Fair Prices and Commissions

What this video covers

• How principal transactions require a fair price that considers market conditions, expenses, and the member's entitlement to a profit, while agency transactions permit only a fair commission or service charge
• Why the rule applies to both listed and unlisted securities, and how an unreasonable price can violate both the fair prices and commissions rule and the standards of commercial honor rule
• Why the 5% Mark-Up Policy is a guide rather than a safe harbor, how contemporaneous cost indicates prevailing market price, and why even a 5% or lower pattern can be unfair
• How proceeds transactions combine the profit or commission from the security being sold with the markup on the security being purchased, and why disclosure does not cure an unfair charge
• The strict debt-pricing hierarchy for non-municipal debt securities: contemporaneous cost, inter-dealer transactions, institutional trades, quotations, and economic models as a last resort
• How to evaluate a similar security from the investor's perspective using credit quality, spread, structural characteristics, and technical factors
• The four conditions for the QIB pricing exception, including non-investment-grade debt, independent risk evaluation, affirmative judgment, and the $100 million or $10 million qualification thresholds