General Securities Sales Supervisor (Series10) Practice Exam

If a customer orders to buy 500 shares but receives an execution report showing 5,000 shares purchased, what is the proper procedure?

1. Void the transaction

2. Take 4,500 shares from the customer's account and place them in the firm's error account

3. Confirm the 5,000 share purchase to the customer at $40 per share

4. Contact the customer to see if they wish to take the extra shares

The correct answer is: Take 4,500 shares from the customer's account and place them in the firm's error account

The appropriate procedure in this scenario involves taking corrective action when there is a discrepancy between a customer's order and the execution report received. When a customer intended to purchase 500 shares but received an execution report for 5,000 shares, it's essential to address the error while ensuring compliance with regulations and protecting the interests of the customer and the firm. In this case, placing the excess 4,500 shares into the firm's error account is a recognized method of handling such discrepancies. This approach allows the firm to maintain accurate records and ensures the customer is not treated unfairly or confused by the unexpected increase in their position. The error account serves as a way to segregate such mistakes, allowing the firm to resolve the situation efficiently. This choice not only complies with regulatory guidelines but also safeguards the customer's rights and financial interests. The firm should automatically initiate steps to correct the trade, often by contacting the customer to determine their intentions regarding the surplus shares after the error has been acknowledged. This ensures that any further actions are taken in line with the customer's expectations and preferences.