Friday’s Files: Regular Statements

Ben Dell’Orto, Spring 2018 IAC Student Intern

Sometimes it pays to check the mail.

Under FINRA Rule 2340 on  Customer Account Statements, brokers are required to send “a description of any securities positions, money balances, or account activity to each customer” at least each quarter, meaning every three months. Some firms and some accounts will have a monthly statement, but it will still contain the same information.

The purpose of these statements is to allow you, the investor, to keep track of what is happening in your account and when. Your statement will list out any sales or purchases your broker has made during the statement period. The statement will also include the names and quantities of each investment in the account, including the ticker symbol, an abbreviation that allows you to easily look up your securities.

While account new account statements are the best for detecting a suitability claim in the future, these monthly or quarterly statements will allow you to detect whether your broker is churning, which the SEC defines as “excessive buying and selling of securities in a customer’s account chiefly to generate commissions that benefit the broker.” Your broker might get commissions for each purchase and sale in the account and charging you for these unnecessary transactions is an easy (and illegal) way to make some money. Check your statements for these kinds of purchases.

You’ll want to hang on to these statements, because if you later determine misconduct has occurred in your account, these statements will be critical in charting the history of your account, finding out what went wrong, and figuring out just how much money you’ve lost.  While you can obtain them from the firm, it is often faster for a lawyer to determine if you have a claim if you already have the documents.