11.2  Customer Disclosures

FINRA requires financial firms to provide their customers with several disclosures to help them make informed investment decisions. The following section contains descriptions of these disclosures.

Financial information about the firm. The SEC requires each broker-dealer (except some introducing firms or firms dealing only in mutual funds) to file a copy of its most recent Statement of Financial Condition with the SEC and FINRA and deliver the statement to its customers every six months, one audited, one unaudited. Filing this report may be exempted if the firm meets a series of criteria, including the requirement to post the information on its website within a prescribed period and to provide a hard copy of this information to customers upon request.

Control relationship with an issuer. FINRA requires a broker-dealer to disclose any control relationship it is in with the issuer of a security prior to entering into a contract with a customer for the purchase or sale of the issuer’s security. If the disclosure is not in writing, the broker or dealer must put it in writing before completing the transaction.

Participating interest in a security. FINRA also requires that broker-dealers disclose their own participating interest in a security before contracting for its purchase or sale on behalf of a customer.

Margin account risks. Non-institutional customers opening a margin account must be given a disclosure document, in paper or electronic form, explaining the risks of margin trading. This must be given prior to or at the time of opening the account. Once the account has been opened, the document must be delivered again to all margin customers every year.

Extended hours trading. Before customers are permitted to engage in extended hours trading (i.e., trading outside of 9:00 a.m. ET to 4:00 p.m. ET market hours), member firms are required to provide them with an extended hours trading risk disclosure document. This do