Virginia Administrative Code › Title 21 - SECURITIES AND RETAIL FRANCHISING › Agency 5 - STATE CORPORATION COMMISSION › Chapter 20 - BROKER-DEALERS, BROKER-DEALER AGENTS AND AGENTS OF THE ISSUER › Part IV - Broker-Dealer and Agent Regulations › Section 21VAC5-20-285 - Customer notice for designated securities

Current through Register Vol. 40, No. 24, July 15, 2024
A. Broker-dealers that solicit the purchase
				  and sale of designated securities shall provide the following notice to
				  customers:
IMPORTANT CUSTOMER NOTICE-READ CAREFULLY
You have just entered into a solicited transaction
					 involving a security which may not trade on an active national market. The
					 following should help you understand this transaction and be better able to
					 follow and protect your investment.
Q.
				  What is meant by the BID and ASK price and the spread?
A. The BID is the price at which you could
				  sell your securities at this time. The ASK is the price at which you bought.
				  Both are noted on your confirmation. The difference between these prices is the
				  "spread," which is also noted on the confirmation, in both a dollar amount and
				  a percentage relative to the ASK price.
Q. How can I follow the price of my security?
A. For the most part, you are
				  dependent on broker-dealers that trade in your security for all price
				  information. You may be able to find a quote in the newspaper, but you should
				  keep in mind that the quote you see will be for dealer-to-dealer transactions
				  (essentially wholesale prices and will not necessarily be the prices at which
				  you could buy or sell).
Q. How does
				  the spread relate to my investments?
A. The spread represents the profit made by
				  your broker-dealer and is the amount by which your investment must increase
				  (the BID must rise) for you to break even. Generally, a greater spread
				  indicates a higher risk.
Q. How do
				  I compute the spread?
A. If you
				  bought 100 shares at an ASK price of $1.00, you would pay $100 (100 shares X
				  $1.00 = $100). If the BID price at the time you purchased your stock was $.50,
				  you could sell the stock back to the broker-dealer for $50 (100 shares X $.50 =
				  $50). In this example, if you sold at the BID price, you would suffer a loss of
				  50%.
Q. Can I sell at any time?
A. Maybe. Some securities are not
				  easy to sell because there are few buyers, or because there are no
				  broker-dealers who buy or sell them on a regular basis.
Q. Why did I receive this notice?
A. The laws of some states require your
				  broker-dealer or sales agent to disclose the BID and ASK price on your
				  confirmation and include this notice in some instances. If the BID and ASK were
				  not explained to you at the time you discussed this investment with your
				  broker, you may have further rights and remedies under both state and federal
				  law.
Q. Where do I go if I have a
				  problem?
A. If you cannot work the
				  problem out with your broker-dealer, you may contact the Virginia State
				  Corporation Commission or the securities commissioner in the state in which you
				  reside, the United States Securities and Exchange Commission, or
				  FINRA.