Brokerage account statements and trade confirmations offer valuable insights that can help identify errors or even misconduct by your broker or brokerage firm.

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Reviewing Your Statements:

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Carefully inspect your statements: Immediately call your firm about any transaction or entry you do not understand or did not authorize.

 

Anatomy of Your Account Statement:

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Statement Period or End Date: Ensure a specific end date and consistent statement periods (e.g., January 1st to March 31st).

 

Account Holder Information: Verify the accuracy of your name, address, and account number. Promptly notify your firm of any changes, including updates to your email address.

 

Firm Contact Information: Statements will include the name, address, and phone number of your firm and, if applicable, the clearing firm. Ensure this information is consistent with prior statements and is valid.

 

Account Summary: Review your account's overall performance. Check for unexpected or unauthorized activity and ensure all reported income is deposited into your account.

 

Fees: Most fees should be disclosed on your account statements or trade confirmations. Investigate any fees that seem excessive or unfamiliar.

 

Account Activity: This section provides detailed transaction information for the statement period. Confirm that all activity matches your trade confirmations.

 

Portfolio Detail: This section lists the assets in your account. Look for missing or unfamiliar assets or an asset mix that doesn't align with your risk profile.

 

Investment Objectives: Describe your investment strategy, such as "growth," "speculative," or "conservative." Ensure it accurately reflects your goals and aligns with your account activity.

 

Disclosures and Definitions: Review crucial legal information and fee disclosures. These should not be ignored.

 

Tip:

 

Brokerage firms are typically required to provide customers with quarterly account statements and trade confirmations at or before the completion of a transaction. You might receive confirmations or statements from your brokerage firm's clearing and carrying firms, which finalize ("settle" or "clear") trades and hold the funds or securities.

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Carefully Review Your Trade Confirmations:

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Key Trade Details: Trade confirmations include the date and time of a transaction, the price at which you bought or sold a security, and the quantity of shares traded. Review this information as soon as you receive the confirmation.

 

Broker's Role: Confirmations will indicate whether your broker acted as an agent for you or another customer or whether the broker or brokerage firm worked as a principal for its account.

 

Agent Role: If the firm acts as an agent, they act on your behalf to buy or sell a security and must disclose the commission you were charged on the confirmation.

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Principal Role: If the firm acts as a principal, it acts for its benefit, and any mark-up, mark-down, or commission-equivalent must be disclosed on the confirmation.

 

Bond Transactions: Similar to equity transactions, bond transactions must disclose the amount of commission if the firm acts as an agent. If acting as a principal, the price includes a mark-up or mark-down as the firm's compensation.

 

Mark-Up/Mark-Down Disclosure:

 

For retail customer trades in municipal, corporate, or agency bonds, the mark-up or mark-down must be separately disclosed on the confirmation as both a dollar amount and a percentage of the security's market price when a broker acts as a principal and trades the same security on the same trading day.

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Don't Be Shy:

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Ask for Details: Request details about mark-ups, mark-downs, or any fees or commissions associated with your investments.

 

Avoid Problems:

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Cross-Check Information: Compare your trade confirmation with the information in your brokerage statement for the period the trade took place. If you find any unauthorized trades, contact the firm in writing.

 

Categorize Trades: Confirm whether trades are unsolicited or solicited and properly categorize them.

 

Scrutinize Fees: Examine all fees, especially any added ones like handling or mailing charges, and seek explanations for any unexpected or unreasonable costs.

 

Bottom Line:

Your account statements and trade confirmations contain crucial information that must be reviewed for accuracy. If you identify any problems, contact your broker or firm promptly.