Keep a close eye on your account

Financial intermediaries

When you receive a contract note or statement of account from your intermediary (eg. a broker), do you normally take a look at once, or simply put it aside?

The case below tells you how important it is to read promptly all trade documents from your broker when you receive them.

Joe bought a property stock and received the contract note from the brokerage firm two days later. He also received the monthly statements of account after the month end. However, he didn’t find the purchase transaction was recorded in the statement. He then checked with the brokerage firm and was told that this was an operational error. The brokerage firm quickly put it right.

How do contract notes differ from statements of account?

Joe’s experience tells you that checking promptly all trade documents sent by your broker will enable you to find out any errors, discrepancies or even potential misconduct committed by your broker at the earliest possible time.

As the client, you receive from your broker the contract notes and statements of account at prescribed time.

Don’t assume that information contained in these two documents must be the same so you don’t bother to read them. These documents provide you with different information that let you have an overall picture of your trading transactions, stock holdings and movements in your account. You will miss certain important information about your investment if you only read either one document.

  Contract notes Statements of account
Information Record all details of a trade executed by the broker on behalf of you, including the transaction date, settlement date, stock name and volume traded, execution price, and transaction costs Record details of any trades and all movements in the account during the statement period (eg. in a month), as well as your cash balance and a full list of stocks held in your account as at the statement date
Time of issuance By the second trading day after the transaction day (ie T+2 day) At least once a month, except if there has been no transaction and there is a zero cash balance and no stocks in your account

Trade documents for margin account

If you open a margin account, you will receive from your broker a daily statements of account every time there is a deposit or withdrawal of money or securities or an adjustment to the account (other than interest accrual); or a consolidated statement that combines both contract note and daily statements.

Dos and Don’ts

Dos Don’ts
  • Check carefully any trade document at once when you receive it. If your broker only provides access to the trade documents through its website, log on your internet trading account regularly, or when you receive e-statement alert from your broker, review the transaction details and account balances
  • Contact the responsible officer/complaints officer/back office staff of your broker if you have not received contract note or statement of account on a timely basis
  • Keep an eye on potential red flags: For example, any mistakes and irregularities in trade documents, such as letterhead of the trade document shows the name of another company, cut-and-paste marks, hand-written amendments, blurred figures/ information, and a sudden change in the format of the document
  • Keep all trade documents together with pay-in slips.
  • If there is a change in your contact details, you have to update the responsible officer/ back office staff of your broker promptly
  • Under no circumstances authorise your account executive to receive these documents on your behalf
  • Don’t use a hold-mail arrangement (ie at your written request, your broker will retain all documents including contract notes and statements of account, and not deliver to you directly) unless you really have to and understand and accept the risks as explained by your broker. To do this, you must provide a written authorisation to your broker and reconfirm the authorisation at least once a year. You should also collect all trade documents from your broker promptly in person and review them carefully for any anomalies or mistakes
  • Don’t rely on faxed copies of these documents as faxes can be easily forged

Look for help

Your broker must keep records of the clients' contract notes and daily account statements for at least two years and keep copies of monthly statements of account for at least seven years.

In case you find any issues in the trade documents, you have to contact immediately the responsible officer/complaints officer/back office staff of your brokerage firm, and not your account executive, and ask for written explanation. You can check out the information of the responsible officer and contact details of the complaints officer of licensed corporations from the “Public register of licensed persons & registered institutions” in the Securities and Futures Commission’s (SFC) website.

If you think the trade document is fictitious or discover any discrepancies or misconducts including statements not issued in the name of your broker, unauthorised trades, transfers or withdrawals in your investment account, you should contact the SFC.