General Securities Sales Supervisor (Series10) Practice Exam

What must be disclosed to a client placing a sell order in terms of commission charges?

1. Verbally at the time of the request

2. In writing on the confirmation

3. As a reduction on Form 1099-B

4. Only if performed on an exchange

The correct answer is: In writing on the confirmation

When a client places a sell order, it is essential that the commission charges are disclosed in writing on the confirmation statement. The confirmation is a critical document that provides details about the transaction, including the buy or sell order, the security involved, transaction date, and the total cost associated with the trade, which encompasses the commission charges. This ensures transparency and allows the client to understand the full financial implications of their trade. Disclosing commission charges in writing is a regulatory requirement, as it helps protect clients by providing clear, documented evidence of all costs involved. This practice not only fosters trust between the client and the brokerage firm but also facilitates compliance with industry regulations designed to safeguard investor interests. Verbal disclosures at the time of the order may occur but are not sufficient on their own since they do not provide a permanent record. Additionally, commission charges are not reported on Form 1099-B as reductions nor are they disclosed solely for trades conducted on exchanges, making the written confirmation the most appropriate and necessary channel for this information.