Resolve Trade Errors And Complaints - Series 7

1. Which document is the primary written evidence used to verify the terms of an executed trade?

   The trade confirmation (and order ticket/blotter as supporting records). It serves as the official record of trade details, supported by internal documents to resolve discrepancies accurately.

2. Which type of error occurs when the customer receives an incorrect execution price on the confirm?

   Wrong price (incorrect execution price) error. It stems from execution variances, requiring adjustment to ensure the customer receives the intended market terms.

3. What should a registered representative do immediately upon receiving a written customer complaint?

   Forward it to a supervisor/compliance promptly; do not handle alone. Escalation ensures proper documentation and investigation, complying with supervisory requirements and preventing mishandling.

4. What is the correct general remedy if a firm caused an error that disadvantaged the customer?

   Adjust the trade to the customer's benefit; firm absorbs the difference. This approach protects the customer from firm mistakes, aligning with industry standards for fair dealing and error rectification.

5. Which dispute-resolution method allows either party to walk away without settlement?

   Mediation. Its nonbinding nature permits parties to pursue other options if no agreement is reached, fostering voluntary resolutions.

6. Identify the correct action if an error favored the customer and the firm is at fault.

   Customer keeps the better outcome; firm does not "bust" to recapture gains. Industry practice prevents firms from disadvantaging customers due to internal errors, promoting ethical conduct and customer protection.

7. Identify the prohibited action when a customer asks you to "put it in writing" as a complaint.

   Do not discourage or edit; forward the written complaint as received. Preserving the original complaint maintains integrity and complies with rules against influencing or altering customer feedback.

8. Which type of error occurs when a trade is entered with too many or too few shares?

   Wrong quantity (shares/par value) error. It results from inaccuracies in order size, potentially causing financial discrepancies that firms must rectify to match customer intent.

9. Which two parties typically determine who is made whole after a trade error?

   The firm (broker-dealer) and the customer; the firm bears the loss. Resolution involves negotiation between these parties, with the firm assuming financial responsibility to maintain trust and regulatory compliance.

10. What is mediation in the securities industry dispute-resolution context?

    A voluntary, nonbinding negotiation facilitated by a neutral mediator. This process encourages mutual agreement without legal obligation, offering a flexible option before or during arbitration.

11. Which option best describes the firm's obligation when correcting a trade error caused by the firm?

    Make the customer whole at no cost; firm absorbs any loss from correction. Firms must prioritize customer restitution without charge to uphold fiduciary duties and regulatory expectations.

12. What is the first action a registered representative should take upon discovering a trade error?

    Notify the appropriate supervisor/trade desk immediately. Immediate notification allows for prompt investigation and correction, minimizing potential losses and ensuring adherence to firm procedures.

13. Identify the correct forum commonly used for customer disputes with FINRA member firms.

    FINRA Dispute Resolution (arbitration and mediation forum). FINRA oversees this forum to provide impartial dispute resolution for members and customers in the securities industry.

14. Which type of error is present when a trade is allocated to the wrong customer account?

    Wrong account (misallocation) error. This involves allocation errors, demanding reallocation to prevent unauthorized trades in incorrect accounts.

15. Which records must firms maintain related to customer complaints?

    Complaint records and a complaint file/log per supervisory procedures. Maintenance of these records supports regulatory oversight and internal review for pattern identification and resolution.

16. Which type of error involves buying or selling the wrong security (wrong symbol)?

    Wrong security (wrong CUSIP/symbol) error. This error type arises from input mistakes in identifiers, leading to unintended asset transactions that require immediate correction.

17. Which communications can create a reportable customer complaint under firm procedures?

    Written communications (including email, text, social media messages). FINRA rules classify various electronic and written formats as complaints to capture all customer grievances comprehensively.

18. What is arbitration in the securities industry dispute-resolution context?

    A binding dispute process decided by neutral arbitrator(s), not a court. It provides an efficient alternative to litigation, with decisions enforceable under FINRA rules for securities disputes.

19. What is a trade error in a broker-dealer context?

    An execution/processing mistake that differs from the customer order or intent. This definition captures deviations from the customer's instructions during trade execution, ensuring accountability in broker-dealer operations.

20. Which type of error is present when a trade is executed as a buy instead of a sell (or vice versa)?

    Wrong side (buy/sell) error. This occurs due to misinterpretation of order direction, necessitating reversal to align with the customer's original instructions.

21. Which dispute-resolution method generally results in a final, enforceable award?

    Arbitration. Arbitration yields enforceable outcomes, ensuring finality in resolving securities disputes per industry standards.

22. What is a customer complaint for regulatory purposes at a broker-dealer?

    Any written grievance alleging misconduct or dissatisfaction with services. Regulatory definitions encompass broad written expressions of discontent to ensure all potential issues are formally addressed.

23. What is the purpose of an error account (error file) at a broker-dealer?

    To temporarily hold and resolve positions from firm trade errors. It facilitates isolation of erroneous trades for correction without impacting customer accounts, aiding in efficient resolution.

24. Identify the correct response if a customer alleges an unauthorized trade by email.

    Treat as a written complaint; escalate to supervisor/compliance immediately. Email allegations qualify as complaints under FINRA, requiring escalation for proper handling and potential investigation.

25. What is the typical effect of a predispute arbitration agreement in a new account form?

    It requires arbitration (not court) for covered disputes, if enforceable. Such agreements mandate alternative dispute resolution, streamlining processes and reducing court involvement for efficiency.

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