Customer Disclosure and Settlement Rules Flashcards
How is fairness of pricing different in OTC and exchange markets?
In exchanges, all trades are agency trades and commissions are competitive. In OTC, trade can be either principal or agency basis, making them more fair/reasonable
What is the FINRA 5% policy?
Applies to all OTC and exchange trades except municipals: It is a guideline, not a rule, for commissions and markups. (Note, this does NOT apply to NEW issues)
Why items are considered when pricing a commission/mark up?
- Type of security
- Availability of security
- Total dollar amount of trade
- Pattern of markups
- Value of services rendered
What is regular way settlement for stocks?
3 Business days after trade date
What is regular way trade for US Govt’s/Options?
Next business day
What is regular way trade for Cash?
Same day before 2:30pm EST
What is When, as, and If issued?
Used for NEW issues whose issuance is announce but the certificates aren’t accessible for trading yet
What does the TSRT acronym stand for?
T - transaction date
S - settlement date
R - receipt of confirmation
i.e. regular way settles T + 3, cash occurs T, etc
What is a DK notice?
A “don’t know” notice. These must be resolved within 20 minutes after receiving
What is “assignment”
Relates to security endorsement. A signature in the EXACT name must be printed on the certificate
What size lots must stocks be delivered in?
Round lots of 100’s
What is DRS?
Direct registration system. The goody delivery of securities for those in physical form
What is the DTC?
Depository trust corporation. Maintains custody of physical certificates and clears through the NSCC
What are the Ex dates for cash dividends, cash settlements, and stock dividends/splits?
- Cash div - 2 business days before record date
- Cash settlement - business day after record date
- Stock div/splits/rights - day after payable date
What is rejection of a security?
Securities are delivered and the brokerage firm refuses (rejects) them for a valid reason
