacity as a dealer. Trade confirmations for principal transactions must disclose the firm's capacity and the dollar amount of the markup charged to the investor.
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Regular-Way Settlement (T+1) and Broker-Dealer Capacity Disclosures on Trade Confirmations
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