Question

Under NASAA Statements of Policy on Dishonest and Unethical Business Practices by Broker-Dealers and Agents, which of the following statements would be true when an Agent of a Broker-Dealer creates a summary sheet or sales piece which will accompany the prospectus on the sale of a new issue of common stock?
I. The Agent of the Broker-Dealer is not allowed to create summary sheets or a sales piece.
II. The Agent of the Broker-Dealer would be allowed to provide a potential customer with such a sales piece or summary if it does not omit any relevant information that the client would need to determine if they would like to buy the security.
III. The Agent of the Broker-Dealer would not be allowed to provide clients with summary sheets or a sales piece until the client has received and had an opportunity to read the prospectus.
IV. The Agent of the Broker-Dealer, when creating a summary or sales piece, is required to present a fair and balanced presentation of all material information from the prospectus.

A) I & III
B) II & IV
C) I & IV
D) II & III

Answer 1

Answer:

B) II & IV

II. The Agent of the Broker-Dealer would be allowed to provide a potential customer with such a sales piece or summary if it does not omit any relevant information that the client would need to determine if they would like to buy the security.

IV. The Agent of the Broker-Dealer, when creating a summary or sales piece, is required to present a fair and balanced presentation of all material information from the prospectus.

Explanation:

Under North American Securities Administrators Association (NASAA) rules, when an agent or a broker-dealer creates a summary sheet or sales piece, it must include a fair and balanced presentation of all the important and relevant information that their client may need to be able to make a decision as to whether or not they want to purchase the security. Obviously the client trusts his/her agent, but the client must be given all the information necessary for him/her to decide whether the agent's advice should be followed or not.