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One complete free lesson for SIDC Exam Module 6: Stock Market and Securities Law. No account or payment needed.
Resolve a share-order discrepancy by separating client authority, execution quality, error handling, and conflicts.
A client instructs a dealer to buy eight thousand shares at no more than two ringgit forty sen each. The dealer buys ten thousand at two ringgit thirty eight sen, then argues that the better price makes the transaction acceptable. In this original Module Six scenario, which fact resolves the dispute? The problem concerns the scope of client authority. A favourable execution price does not establish permission to increase the quantity, so examine the instruction before evaluating the result.
Separate the order into instrument, direction, quantity, and price condition. Buying the specified share satisfies the instrument and direction. Paying two ringgit thirty eight sen satisfies the stated ceiling. Buying ten thousand fails the quantity condition because the client authorised eight thousand. The extra two thousand shares represent four thousand seven hundred sixty ringgit of additional purchase exposure before charges. That amount identifies the disputed exposure; it is not automatically the client's recoverable loss or a regulatory penalty.
Next distinguish carrying out a specific instruction from exercising investment discretion. Choosing how to execute within an instruction is different from choosing a larger investment for the client. A dealer cannot infer broader authority simply because the client has traded frequently or trusted earlier suggestions. If discretionary authority is asserted, examine its actual documentation and scope. The outline expressly includes discretionary trades and the stockbroking company and client relationship, making the source of authority central to this analysis.
Once the mismatch is identified, preserve the original instruction, order entries, execution records, and relevant communications. Refer the discrepancy through the firm's error handling and supervisory procedures, explain the facts accurately, and establish the appropriate correction under the applicable framework. Quietly assigning the excess shares to another client would create a fresh authority problem. Keeping a profitable excess personally could also create a conflict. Treat documentation, fair client treatment, and conflict management as connected controls, rather than competing priorities.
Change the facts. The dealer buys exactly eight thousand shares at two ringgit thirty nine sen, and the client later complains because the market falls. Does the loss itself establish an execution error? No. On these facts, the quantity and price satisfy the instruction. Other issues could still require investigation, such as misleading advice, but a later price decline does not prove unauthorised execution. Compare conduct with the authority and information available when the order was handled, not merely the eventual outcome.
The transferable method is to reconstruct what the client authorised, compare each material order term with the execution, and investigate any mismatch through a documented process. Keep authority separate from price improvement, investment performance, and the dealer's preferred remedy. In a stockbroking case, a transaction can achieve a good price while exceeding its mandate, or lose money while following the instruction. This focused lesson applies the syllabus topics on discretionary trades, handling errors, client duties, and records to one concrete problem.
Aligned to the SIDC July–December 2026 study outline. Independent teaching with original examples; this focused lesson does not cover the entire syllabus.
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Exam Syllabus
Capital Markets and Services Act 2007 | CMSL and CMSRL licensing concepts | Regulated activity of dealing in securities | Role of the Securities Commission Malaysia
Bursa Malaysia Securities Berhad | clearing and settlement infrastructure | central depository functions | stockbroking operational roles
order handling | trading sessions and trading phases | market orders and limit orders | prohibited trading conduct
settlement cycles | delivery and payment obligations | depository transfers | failed trades
client asset protection | suitability and disclosure | conflicts of interest | complaint handling
customer due diligence | suspicious transaction reporting | targeted financial sanctions | ongoing monitoring
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