Chapter 4 Part 3 Flashcards
selling away
If an agent wishes to sell securities (or other types of financial instruments) outside the normal course of his employment
selling away The agent must first obtain
“his firm’s
written permission. If the firm approves of the arrangement, the agent’s activities must then be recorded on the books and records of the firm, and the firm then becomes responsible for
supervising the transactions”
The only person allowed to compensate an agent of a broker-dealer for a securities transaction is the
agent’s employer
Securities professionals arc required to follow all
lawful client requests in servicing their accounts
When a client indicates a desire to purchase, sell, transfer, or close an account, the agent has an obligation to
execute the client’s instructions properly in a timely manner
When an agent solicits a customer, the agent and his broker-dealer have the responsibility to recommend securities that are both
suitable and in cmnpliance with the provisions of the Uniform Securities Act
in cmnpliance with the provisions of the Uniform Securities Act would include
confirming that the security is registered properly in the state, if the security is nonexempt
An agent would commit a prohibited sales practice if she
solicited a sale of an unregistered, nonexempt security-Le., if she solicited the sale of a security that is required to be registered but is not
if a client places an unsolicited order for unregistered, nonexempt securities, the transaction may be
completed. The Administrator may require a signed acknowledgement from the client that the order was unsolicited
Every customer purchasing a new issue must receive a copy of the final prospectus by the date the
“transaction is confirmed. This requirement may also be fulfilled by giving the client a written or
electronic copy of the preliminary prospectus and an additional docun1ent that, together, contain all the information found in the final prospectus. The broker-dealer that sells the security to the client is responsible for making sure that the client receives all necessary documents”
When involved in an initial public offering, a broker-dealer must always make a
“genuine (bona fide)
public offering of all securities that were allotted to it as an underwriter or member of a selling group. When presented with a customer order, it is considered an unethical sales practice to withhold the sale of these securities”
A broker-dealer that is affiliated with or controlled by the issuer of any security must disclose this
relationship to the client before the client agrees to buy or sell the security. The initial disclosure of this relationship may be done verbally, provided the firm supplies written disclosure no later than the date on which the transaction is completed
Broker-dealers may require customers to pay for their securities purchases by the
settlement date (T + 3). Customers are entitled to the same prompt treatment by their broker-dealer. Therefore, firms are not allowed to delay delivery of securities purchased by a client, delay payment to a client for securities sold in their account, or delay payment of funds that a client has available in his account (free credit balance)
When quoting prices in the marketplace, brnker-dealers have an obligation to honor
their quotes
Transactions must be executed at
“contemporaneous prices or at prices that are reasonably related
to the current market price. Quoting prices that are better than the market, and then adding an
unreasonable commission or markup, is considered a violation. Remember, if a firm states that a security is being offered at its current market price, it must have reasonable grounds for making this statement”
