Keep a close eye on your account
When you receive a contract note or statement of account from your intermediary (eg. a broker), do you normally take a look at once, or simply put it aside?
The case below tells you how important it is to read promptly all trade documents from your broker when you receive them.
Joe bought a property stock and received the contract note from the brokerage firm two days later. He also received the monthly statements of account after the month end. However, he didn’t find the purchase transaction was recorded in the statement. He then checked with the brokerage firm and was told that this was an operational error. The brokerage firm quickly put it right.
How do contract notes differ from statements of account?
Joe’s experience tells you that checking promptly all trade documents sent by your broker will enable you to find out any errors, discrepancies or even potential misconduct committed by your broker at the earliest possible time.
As the client, you receive from your broker the contract notes and statements of account at prescribed time.
Don’t assume that information contained in these two documents must be the same so you don’t bother to read them. These documents provide you with different information that let you have an overall picture of your trading transactions, stock holdings and movements in your account. You will miss certain important information about your investment if you only read either one document.
|Contract notes||Statements of account|
|Information||Record all details of a trade executed by the broker on behalf of you, including the transaction date, settlement date, stock name and volume traded, execution price, and transaction costs||Record details of any trades and all movements in the account during the statement period (eg. in a month), as well as your cash balance and a full list of stocks held in your account as at the statement date|
|Time of issuance||By the second trading day after the transaction day (ie T+2 day)||At least once a month, except if there has been no transaction and there is a zero cash balance and no stocks in your account|
Trade documents for margin account
If you open a margin account, you will receive from your broker a daily statements of account every time there is a deposit or withdrawal of money or securities or an adjustment to the account (other than interest accrual); or a consolidated statement that combines both contract note and daily statements.
Dos and Don’ts
Look for help
Your broker must keep records of the clients' contract notes and daily account statements for at least two years and keep copies of monthly statements of account for at least seven years.
In case you find any issues in the trade documents, you have to contact immediately the responsible officer/complaints officer/back office staff of your brokerage firm, and not your account executive, and ask for written explanation. You can check out the information of the responsible officer and contact details of the complaints officer of licensed corporations from the “Public register of licensed persons & registered institutions” in the Securities and Futures Commission’s (SFC) website.
If you think the trade document is fictitious or discover any discrepancies or misconducts including statements not issued in the name of your broker, unauthorised trades, transfers or withdrawals in your investment account, you should contact the SFC.