Performance Guarantees Prohibition

What this video covers

• Why a verbal promise to guarantee against loss is just as prohibited as a written guarantee, and why the test writers bait you with "he simply comforted the client" scenarios
• The absolute prohibition under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents (1983, as amended): zero circumstances allow a guarantee against loss
• Why the performance guarantee prohibition applies to both broker-dealers (the firms) and agents, not just individual fast-talking salespeople
• The three strict requirements for sharing in customer accounts: written authorization from the customer, written authorization from the broker-dealer, and proportionality to actual financial contribution
• Why getting written approval from only the customer (and not the firm) is a violation, and why a 10% cash contribution cannot earn 50% of profits
• The antifraud boundary between permitted communications (historical returns with disclaimers, potential range of outcomes, fixed coupon facts) and prohibited communications (projecting future performance, implying past results will recur, exaggerated claims)
• Why guaranteeing performance or against loss constitutes fraud under the Uniform Securities Act (USA) antifraud provision when it is a material misrepresentation in connection with the offer, sale, or purchase of a security