Customer Account Statements

Following numerous incidents of unauthorized transactions, SFC has reminded again and again investors to check against their account statements to detect and report any discrepancies on a timely basis. Typically in the account statements a reminder is made that if no discrepancy is reported within a period of time (e.g. 30 days), the transactions are assumed to be accurate. If there is unreported false accounting, investors would face a risk when claiming compensation upon broker liquidation.

In US, recently SEC approved amendments to the NASD Rule 2340 requiring account statements to include a statement reminding customers to report inaccuracies in their accounts in writing. That means, even the customers have verbally confirmed any discrepancy with the broker, they should re-confirm the matter by writing to the broker and keep a copy. This gives the customers a better protection in terms of investor compensation.

Rule 2340 does not impose any time limit during which customers may report inaccurancies in their accounts. This is better than the HK practice in general. NASD also reminds its members to include in each account statement the name and telephone number of a responsible individual whom the customers can contact. Obviously such individual should be an independent person (e.g. back office staff) rather than the account executive, otherwise the problem may be withheld.

Business people often complain that account statements consume too much paper because more and more compliance messages are included. While investors have been overloaded, they would give up digesting the information and then surrender self-protection.