Tuesday, January 12, 2010

Completion of a securities transaction

I was reading a financial planning textbook the past couple of weeks in order to enter the twisted minds of those who write Series 65/66 questions, and I ran into a concept that makes a very likely exam question:

When does the SEC consider that a securities transaction has been "completed"?

A. when the prospectus has been received
B. when a registered representative completes the order ticket and submits it to the wire room
C. when the customer gives oral authorization for the terms of the order
D. upon settlement

EXPLANATION: a securities transaction has been "completed" when it settles/clears, at which point payment has been made, and the securities have been delivered. An investment adviser, for example, must disclose that it intends to act in a 'principal' capacity on a customer transaction and get the customer's consent no later than completion of the transaction, which is settlement. Settlement is usually T + 3 business days.


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