Order Tickets and the Series 7 Exam - dummies

Order Tickets and the Series 7 Exam

By Steven M. Rice

When you’re working as a registered rep, completing documents such as order tickets will become second nature because you’ll have them in front of you. When you’re taking the Series 7 exam, you don’t have that luxury, but you still need to know the particulars about what to fill out.

Getting the particulars on paper (or in binary form)

When your customer places an order, you have to fill out an order ticket. Order tickets may be on paper or entered electronically. Regardless of how you enter the order, it needs to contain the following information:

  • The registered rep’s identification number

  • The customer’s account number

  • The description of the security (stocks, bonds, symbol, and so on)

  • The number of shares or bonds that are being purchased or sold

  • Whether the registered rep has discretionary authority over the account

  • Whether the customer is buying, selling long (selling securities that are owned), or selling short (selling borrowed securities)

  • For option tickets, whether the customer is buying or writing (selling), is covered or uncovered, and is opening or closing

  • Whether it’s a market order, good-till-canceled (GTC) order, day order, and so on

  • Whether the trade is executed in a cash or margin account

  • Whether the trade was solicited or unsolicited

  • The time of the order

  • The execution price

The figure shows you what standard paper order tickets may look like.

Buy and sell order tickets have spaces for the info you need to make a trade.
Buy and sell order tickets have spaces for the info you need to make a trade.

Designating unsolicited trades

Normally, you’ll be recommending securities in line with a customer’s investment objectives, risk tolerance, and so on. (Rule 405: Know your customer rule.) If, however, the customer requests a trade that you think is unsuitable, it’s your duty to inform him about it. You don’t have to reject the order (it’s the customer’s money, and you’re in the business to generate commission). If the customer still wants to execute the trade, simply mark the order as unsolicited, which takes the responsibility off your shoulders.

A trip to the principal’s office: Securing a signature

Principals are managers of a firm. All brokerage firms, no matter how small, must have at least one principal. When you open or trade an account, you have to bring the new account form or order ticket to a principal to sign. Principals need to approve all new accounts, all trades in accounts, and all advertisements and sales literature; they also handle all complaints (lucky break for you!). A principal doesn’t have to approve a prospectus or your recommendations to your customers.

Although you’ll generally bring an order ticket to a principal right after taking an order, the principal can sign the order ticket later in the day. If you’re questioned about this on the Series 7 exam, you want to answer that the principal needs to approve the trade on the same day, not before or immediately after the trade.