Regulatory Notice 4.24.1 — Contract Notes

1. Introduction
1.1. Rule 4.24.1 requires a Trading Member to send its customer a contract note for any purchase or sale of securities or futures contracts.
1.2. This Regulatory Notice sets out:
(a) other Rules that are of relevance to the requirement to send contract notes to customers; and
(b) the internal controls that Trading Members should have with respect to operational processes for sending contract notes to customers.
2. Other relevant Rules
2.1. Rule 4.24.1 should be read together with the following Rules:
(a) Rule 4.27.2 requires a Trading Member to communicate directly with its customers in respect of statements, contract notes or all other information, whether in writing or electronically, unless the customer has authorised otherwise in writing;
(b) Rule 4.27.3 requires a Trading Member to send contract notes to the customer's residential address or any other address authorised by the customer. This is to guard against unauthorised trading. If the customer chooses for contract notes and statements to be sent to a "care of" address or the Trading Representative's address, the Trading Member must explain the risk of unauthorised trading to the customer, obtain the customer's written authorisation for such arrangement, and monitor the customer's accounts for any unauthorised trading activities.
(c) Rule 4.27.4 requires that a Trading Member must not allow any person other than the customer to collect any cash, share certificates, contract notes, credit or debit notes, cheques or statements, unless the customer has authorised that person in writing; and
(d) Rule 4.9.3 requires a Trading Member to have processes in place to minimise and manage any conflicts of interest, including but not limited to separating its front office and back office functions.
3. Internal controls with respect to contract notes
3.1. Trading Members should have appropriate internal controls in place to ensure that no contract note is omitted or suppressed. Basic controls that Trading Members should have in place include the following:
(a) proper controls to maintain the accuracy of customers' contact information;
(b) robust controls over the generation and dissemination of contract notes;
(c) proper segregation between the personnel responsible for trade execution and the personnel responsible for generating and disseminating contract notes; and
(d) ensuring that appropriate channels are available for customers to enquire about or verify transactions reflected in their contract notes.

Added on 3 June 20193 June 2019.