New-Issue Credit Restriction and Related Exemptions
Chapters in this video
- 0:00 The 30-day cooling-off rule and when the clock starts
- 2:46 Three ways a firm becomes a distribution participant
- 3:50 DPP exemption: why illiquidity removes the conflict
- 4:45 Investment company shares as margin collateral versus purchase on margin
- 5:45 SEC credit arrangement disclosure: extend or arrange, then two required steps
- 6:58 Pro forma balance sheets: identified adjustments and reasonable basis
- 8:03 Rapid-fire exam recap
What this video covers
- When the 30-day new-issue credit restriction clock actually starts, and why "end of distribution" is the exam's favorite trap
- The three specific roles that make a firm a distribution participant: underwriter, selling group member, and dealer holding new issue for resale at the offering price
- Why Direct Participation Programs (DPPs) are exempt from the new-issue credit restriction due to their illiquidity and absence of a manipulable public market price
- The precise distinction between investment company shares used as margin collateral (exempt) and those purchased on margin within the 30-day window (violation)
- The dual requirements of the Securities and Exchange Commission (SEC) credit arrangement disclosure rule: written statement of terms plus suitability determination based on customer financial information
- The two compliance standards for pro forma balance sheets: clearly identified adjustments and reasonable basis of support, and what happens when either is missing
- How to apply the supervisory framework so you can recognize when a principal must intervene before a representative crosses into fraud or credit restriction violations
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