Penny-Stock Compensation Disclosure

What this video covers

• The exact definition of a penny stock: unlisted equity security priced below five dollars per share, and why exchange-listed securities and registered investment company securities (mutual funds, closed-end funds, exchange-traded funds) are exempt regardless of price
• The two-part disclosure structure: oral or written pre-trade, then written at or before confirmation, and why satisfying only one part is a violation
• How compensation is calculated differently for agency trades (commission), riskless principal trades (markup against the contemporaneous offsetting price), and other principal trades (markup against the prevailing market price)
• Why transparency is the sole purpose of the rule, and why there is no legal cap on the markup itself
• The three-year total record retention requirement, with the first two years kept easily accessible, and why creating the disclosure without preserving the record is still a violation
• The real-world context for Series 6 reps: why a mutual fund and variable annuity specialist must still recognize penny-stock triggers in dual-registered or cross-line scenarios