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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Introduction to Securities Broking Operations

A stockbroker receives a client's order over the telephone and wants to ensure there is an auditable trail of the instruction. Which of the following is the most appropriate operational practice?

The broker should log the order with a time stamp, or record the telephone conversation, before or when entering it in the trading system. This creates an auditable trail for resolving disputes, whereas later recording or memory gives no dependable evidence of the client's instruction.

  1. AExecute the order and record the details at the end of the month
  2. BRecord the telephone conversation or log the order with time stamp before or at the time of entering it in the trading systemCorrect
  3. CAsk the client to confirm the order only after the trade is executed
  4. DRely on the dealer's memory since the contract note will be issued later

Explanation

Brokers must keep a verifiable record of client orders, including time of receipt, so that disputes can be resolved. Recording the order before or at entry gives an audit trail. Recording afterward or relying on memory gives no reliable evidence.

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