The 4:52 p.m. Email, the Cash Account, and the Brother on the Phone
Priya Raman, 47, an existing client, is in Singapore on business. At 4:52 p.m. ET Monday she emails from her address of record: "Sell my entire 2,000 shares of TPLX at market and use the proceeds to buy 300 shares of VGQ. I'm in meetings all week - don't wait for me." TPLX last traded at $48.10 and VGQ at $212. Her account is a cash account with $4,000 of settled cash; the balance of the purchase will have to come from the sale. Your firm's policy requires call-back verification for any order above $50,000 originating by email, unless a written instruction letter is on file - none is. Your assistant took a similar email order from Priya in March without calling her back. Both TPLX and VGQ settle T+1.
1. The instructions are specific. Can you act on the email, and what do you do about the 4:52 p.m. timing?
Read the worked answer
The order is not discretionary. She named the security, the side, the quantity, and the order type. You are not exercising discretion, so no discretionary authorization is required.
But firm policy governs. The sale is roughly $96,000 and the purchase roughly $64,000 - both above the $50,000 email threshold - and no written instruction letter is on file. Get the call-back, or obtain a documented principal exception before entering the order. "She's unreachable" is the exact scenario the policy was written for; if you cannot reach her, the answer is to wait, not to proceed.
The March precedent is not authority. Your assistant's earlier shortcut does not establish a practice, and it is itself a supervisory issue worth raising.
Timing: 4:52 p.m. ET is after the close, so nothing executes at Monday's prices. A market order entered now executes at Tuesday's opening price, which is unknown when she sends it. She got $47.85 rather than the $48.10 last sale - that gap risk is hers, and she should be told the fill price explicitly rather than left to infer it. Market-on-open orders can gap meaningfully.
2. Explain the cash-account mechanics. Can she buy VGQ with money that has not settled yet, and what happens if she sells VGQ on Thursday?
Read the worked answer
Yes, she can use the unsettled sale proceeds to buy. Under Reg T, proceeds from a sale may be used to purchase securities before settlement, provided the client does not sell the newly purchased security before the purchase settles.
The timeline:
- Tuesday: TPLX sold (settles Wednesday); VGQ bought (settles Wednesday).
- Wednesday: both settle. Cash arrives, VGQ is paid for.
- Thursday: she may sell VGQ freely. It has settled; there is no violation.
What would have been a violation: selling VGQ on Tuesday or Wednesday, before the purchase settled. That is a free-ride - selling a security before paying for it. Reg T permits the firm to impose a 90-day restriction requiring settled funds before purchases, and repeat offenders can be restricted further. The $4,000 of settled cash does not change this analysis; it is not enough to cover the purchase.
Practical points:
- She specified shares, not dollars, so a price move changes the cash requirement. Watch commissions and fees.
- Do not extend settlement, do not lend the funds, and do not let the trade sit unresolved.
- If the sale had only partially filled, you would have a genuine cash shortfall - which is a reason to confirm the sale completed before entering the buy.
3. Wednesday morning her brother calls: "Priya wants the VGQ sold - she told me on the phone." What do you do?
Read the worked answer
You do not act.
- No authority. A family member - adult child, sibling, spouse - has no authority to give orders or receive account information without a written trading authorization or power of attorney on file, and even then you should verify identity and confirm the scope of the authorization.
- Privacy. Discussing the account or the position with him may violate the firm's privacy obligations.
- The instruction is second-hand and unverifiable. "She told me" is not an instruction from the client.
What to do instead:
- Attempt to reach Priya directly through a method she has pre-arranged (a second phone number or email on file).
- If she is genuinely unreachable, leave the position alone. She owns 300 shares of VGQ and the market risk that comes with them.
- Document the call: who called, what was requested, when, and what you did. Note who you notified and when.
- Notify your supervisor - a third-party instruction on an account is a standard exploitation red flag, even where no elder issue is present.
If she later confirms in writing or on a recorded line, execute then. Not before.