Securities Trader Representative (Series 57) Practice Exam

Which of the following statements regarding a broker-dealer's order-routing disclosure requirements is true?

1. Customers must be notified in writing at least annually that the disclosures are available upon request

2. The broker-dealer is required to include the disclosure information in each account statement sent to customers

3. Order-routing disclosure requirements apply to all reporting parties, including both market makers and order entry firms

4. The information must be posted on the broker-dealer's Web site

The correct answer is: The broker-dealer is required to include the disclosure information in each account statement sent to customers

The statement regarding a broker-dealer's order-routing disclosure requirements that is true is that the broker-dealer is required to include the disclosure information in each account statement sent to customers. This requirement ensures that customers receive timely and relevant information directly related to their transactions and order execution. Including this information in account statements reinforces transparency, allowing customers to understand how their orders are being handled and where they are routed. While it's important for broker-dealers to provide disclosures, not all brokers may be mandated to contain this information in the formats offered in the other options. The emphasis on including it in account statements serves the dual purpose of compliance and enhancing customer awareness, which reinforces the broker-dealer's commitment to best practices in handling client orders. As for the other statements, they refer to various methods of information delivery. Although providing disclosures on the website and notifying customers about availability are helpful, these methods do not fulfill the specific requirement outlined in the correct choice regarding contents of account statements. Similarly, while order-routing disclosure requirements do apply to a broad category of firms, not all aspects of this matter are included in the statements.