Regulatory FrameworkQuestion 392 of 398
A representative wants to participate in a private securities transaction on behalf of a customer and will NOT receive any selling compensation. Under FINRA rules, the representative must at minimum:
a.Do nothing, since no compensation is involved
b.Obtain written approval and firm supervision as if compensation were received
c.Provide prior written notice to the firm, which may then require it to be supervised
d.Report the transaction to the SEC directly
Explanation
Under FINRA Rule 3280, when a representative engages in a private securities transaction without selling compensation, they must still provide prior written notice to the firm. The firm may, at its discretion, require that the transaction be recorded and supervised. When compensation IS received, the firm must approve and supervise the transaction and record it on its books.
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