FINRA Rule 2232 – Customer Confirmations
As summarized below, the SEC has recently approved amendments to FINRA Rule 2232 (Customer Confirmations) that require firms to disclose additional transaction-related information to retail customers for trades in certain fixed income securities.
These amendments will become effective on May 14, 2018.
When Disclosure is Required
New FINRA Rule 2232(c) requires firms to disclose to a non-institutional customer the amount of mark-up or mark-down the customer paid for a trade in a corporate or agency debt security, if the firm also executes one or more offsetting principal trades in the same security on the same trading day which in the aggregate meet or exceed the size of the customer trade.
FINRA notes that a disclosure obligation under Rule 2232(c) could also be triggered by an offsetting principal trade executed by a firm’s affiliate. Specifically, if a firm’s offsetting principal trade is executed with a broker-dealer affiliate and did not occur at arm’s length, the firm is required to “look through” to the time and terms of the affiliate’s trade to comply with the rule. Read More…