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| No advance notice required |
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Definition
| A firm may change its in-house margin requirements at any time without advance written notice. |
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| • FINRA rules require that you immediately forward the A-CAT Form to the firm currently carrying the account. |
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| At or before completion of transaction |
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Definition
| Customer confirmations must be given or sent at, or before, completion of the transaction. |
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| • The SEC requires a minimum equity of $500,000 for prime brokerage accounts. The minimum net capital requirement is $1,500,000. |
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| • The Patriot Act requires firms to make and retain records relating to wire transfers of $3,000 or more. Information to be collected includes the name and address of both sender and recipient, the amount of the transfer, the name of the recipient's financial institution and the account number of the recipient. |
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• Any customer with a free credit balance with a broker/dealer must receive a written statement of the amount due the customer by the broker/dealer. The statement must also indicate that the amount is payable upon the customer's demand, but until then, the funds may be commingled with other customer's funds and/or with the funds of the broker/dealer, and therefore, may be used by the broker/dealer in the course of conducting business. The written statement required under this rule must be sent to customers at least once a quarter.
• The SEC and FINRA require member firms to send customer account statements at least once per calendar quarter.
• Customers must be advised of their free credit balances (cash balances) whenever a statement is sent. Under FINRA rules, statements must be sent at least quarterly. |
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| • Under FINRA rules, customer mail can be held for up to two months if the customer is traveling domestically, and for up to three months if traveling abroad. |
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| • Under FINRA rules, customer mail can be held for up to two months if the customer is traveling domestically, and for up to three months if traveling abroad. |
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Definition
| • If, for whatever reason, a firm is unable to close out a customer fail to deliver within 60 days of settlement date, the firm will be prohibited from selling that security as principal and buying that security as agent for a customer. Note that fails to deliver should be bought in after ten business days from settlement |
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| • Under Uniform State Law, guardianship accounts must be opened within 60 days of court appointment (the date the guardian receives a court order). |
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| • To monitor extension requests, FINRA requires clearing firms to file monthly reports within five business days of month end, indicating which of its introducing firms requested extensions that exceeded 2% of their total transactions for the month. If an introducing firm has a ratio that exceeded 3%, it will be prohibited from any further extension requests for a 90-day period if it does not reduce its ratio by the next monthly reporting period |
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Definition
• A new issue becomes marginable (if determined by the Fed) only after it has traded in the secondary market for 30 days.
• A firm must give a customer 30 days to implement any opt-out provision in the privacy notice.
• Mutual fund shares may not be purchased on margin but are marginable after being held, fully paid, for 30 calendar days. |
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Definition
• Under SEC rules, firms must provide a customer an updated account record reflecting any change in investment objectives within 30 days of the change. Firms must create a record for each written agreement entered into with a client and a record containing the dated signature of each customer granting discretionary authority.
• Member firms must provide new customers with a copy of the account record (new account form) within 30 days of opening the account; this ensures the information the firm has on file is accurate.
• An offer of rescission must be accepted within 30 days of the offer. Rescission can occur if a member solicits an unsuitable trade for a customer and subsequently wishes to rescind the trade. With an offer of rescission, the member offers to buy back the security from the customer at cost plus interest at 6%. The offer becomes void after 30 days, and the customer can no longer sue for recovery of any losses. |
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Term
| 10 Business days from settlement date |
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Definition
| • Under SEC rules, customer fails-to-deliver must be bought in after ten business days from settlement date. |
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| SEC rules require that customer fails to deliver be bought in no later than ten business days after settlement |
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Definition
• All order tickets, discretionary or otherwise, must be reviewed promptly after execution. This usually means by the end of the trading day.
• All order tickets must be reviewed, individually or as part of a trade blotter, promptly after execution |
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Definition
| • If a member maintains a list of borrowable securities for short sale purposes, the list can be no more than 24 hours old |
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| • Under FINRA rules, discretionary accounts must be reviewed frequently by a principal to detect potential abuses such as churning. Nondiscretionary accounts must be reviewed periodically. |
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Term
| At or before account opening |
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Definition
• A disclosure document that addresses the risks associated with trading on margin must be delivered to noninstitutional customers at or before account opening. It must also be provided to margin customers on an annual basis.
• The disclosure document, which describes the risks associated with margin trading, must be delivered at or before account opening. The document must also be provided to margin customers annually |
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Definition
| All order tickets showing the account name or number must be prepared before order execution. |
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| • Members are required to review fee-based accounts periodically to determine whether they remain appropriate. |
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Term
| When securities are delivered to customer account |
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Definition
| • Under FINRA rules, if a customer pays for securities purchased prior to settlement date, the trade is considered complete when the securities are delivered into the account. This should occur on settlement date. |
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| Confirmations on DVP trades must be delivered to customers no later than T+1 |
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| • Within one business day following receipt of the A-CAT Form, the carrying firm must validate the positions in the account and return the transfer instruction to the receiving member with an attachment showing all securities positions |
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Definition
• The carrying firm must transfer the positions within three business days of validation.
• Maintenance calls on portfolio margin accounts must be met within 3 business days. |
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Term
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Definition
| • The definition of a pattern day trader is one who executes four or more day trades in a five-business-day period. There is no way to execute seven day trades in a ten-business-day period without at least four of these occurring in no more than five business days. |
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