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petitioner reserves the right to cover the position, and the
customer is responsible for any loss resulting from the execution
of the trade order.
A security is not debited or credited to the customer’s
account until the actual settlement date. The settlement date is
also important for purposes of determining who is entitled to
receive dividends paid on stock and interest that has accrued on
bonds. Dividends are paid to the holders of record (i.e., those
persons in whose name the stock is registered). If a transaction
occurs, but does not settle prior to the dividend record date or
if the security is not re-registered in the new name by the
record date, the buyer is not entitled to the dividend. Bonds
trade at market price plus accrued interest. Interest continues
to accrue to the bond’s seller up to, but not including, the
settlement date.
As a general rule, petitioner does not permit cash and next-
day orders. In the event of customer hardship, such as a medical
emergency or an escrow closing, however, proceeds from a sale can
be paid to a customer prior to settlement. In such instances,
the customer is charged a special prepayment fee of the greater
of $10 or 0.2 percent of principal in addition to the standard
commission for the trade.
There was generally a 5-day delay between the trade and
settlement dates. The 5-day delay between the trade and
settlement dates allows sufficient time to reflect the trade in
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Last modified: May 25, 2011