A market maker in the stock ABCD has filled a portfolio over time with prices as low as $2 per share ...

By Investopedia Staff AAA
Q:
A market maker in the stock ABCD has filled a portfolio over time with prices as low as $2 per share and as high as $10 per share. The average cost is about $5 per share. The current quote for the stock is 4 to 4 ¼. According to NASD, the dealer should offer the shares to the public at:

A. $2
B. $10
C. $4
D. $5

A:
C is closest. Mark-up rules of fair practice on Nasdaq require market pricing.
The NASD views markups in excess of 5% above the prevailing market price to be a violation of the requirements that a broker-dealer comply with the basic principles of fair and equitable trade. There are unique circumstances where the relevant facts justify a markup/down of over 5%. Such markups/downs should require Compliance Department approval prior to such charges being made.
Have a Financial Question?

RELATED FAQS

  1. Sometimes investment banking firms allocate shares of hot issues to the personal ...

    The correct answer is a) Spinning is the act of selling hot issues to the personal accounts of corporate officers which in ...
  2. Donald has been putting aside money for his retirement into a Roth IRA for six years.  Although ...

    The correct answer is A) In a Roth IRA, there is no required distribution date as there is in a traditional IRA.
  3. A 7-year, 6% coupon callable bond is currently trading at 96.25.  The ...

    Free info on financial certification exams including study guides, exam questions, and much more!
  4. According to SEC Release IA-1092, which of the following would NOT qualify as an ...

    The correct answer is C). SEC Release IA-1092 considers financial planners, pension consultants and sports and entertainment ...
RELATED TERMS
  1. Series 79

    A examination to ensure a candidate is qualified to become a ...
  2. Research Analyst

    A person who prepares investigative reports on equity securities. ...
  3. Series 34

    An exam required for individuals seeking to engage in off-exchange ...
  4. Financial Advisor

    One who provides financial advice or guidance to customers for ...
  5. Series 23

    An exam offered by the Financial Industry Regulatory Authority ...
  6. Series 28

    An exam given by the Financial Industry Regulatory Authority ...

You May Also Like

Related Articles
  1. Professionals

    Should You Add A Securities License ...

Trading Center