Trade Confirmations
Trade confirmations are written records of securities transactions that must be provided to customers. SEC Rule 10b-10 governs the content and timing of these confirmations.
SEC Rule 10b-10 Overview
Rule 10b-10 requires broker-dealers to provide written confirmation of securities transactions to customers:
Timing Requirement: Confirmations must be sent "at or before completion of the transaction" - meaning at or before settlement.
Required Confirmation Information
Basic Transaction Details
| Information | Description |
|---|---|
| Trade date | Date the transaction was executed |
| Settlement date | Date payment/delivery is due |
| Security name | Full name and description |
| CUSIP number | Unique security identifier |
| Quantity | Number of shares/units |
| Price | Execution price per share |
| Total amount | Total transaction value |
Firm Capacity
Confirmations must disclose whether the firm acted as:
| Capacity | Meaning | Compensation |
|---|---|---|
| Agent | Acted on behalf of customer | Commission disclosed |
| Principal | Traded from firm's inventory | Mark-up/mark-down |
Compensation Disclosure
| Capacity | Disclosure Required |
|---|---|
| Agent transactions | Commission amount must be disclosed |
| Principal transactions | Mark-up/mark-down disclosure in certain cases |
| Debt securities | Yield information required |
Confirmation for Mutual Fund Transactions
Mutual fund confirmations include additional information:
| Information | Description |
|---|---|
| NAV | Net Asset Value used for pricing |
| Sales charge | Front-end load amount (if applicable) |
| CDSC disclosure | Notice if back-end load applies |
| Redemption fee | If applicable |
| Fund family | Identity of fund complex |
Exception for Periodic Plans
For systematic investment plans, firms may provide:
- Confirmation of initial transaction
- Periodic statements instead of individual confirmations
- Must have customer consent
Timing Requirements
Standard Timing
| Transaction Type | Confirmation Timing |
|---|---|
| Securities | At or before settlement (T+1) |
| Mutual funds | At or before settlement (T+1) |
| Variable annuities | Upon contract issuance |
Electronic Confirmations
Firms may deliver confirmations electronically if:
- Customer consents to electronic delivery
- Customer can access and retain the document
- Firm maintains delivery records
- Customer can revoke consent
2025 Data: Approximately 35% of confirmations are delivered electronically.
Customer Responsibilities
Review and Verification
Customers should:
- Review confirmations promptly upon receipt
- Verify accuracy of all details
- Report discrepancies immediately
- Keep copies for tax records
Reporting Discrepancies
If errors are found:
- Contact the firm immediately
- Put concerns in writing
- Document the issue
- Follow up if not resolved
SIPC Warning: "Unless you complain in writing, your eligibility for SIPC protection may be compromised."
Special Confirmation Rules
Penny Stock Transactions
Additional disclosures required:
- Risk disclosure statement
- Market maker compensation
- Inside bid/ask spread
Debt Securities
Additional information:
- Yield to maturity
- Yield to call (if callable)
- Call provisions
- Accrued interest
No Waiver Permitted
Important: SEC Rule 10b-10 rights cannot be waived by customers. Firms cannot substitute summary reports for full confirmations (with limited exceptions for wrap accounts).
Common Confirmation Errors
| Error Type | Example |
|---|---|
| Wrong security | Purchased different stock than ordered |
| Wrong quantity | 1,000 shares instead of 100 |
| Wrong price | Incorrect execution price |
| Wrong account | Transaction in wrong customer account |
| Buy vs. sell | Purchase shown instead of sale |
Key Exam Points
- Rule 10b-10 - Governs confirmation requirements
- At or before settlement - Timing for delivery
- Agent vs. principal - Capacity must be disclosed
- Commission disclosure - Required for agency trades
- Cannot be waived - Customer cannot give up right to confirmations
- Report errors immediately - In writing to protect rights
- Electronic delivery - Requires customer consent
Under SEC Rule 10b-10, when must trade confirmations be sent to customers?
On a trade confirmation, what must be disclosed when a broker-dealer acts as AGENT for the customer?
A customer notices an error on their trade confirmation. What is the recommended course of action?
6.4 Account Statements
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