On Tuesday, October 13, a retail investor purchases 600 shares of Beacon Financial Corp. common stock at $80 per share through a broker-dealer. The broker-dealer executes the order by selling the stock to the customer out of its own inventory. Which of the following correctly identifies the regular-way settlement date for this trade and the required capacity disclosure on the trade confirmation under FINRA rules?
- The trade settles on Wednesday, October 14 (T+1), and the trade confirmation must disclose that the firm acted as a principal.Cevap
- BThe trade settles on Thursday, October 15 (T+2), and the trade confirmation must disclose that the firm acted as a principal.
- CThe trade settles on Wednesday, October 14 (T+1), and the trade confirmation must disclose that the firm acted as an agent and report the commission charged.
- DThe trade settles on Thursday, October 15 (T+2), and the trade confirmation must disclose that the firm acted as an agent and report the commission charged.
Cevap
The trade settles on Wednesday, October 14 (T+1), and the trade confirmation must disclose that the firm acted as a principal.
Under FINRA and SEC rules, regular-way settlement for equity securities takes place on the first business day following the trade date (T+1), making Wednesday, October 14 the correct settlement date for a Tuesday purchase. Furthermore, when a broker-dealer executes a transaction by selling securities to a customer directly out of its own inventory, it is acting as a principal (dealer) for its own account. The mandatory trade confirmation delivered to the customer must clearly state that the broker-dealer acted as a principal.
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T+1 Regular-Way Settlement & Broker-Dealer Confirmation Capacity Disclosures
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