Trade Error Correction and Cancel-and-Rebill Principal Approval
A representative mistakenly enters an order for account #12345 that was intended for account #67890. The trade executes. To correct this error and re-bill the trade to the correct account, what MUST happen?
Under FINRA Rule 4511 and supervisory rules, any trade correction involving a change of account number (cancel-and-rebill) REQUIRES WRITTEN APPROVAL FROM A REGISTERED PRINCIPAL.
Complete Analysis & Legal Rationale
The principal must document the reason for the error and retain the records in the firm's error log to prevent account manipulation or commission switching.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Designated principal written sign-off is mandatory for any cancel-and-rebill.
Representatives cannot independently alter account numbers without principal approval.
Customers are never forced to pay for broker clerical errors.
Exchange floor cancellations do not occur for internal firm booking errors.