3.1. Customer Trade Confirmations and Completing a Transaction

SEC Rule 10b-10 dictates that a trade confirmation must be given to a customer at or before the completion of a transaction. The SEC defines the conditions for when a transaction is complete.

A purchase is judged to be complete when the securities are paid for, which usually must occur no later than two business days after the trade date (T + 2). Likewise, a sale is judged to be complete when the securities are delivered. A sale or purchase can be judged to be complete before the settlement date if the securities were both delivered and paid for before the settlement date.

You can remember these dates with the acronym PPSS: Completion of Purchase is when Payment is complete; completion of a Sale is when Securities are delivered.

Sample Question

According to the SEC, which of the following would not be enough to constitute a completed purchase?

A. Fifty percent of payment was made on the settlement date for a security bought on margin.

B. Securities were delivered to the purchaser and 100% of payment was paid before the settlement date.

C. The securities were delivered on the settlement date.

D. 100 percent of payment was made on the settlement date for a security.

Answer: C. A purchase is judged to be complete when the securities are paid for, which usually must occur no later than two business days after the trade date (T + 2).

The following information must be disclosed on the required trade confirmation:

• Date and time of the transaction

• Name of the security

• Price of the security

• Number of shares purchased or sold

• Whether the broker-dealer was acting in an agency capacity for the customer

• If the broker-dealer was acting in an agency capacity for another person, then the name of the person and the compensation the broker-dealer will receive from the other party for the transaction.

• Whether the broker-dealer was