Rule Atlas
FINRA Rule 1100: Settlement Procedures, Customer Statements, and Error Resolution
Under FINRA Rule 1100 (FINRA / SEC / MSRB / CBOE), settlement Procedures, Customer Statements, and Error Resolution establishes the authoritative rules tested on the FINRA Series 7. Covers the critical post-trade activities including settlement cycles, confirmation and account statements, and the proper handling of trade errors. VoraPrep verifies every threshold, worked table, and practice question below against the current FINRA Series 7 blueprint.
Core Statutory Concepts
| Security Type | Standard Settlement Cycle | Description |
|---|---|---|
| Equities (Common/Preferred Stock) | T+2 (Trade Date plus 2 business days) | Ownership of stock transfers; payment is due. |
| Corporate Bonds | T+2 (Trade Date plus 2 business days) | Ownership of bond transfers; payment is due. |
| Municipal Bonds | T+2 (Trade Date plus 2 business days) | Ownership of bond transfers; payment is due. |
| Government Securities (Treasuries) | T+1 (Trade Date plus 1 business day) | Ownership of security transfers; payment is due. |
| Options | T+1 (Trade Date plus 1 business day) | Premium payment due; ownership of option contract transfers. |
| Cash Trades | T+0 (Trade Date) | Settles on the same day as trade. |
A registered representative (RR) mistakenly enters an order to sell 500 shares of stock for Client A, when Client B was the intended seller. The trade executes immediately, and the error is discovered shortly after during post-trade review. Which of the following statements is true regarding this situation?
Practitioner Application: Settlement Procedures, Customer Statements, and Error Resolution
A client calls their registered representative, David, confused about a recent dividend payment; they sold stock X on Monday, April 8th, but received the dividend, while their friend sold stock Y on Tuesday, April 9th, and did not. Both stocks had a record date of Thursday, April 11th. David must explain the 'ex-dividend date' and settlement cycle. Later, an internal audit reveals a 'trade error' where a customer's buy order was incorrectly executed for a different security. David must understand the firm's obligations and the correct procedure for resolving this error without customer detriment.
- After an order is executed, a series of post-trade processes ensure the transaction is completed and accurately reflected for the customer and regulators. This involves settlement, confirmations, statements, and error resolution.
- Settlement Cycles Settlement is the process by which securities and cash change hands after a trade. The 'Uniform Practice Code' (FINRA Rule 11000 Series) establishes standard settlement dates.
Common FINRA Series 7 Distractors on FINRA Rule 1100
- 1Watch out for these common Series 7 traps related to settlement and errors:
- 2Ex-Dividend Date vs. Record Date: The most common trap is confusing these. Remember the 'ex-dividend date' is 'one business day before' the 'record date' for regular way settlement. A customer must buy before the ex-dividend date to receive the dividend.
- 3Settlement Cycle Misapplication: Don't mix up T+1 for government securities and options with T+2 for equities, corporate bonds, and municipal bonds. Read the security type carefully.
- 4Equities, corporate bonds, and municipal bonds settle 'T+2'.
- 5Government securities and options settle 'T+1'.
Frequently Asked Questions: FINRA Rule 1100
What is the core rule under FINRA Rule 1100 (Settlement Procedures, Customer Statements, and Error Resolution)?
Under FINRA Rule 1100 (FINRA / SEC / MSRB / CBOE), settlement Procedures, Customer Statements, and Error Resolution establishes the authoritative rules tested on the FINRA Series 7. Covers the critical post-trade activities including settlement cycles, confirmation and account statements, and the proper handling of trade errors. VoraPrep verifies every threshold, worked table, and practice question below against the current FINRA Series 7 blueprint.
How is FINRA Rule 1100 tested on the FINRA Series 7?
Watch out for these common Series 7 traps related to settlement and errors: Ex-Dividend Date vs. Record Date: The most common trap is confusing these. Remember the 'ex-dividend date' is 'one business day before' the 'record date' for regular way settlement. A customer must buy before the ex-dividend date to receive the dividend.
Where can I practice FINRA Series 7 questions on Settlement Procedures, Customer Statements, and Error Resolution?
Test yourself instantly with the free playable FINRA Series 7 question on this page, or launch VoraPrep's full FINRA Series 7 adaptive question bank, interactive lessons, and 1:1 exam simulator at voraprep.com/series7.