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Compliance

FINRA Issues Investor Alert

The Financial Industry Regulatory Authority (FINRA) issued an investor alert called “It Pays to Understand Your Brokerage Account Statements and Trade Confirmations.”

The alert is designed to help guide investors through the key elements of their account statements and trade confirmations. FINRA is reminding investors that reviewing their account statements not only helps them stay on top of their holdings, but also alerts them of errors, as well as broker or firm misconduct, such as unauthorized trading or overcharging customers for handling transactions. 

"Investors whose portfolios have taken a hit might not be keen to open their account statements, but investors should review their statements carefully—and immediately call the firm that issued the statement about any fee they do not understand or transaction they did not authorize," said Gerri Walsh, FINRA's vice president for Investor Education. "Investors should also review trade confirmations as soon as they receive them because a single keystroke can make the difference between 100 and 1,000 shares."

In most cases, brokerage firms are required to provide customers with quarterly account statements and written notification of trade confirmations at or before completion of a transaction. “It Pays to Understand Your Brokerage Account Statements” details in plain language the key elements of account statements and "red flags" that can help investors spot and avert problems. Many account statements include an investment objective that characterizes an investor's strategy, such as "growth" or "conservative." Investors should ensure that this description, as well as the account activity, accurately reflects their goals.

Consolidated account statements, which provide customers with a single document that combines information on most or all of their financial holdings regardless of where those assets are held, are growing in popularity. Investors should understand that these consolidated statements supplement, but do not replace, the required brokerage account statement. Investors who receive both kinds of statements should keep in mind that the official brokerage statement is used in case of a dispute with the broker or firm.

“It Pays to Understand Your Brokerage Account Statements” explains that trade confirmations disclose whether your broker acted as an agent for you or whether the firm acted as a principal for its own account. In equity transactions, if the firm acts as an agent, then the firm must disclose the commission you were charged either on the confirmation or upon request by you. If the firm acts as principal, it is acting for its own benefit, and any markup or markdown or commission-equivalent must be disclosed on the confirmation.

Investors who find inaccuracies or discrepancies on any of their statements should contact their broker or firm as soon as possible, and if the problem is not resolved, FINRA urges investors to file a complaint using FINRA's online Complaint Center.

“It Pays to Understand Your Brokerage Account Statements” is available here. 

Corie Russell editors@plansponsor.com