Can a firm provide account statements to its clients under Section 14.14 of NI 31-103 on a “trade-date” basis, taking into account that certain securities may not settle by the end of the reporting period?
A firm should exercise caution when including pre-settlement trades in an account statement. If (a) there is any ambiguity regarding which securities have settled and which have not, or (b) a trade fails to settle, then the PM may be subject to a misrepresentation claim. It must also be very obvious that the security subject to the provisional trade is on the statement on a provisional basis only. Otherwise, the confirmation could arguably misrepresent the true state of the client’s holdings.
We also suggest considering what the subsequent account statement will look like. For example, assuming a client has requested monthly statements, will the firm need to repeat the information required by s. 14.14(4) in the following month’s statement (i.e., the month that the trade actually settles)? If so, care must be taken to ensure this does not prove confusing for the client.