A retail investor reviews a trade confirmation for a corporate equity purchase executed in the secondary market. The executing firm filled the customer's order directly from its own trading inventory rather than matching the order with another market participant. Under SEC Rule 10b-10 and FINRA disclosure rules, which of the following disclosures MUST be explicitly stated on the trade confirmation?
- That the firm acted in a principal capacity for its own account and the dollar amount of markup charged on the transaction.Cevap
- BThat regular-way settlement for the transaction will take place two business days following the trade date (T+2).
- CThat the broker-dealer acted in an agency capacity and charged a standardized commission for matching buyer and seller.
- DThat trade clearance and multilateral netting functions were executed directly by the Depository Trust Company (DTC) rather than NSCC.
Cevap
The trade confirmation must state that the broker-dealer acted in a principal capacity and disclose the amount of markup charged on the trade.
Under SEC Rule 10b-10 and FINRA rules, a broker-dealer that fills a customer order from its own inventory acts as a principal for its own account. The trade confirmation sent at or before trade completion must explicitly state that the firm acted as principal and disclose the dollar amount of markup or markdown charged on equity transactions.
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Trade Confirmation Required Disclosures and Broker-Dealer Capacity