FINRA Series 7Processes and Confirms TransactionsMedium
A broker-dealer's operations department receives a trade confirmation from a contra-broker showing a quantity that does not match the firm's own trade blotter. What should the firm send to the contra-broker to formally dispute the trade details?
- AA Regulation SHO locate confirmation
- BA written complaint filed under FINRA Rule 4530
- CA Don't Know (DK) notice
- DAn amended Form U4
Show answer & explanationAnswer & explanation
Correct answer: C. A Don't Know (DK) notice
A DK (Don't Know) notice is sent between broker-dealers when one party does not recognize or agree with the details of a trade reflected on a confirmation received from the contra-party, prompting reconciliation before settlement.
Why the other options are wrong
- A. Reg SHO locates pertain to short sale borrowing confirmation, not trade matching disputes.
- B. FINRA Rule 4530 involves customer complaint reporting, not inter-dealer trade discrepancies.
- D. Form U4 relates to registered representative registration, not trade discrepancies.
DK (Don't Know) Notice
A notice sent by a broker-dealer to a contra-party when it does not recognize or cannot verify the details of a trade shown on a received confirmation.
- Used for inter-dealer trade discrepancies
- Prompts reconciliation before settlement
- Distinct from customer complaint procedures
Memory trick: DK = 'I Don't Know this trade' — send it back to fix the mismatch.