Products & Their RisksQuestion 106 of 398
Which is a primary risk that a registered representative should disclose about most direct participation programs?
a.They are federally guaranteed against loss
b.Their interests trade actively on a national exchange
c.They provide guaranteed monthly income
d.They are illiquid, with limited or no secondary market for the interests
Explanation
DPP interests are generally illiquid because there is little or no active secondary market, so investors may be unable to sell readily and should plan to hold for the long term. Combined with their speculative nature and reliance on the general partner, illiquidity makes DPPs suitable only for investors who can bear such risks.
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