Standing Settlement Instructions

Ashgrove Partners is onboarding an institutional advisory client that will execute with several counterparties and settle at a third-party custodian. Operations is asked to set up standing settlement instructions for the account. What does an SSI record do?

1. A.It lets the firm choose a settlement date that suits its own delivery schedule for the account.Wrong. Settlement timing is fixed by the standard settlement cycle and the terms of the trade, and no instruction on file lets a firm move it for its own convenience.
2. B.It stands in for the customer's written authorization to move assets to a third party.Wrong. Sending assets to somebody other than the account owner is controlled by a letter of authorization or equivalent, a separate document with its own approval path.
3. C.It holds the account's default delivery and payment details so each trade settles to the same place.Correct. Capturing the destination once and applying it to every trade is the whole point, and it is what makes execution spread across many counterparties workable.
4. D.It shortens the settlement cycle for the account by allowing deliveries to be pre-matched.Wrong. Pre-matching accelerates affirmation between counterparties, not the regulatory cycle, which is the same for this account as for any other.

Why: A standing settlement instruction is a record of where a customer's securities and cash go at settlement: the custodian, its depository participant number and the account number held there. It is captured once at onboarding and applied automatically to every trade, which is what lets an institutional client execute with many counterparties and still have everything land in one place. An SSI grants no authority and changes no deadline; it supplies routing and nothing else. If the customer wanted assets sent somewhere other than the standing destination, that would take a separate instruction carrying its own authorization and approval.

An email reaches Ashgrove Partners' settlements desk from a trader named on an institutional account's authorization record, asking that the account's standing settlement instructions be changed to a new custodian before the next delivery. What should the desk do?

1. A.Apply the change, because the sender is named on the account's authorization record.Wrong. Being an authorized person establishes a right to give instructions, not that this particular message originated with that person.
2. B.Verify the request through a contact route the firm sourced independently before releasing anything.Correct. A callback to a number the firm already holds defeats a compromised or spoofed mailbox, and it has to happen before assets move rather than after.
3. C.Confirm by replying to the message and act once the sender responds.Wrong. A reply travels back down the same channel an intruder already controls, so the confirmation it produces proves nothing.
4. D.Refuse unless the customer supplies a medallion signature guarantee.Wrong. That guarantee belongs to the transfer of registered securities, and importing it here would stall routine settlement work without touching the actual risk.

Why: A change to standing settlement instructions redirects where every future delivery goes, so it is handled as a change to a payment instruction rather than as ordinary correspondence. The control that matters is out-of-band verification: the firm confirms the request using contact details it already holds, never details supplied inside the request itself. That the sender is an authorized person is necessary but not sufficient, because an authorization record establishes who may instruct and says nothing about whether a given message actually came from that person. Once the firm had reached the customer through its own channel and the customer had confirmed, the change would be processed as routine.