FINRA Series 7Processes and Confirms TransactionsHard
A customer receives a confirmation for a trade executed on their behalf. Which of the following details is NOT required to be included on the confirmation for an agency transaction?
- AThe dollar amount of the commission
- BThe time of execution
- CThe name of the contra-party
- DThe capacity in which the broker-dealer acted
Show answer & explanationAnswer & explanation
Correct answer: C. The name of the contra-party
For an agency transaction, the confirmation must include the time of execution (upon written request), the capacity in which the broker-dealer acted (always 'agent'), and the dollar amount of the commission. The name of the contra-party is generally not required to be disclosed on a confirmation for an agency transaction, although it may be provided upon written request for certain types of trades or if the firm acted as principal.
Why the other options are wrong
- A. The dollar amount of the commission is always required to be disclosed for agency transactions.
- B. The time of execution must be disclosed upon written request for agency transactions.
- D. The capacity (agent or principal) is always required to be disclosed on a confirmation.
Trade Confirmation Required Disclosures (Agency)
Specific information that must be included on a trade confirmation when a broker-dealer acts as an agent for a customer.
- Capacity (Agent) and commission must always be shown.
- Time of execution must be available upon written request (for equities).
- Yield to maturity (for bonds), settlement date, and CUSIP number are also common.
Memory trick: CAPacity, Commission, Time (if asked), but NOT the Other Party's name!